Blue Point Trading Market View – February 12, 2013
Trade Plan – Renko Fast Robo. Another cold winters day looking at algos on the Ninja Trader. Here is an idea that I came up with for an algo Trade Plan. Rather difficult to trade manually but perhaps you can work on it and come up with a way to use this manually or automated. The concept is that when markets move in a good trend, they tend to follow the Bollinger Bands up/down in a steady progression – usually between the 1.2 to 2.0 deviation on a 20 MA (moving average) Bollinger Band. So I thought I would try to replicate this in an algo.
Trade Plan description: This Trade Plan is called the Renko Fast Robo, primarily because it will only work on instruments that are fast moving, like Oil and Gold. But of course like all instruments, there are times when they are dead and do not move. Hence using a Renko chart we can eliminate the concept of time out of the algo. For this Trade Plan we will we use a 4 tick brick wicked Renko chart, with the 20MA in a 1.2 deviation Bollinger Band. Follow the description pictorially with the thumbnail chart – we will describe the bull case but of course it is just the opposite for the bear case.
Trigger: After 2 closing bricks over the upper Bollinger Band.
Stop: 3 bricks.
Profit Target: 6 bricks.
Filter: None – other than that this Trade Plan should only be used with fast trading markets and instruments. Of course this is often the problem with algos – understanding chop vs. trend.
Order management: Move stops to break even after 2 bricks profit and then move them up to 2 bricks profit after 4 bricks profit. This is not a trail stop, as this will work slightly different.
This Trade Plan obviously will generate a lot of trades for the trader that can not resist the temptation to click. In short, this is not for the faint at heart. Perhaps you can adjust the parameters to go slower or augment its performance. In the Ninja Trader back test it ran about 56% positive over three months average on Gold and Oil. A little hard to compute the profit vs. Stop ration because of the movement of stops, but the profit factor average was 1.29 – generally a good algo should have closer to 1.8 to 2.0 – so not super confident, but profitable.
As a note, we will be running this algo live on the twitter feed this week (Gold demo – Oil Live), so you can follow along with it live by clicking on the trader tweets at the bottom of the Blue Point Trading website. Lets see how we do.
Daily Market View: (click here for the video)