Big Dog Strategy User s Doc

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1 A technical guide to the Big Dog Day Trading strategy. It will help you to install and operate the strategy on your trading platform. The document explains in detail the strategy parameters and their optimization rules. Big Dog Strategy User s Doc For TradeStation Platform by Alex Pressl Copyright CBI Jack F. Cahn, Please note that we require you to provide a written credit on any document, code, system, technical brief, trading methods or indictors contained in this document and obtained from CBI, adapted by you and distributed by you based on its content. Your written credit should read: The source code or trading concepts are provided and courtesy of Creative Breakthrough, Inc West Lake Mead Blvd. Building nine, #151, Las Vegas, NV USA.

Quick Set Up Guide for Big Dog Trading Strategy. Install TradeStation Download TS9 from their website http://www.tradestation.

2 Quick Set Up Guide for Big Dog Trading Strategy. Install TradeStation Download TS9 from their website if you are going to trade on simulation account, you do not need to buy the data feeds for the respective markets you are going to trade since TS does not come with a live data feed for free. In order to get a live data feed you DO NOT need to open a live trading account with their brokerage outlet. You can run your test without that and if you want some other brokerage besides TS, there are trading robots that will pull orders from your TS9 and direct them to your broker. Trade Bullet, NinjaTrader and Strategy Runner are just three examples of the popular and easy to us software packages. In your package you will find zipped up this user doc, performance reports for cross checking, an excel sheet from Portfolio Selector (we suggest this program produced by the fellows at Futures Truth) that will help you select which markets to mix and match. The zip file also contains the workspaces, they contain all the default settings for each make market so it is plug and trade in most cases. The ELD file contains the strategy itself which is already inserted into the workspace for you. To get started, simple do the following step by step procedure. 1

Step by Step Installation of Strategy and Workspaces. 1. Make sure you are on the most recent version of TS9 (We do not use the beta versions) I am not on 9.1 yet, it is still in beta). 2.

3 Step by Step Installation of Strategy and Workspaces. 1. Make sure you are on the most recent version of TS9 (We do not use the beta versions) I am not on 9.1 yet, it is still in beta). 2. Transfer in the files out of the ELD file first, use your Development program to file / import. They will verify on the fly. 3. Create a new desk top called Big Dog. 4. Use your windows explorer to move all the Big Dog.tsw files into a convenient folder for yourself. 5. Copy the Martian Time.CST file to this subdirectory: C:\Program Files (x86)\tradestation 9.0\Templates\Sessions 6. From the TS9 FILE menu, Open Workspace to load each of the Big Dog Workspaces. 7. Now from each opened workspace you should VIEW the respective performance results and you should do a cross check with the reports provided in the zip file. 8. Please review all the results, they should all be balanced and above 1.75 (DAX), if you have any questions or issues, let me know 9. If you need anything at all, me or search the forum for an answer, if not there post the question and one of our traders will respond shortly. If you want more personal attention, just let us know and one of our traders will be in contact via your preferred mans of communications. Obviously you need to let us know these details. 2

4 Custom Session times and *.CST files The time of trading is an important setting to the strategy. Big Dog is trading on charts that use an intraday time frame as opposed to a longer bar like the daily. So you have to make sure the data contained in the chart window is on a day session. For the stock index futures that is easy enough since all one needs to do is put a dot D after the symbol However, for the regular commodity futures we use a side by side custom session time I call Martian time. This limits the data from all sources globex, pit, etc - into an overlap from 8 am to 4 pm Eastern Time (EST). This means all data outside this period of the day is eliminated. The strategy ignores the overnight and pre-session de-factor and looks only at the day time side by side trading plus the session s closing rotation is the last opportunity to exit. Since Big Dog is a day trader, the day session is the only thing that matters. Furthermore, the USA day session is the musty liquid period of the 23 hour trading day. This is when the Big Money makes its decisions because of the depth - in any event therefore is the only time that really matters for Big Dog to decide how it wants to trade. Our research gave us the confidence that Big Dog is more robust to judge a market s ability to move in a single direction by the opening gap versus taking into consideration the overnight data in detail. Big Dog is a real day trader. To Setup the Session Times. Each workspace comes with its own default settings for the Big Dog strategy variables plus the correct symbol format. However, if you did not copy over the CST file into its correct folder before opening up the workspace, you will get an error message. The error messages will tell you that the session has been set back to regular as the custom session file was missing. CLOSE the WORKSPACE AND DO NOT SAVE. In the zip file we delivered to you, find the Martian Time.cst file and copy it to the Program Folder / TradeStation/Templates/Session folder called. C:\Program Files (x86)\tradestation 9.0\Templates\Sessions Once you copy over the CST file the workspace can be reopened and should work fine. If you had saved the workspace with the data Error, it is keeping the incorrect regular session time and this need to be changed. You can now reformat the data in the workspaces. To do this goes to the menu command FORMAT, SYMBOLS, and PROPERTIES. From this window click on the box to the right of Session and you will get a pop up dialog box like the one on the left hand side of the diagram below. Display the sessions available and pick the Martian Time (so called after an associate of mine who discovered how easy it was to trade when the markets were most active). 3

