TRADESIGNAL HOW TO 04.
WHAT’S NEW IN TRADESIGNAL 7.6.
Enhanced measures for risk and return, category tags and new indicators.
With the latest version, Tradesignal provides traders, portfolio managers and analysts with several new tools for greater efficiency and analysis power. In addition to new indicators, improvements in the search and scan quality, the performance report has been extended to include powerful reporting options. How to use these new tools and the benefits they bring, we will show you in the following.
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TABLE OF CONTENTS.
- New scan schedule
- Category tags
- Enhanced performance report MAE & MFE
- New indicators
- Strategy Drawdown
- Strategy P&L
- Forward Curve
- Seasonal Projection
- New features for Equilla programmers
TRADESIGNAL SCANS THE MARKETS FOR YOU AUTOMATICALLY – YOU DECIDE WHEN.
The markets offer attractive trading opportunities every day. Whether you look for stocks generating new highs, individual chart patterns or volume anomalies – Tradesignal allows you to scan thousands of securities by individual criteria. This way, even with a large universe of securities you will not miss a signal.
- 01. Open or create a workspace with one or several scanners and save it.
- 02. Click on Data > Print > Print and Scan Schedule > Add schedule.
- 03. The following window appears (Figure 1).
- 04. Select the desired day of the week on which the scan has to be performed.
- 05. Enter a time of day to perform the scan.
- 06. Select one of the following options:
RUN SCANNERS AND CHARTS (DISCARD RESULTS).
The workspace is opened at the specified time and the scan is performed. Subsequently, the work area is closed, the results of the scan are not saved.
RUN SCANNERS AND CHARTS (SAVE RESULTS).
Here, the workspace is opened and the scan job is executed. All results and the entire workspace are stored and the workspace remains opened.
FIGURE 1: INPUT MASK FOR SCAN SCHEDULE:
The new Tradesignal version 7.6 offers the possibility to automate scans at freely definable periods – for example, at night.
FIGURE 2: TOOLBAR WITH SCAN ICON.
The scan icon gives a quick overview of all existing scans. There you will see all scans that are scheduled for the current day. A change in the time or day of the week or a deletion of a specific scan can be implemented quickly and easily through the following mask.
FIGURE 3: SCHEDULE WINDOW.
Existing scans can be modified or deleted quickly and easily.
FIND INDICATORS AND STRATEGIES QUICKLY – WITH THE NEW CATEGORY TAGS.
Tradesignal provides hundreds of predefined indicators and trading strategies covering a wide variety of facets. With this diversity there is a risk of losing the overview. The new category tags are the solution: They ensure that strategies and indicators are filtered by categories. If you click on the drop-down box below the search, Tradesignal provides you with a list of available categories. The choices are, amongst others:
- Trend Follower
- Trend Strength
- Candlestick Pattern
- Buying/Selling Pressure
- Entry, Exit, Stop
- Position Sizing
In the following we want to show you how practical and time saving the new filter function can be.
FIGURE 4: CATEGORY TAGS FOR INDICATORS AND TRADING STRATEGIES.
The new categorization ensures optimum visibility and thus speeds up the search for indicators and trading strategies.
BY THE WAY:
To use your own categorisation can be realized quickly too. Equilla supports a new “categories” property that can be implemented in the meta-block of each indicator or strategy. If the indicator or strategy should be grouped into several categories simultaneously, a separation with a semicolon is necessary. Here’s an example:
ENHANCED PERFORMANCE REPORT PROVIDES MORE INSIGHT INTO BACK TEST RESULTS.
The evaluation of back tests is one of the most important applications in Tradesignal. With the latest software update the performance report has been expanded: Besides the absolute returns the trade list now includes the percentage figures in a separate column.
FIGURE 5: PERFORMANCE REPORT (TRADES).
The periodic return is shown both in absolute and percentage figures. This way the underlying strategy can be analyzed and compared quickly.
Within the returns section, where all single trades are summarized on a monthly, quarterly and annual basis, all results are displayed on a percentage basis too.
FIGURE 6: PERFORMANCE REPORT (RETURNS).
The returns section summarizes all single trades on a periodic basis. The results are displayed both on an absolute and percentage basis.
Another innovation within the trade list are the two columns “drawdown” and “runup”. As seen in figure 7, the maximum capital gain (runup) was the trade with the exit number 216 (1st row) during the holding period at 217 points. This was closed with a profit of 180 points. The maximum drawdown during the trade was 105 points.
FIGURE 7: PERFORMANCE REPORT (TRADES).
The new drawdown and runup figures for each trade provide a closer look at the characteristics of a trading strategy.
The analysis of individual trades gives the trader a good insight into the workings of the underlying trading strategy. It is not only the end results of closed trades, but also their development during the holding period that provides valuable information which should be exploited in the development and optimization of a strategy.
MAE & MFE – PROFESSIONAL TOOLS FOR DETERMINATION OF PRICE TARGETS AND STOP-SIZES.
With the latest version 7.6. Tradesignal offers two additional metrics introduced by John Sweeney¹ in the performance report: MAE and MFE. (¹Further information can be found here.)
- MAE (maximum adverse excursion): is the deepest (for long trades) or highest (for short trades) point of the trading instrument during a trade. It is the point at which the trade showed the maximum drawdown.
- MFE (maximum favourable excursion): describes the highest (for long trades) or lowest (for short trades) point of the trading instrument during a trade. So this is the point at which the trade was most in the positive and thus the maximum theoretical profit.
The following chart visualizes both metrics for the long and short side.
FIGURE 8: MAE UND MFE.
By using the MAE and MFE, which measure the respective drawdown or runup for every executed trade from the entry point, a trading strategy can be analyzed in detail.
VISUALIZATION SHOWS IMPROVEMENT POTENTIAL.
In order to keep track, even with a large number of individual trades and being aware of optimization potentials, the performance report includes visualisations of MAE and MFE of all trades on a diagram. On one axis the drawdowns or runups are shown, while on the other the corresponding P&L is shown.
A filtering – e.g. only winning or losing trades – can be made and delivers an even clearer picture