Day Trader discipline (the trader's focus as we like to call it). The Big Dog strategy s objective is to isolate a change of trend which is the beginning of a dynamic move.

5 Day Trader discipline (the trader's focus as we like to call it). The Big Dog strategy s objective is to isolate a change of trend which is the beginning of a dynamic move. It is a day trader and uses a traditional long bar but in a unique bar size of 35 minute bar. We know that most floor traders try to get a market overview on the natural size long bars like the 15 minute, 30, 60 or 45. We want to be a little different with the 35 minute. The Big Dog is a day trader; based on that style of trade it is impossible to increase its trading activity by reducing the size of the bar and for it to retain its profitability. Big Dog is designed to be a traditional exit market on close type of day session system and the use of short bars (small bars) is a completely different FOCUS and contradictory to this type of trading. The Big Dog strategy is not in the public domain and as of this publication it is being traded by less than 25 traders. We know all the traders who use it, they are part of the TraderAssist user group, and trading size is not an issue at this point. We are not aware of any slippage caused by the system being too popular at a particular entry level when Big Dog enters at the market and exits. The Big Dog strategy is very picky about when it trades and waits patiently for many days to take a trade, but this patience is rewarded by a high % win rate. You can expect a 60-70% winning rate, which is exceptional for technical strategies in general. The intended exit of the strategy is at the close of the U.S day session, the most liquid time of the trading day. What the system has shown is that it has the ability to pick a change of trend day and for the market on that day to carry the new trend just not into the close but into the next day or two and in some cases longer. However, do not get greedy here, it is the discipline of the Big Dog is to day trade; it 4

6 is your focus as a day trader to do just that, to day trade and not to second guess. Your focus is not to be a scalper or not to be a swing trader but to exit no later than MOC. TradeStation9 comes with stock and standard money management strategies that can be added once you get Big Dog set up. Upon your request we can have trailing stops or profit targets added. See our strategy building tips section below. Exit Rules volume based market on close, most active time of the day. Exceptions: Rules of engagement dictate that traders cancel all orders manually, if and only if there is a hyper news event that has preceded the market open (e.g., Standard & Poor downgraded the USA s credit rating on a Sunday after market hours.) or going into an expected hyper news media event day (e.g., Federal Reserve Meetings) You can refer to your trading advisory news letter MarketMap for a calendar. Trader s Market Observation and Decision making when to Trade: unless the Rule of Engagement has made an exception to cancel the trading for the day, you take every trade. The Optimization Process (if and when needed). Instrument Selection: any of the top 15 liquid markets. We have delivered to you ten workspaces that are default plug and play. No optimization i.e. required. However, review each market s performance summary and trade by trade compare to the reports we included in the zip file. During this review please key in on any major differences between the reports and if you find one, let our customer support staff know. Furthermore, review the largest daily losing trade or largest intraday drawdown for the day. Make sure the risk is within your personal tolerances. If not, take a looks to see if the market has a stop loss on it. We deliver most of them out with the ATP trailing stop loss since, however a straight money stop loss may work better for you and may increase the overall performance. (e.g., put stops on the ES, the profit factor jumps to near 4 to 1). Timeframe Chart Type: 35 bar chart. Money Stops that can be used: Stop loss and profit stops: ATR Trailing and or asymmetrical dollar stop loss plus a percent profit targets or alternate is long bar exit. Optimization starts from a basic fundamental working assumption and depends on you as much as it does the amount of profit you want to pull out of the market. You either begin with the working assumption that you want a pure price based system that is not impacted by money decisions, i.e., not affected by the amount profit or loss of the positions the strategy take on. Alternatively, you want a system that has a historical dollar reward and risk ratio that the strategy formula has to back fit into. In other words with the 100% price based approach - the market flows through the algorithm, the formula, to tell you based on the market s price movement to buy or sell. So the market is telling you the system s trader - that the market is going to go up or down. So orders are generated to enter or to 5

7 exit WITHOUT any consideration of the profit of loss of each trade. This approach to system development is done for good reason. That is because the market does not care how much money you win or lose in a trade. With that said no matter how good and robust the trading system may be, money management is a necessary evil. So at the end of the price type of development process you will have to bring in various sets of money stops and targets that will be a wrapper around the systems to control risk and help you improve overall performance. On the other hand you can have a preset bias in terms of money risk / reward in which case you can set a pre-defined profit and loss limits as the working assumption for the strategy. So before even you begin to develop the variables you insert the stops and target so the strategy should not lose more than 10% of risk capital on any given. On this basis you could for example build the systems around the 10% of 5,000 capital for your stop loss for both long and shorts. In the same manner you insert your profit stops at 20% of risk capital or better. In this way you have what many feel is a conservative method of strategy development. The process will tell you, if the market you are testing with a trading strategy fits your strict risk control personality or guidelines. Plus you will see if the strategy can produce a reasonable profit factor, based on your notion of reasonable. Industry standard is 2 to 1 profit factor. In our case, we want prices to tell the trader if he is right first before we consider money so we do not use stops early in development process. We want to see a simple technical concept show good profits on a popular market and apply our robust testing technique to build confidence. (See our online video or conference). As you have seen from the video, Big Dog has proven itself robust as a day trader with a simple set of entry rules with an exit during the most liquid time of the day, the last 5 minutes of the day, i.e., MOC. So without stops, test the two variables (both long and short) for their best PF. (Turn status off for exits) 6

8 Inputs:fastlng1(13),slowlng1(23),fastsht1(13),slowsht1(23); Run long side( LNG=Long) fast from 7 to 15 increments of 1 and slow long from 14 to 34 in increments of 2. Do the same for the short side (SHT=Short). Every person has his or her threshold of financial pain, the market does not care. We all know that. However, we have to employ a stop point where I am out - the stop loss - which is not based on the market telling us we are wrong about our position plus not left to emotion while the trade is in place. A common tendency we see with strategy users is to try to reduce the losses by having tighter stops. However, having them too close can take you out of a winning trade too early and having the stop set too wide can be more risk than the trader is willing to stomach. By doing the optimization of the stop after you have built the price based systems allows the variance of price movement in the market to tell you what the money stop values are. A good system should naturally give you approximately a profit to risk ratio of 2 to 1. A well balanced strategy finds its optimal stop loss when profit factor is convergent towards 2 to 1; this is a number where the system (strategy) establishes itself as stable under different conditions and markets and is likely to walk into the future profitably. Experience shows that when this criterion is reached the strategy is able to make money in most markets. A higher number is good, but be aware that you have a minimum of 30 results or more for the back test to be statistically significant. For example, if you see a profit factor of 10, looks great but if this result is based on fewer than 30 trades, it has no statistical relevant and indicates nothing for the future. We like to see at least 75 trades over a 3 to 5 year period for the results to be more reliable into the future. -- Great and Many Thanks, Jack F. Cahn, CMT TraderAssist Since 1989, Creative Breakthrough, Inc. Copyright Follow me on Facebook (jfc@traderassist.com), Follow my comments on twitter (drofmoney). Call or text me via Skype (traderassist) Use the old fashion method use the phone with a toll free number U.S. Office: 7500 West Lake Mead Blvd. Suite 9-151, Las Vegas, NV Creative Breakthrough Inc. does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions express here are my own and are grounded in sources I believe to be reliable but not guaranteed. --Any actions taken by a user in response to the any of CBI's products or services shall be solely at the risk of the user. 7

USER GUIDE

USER GUIDE http://www.superprofitscalper.com DISCLAIMER Please be aware of the loss, risk, personal or otherwise consequences of the use and application of this book s content. The author and the publisher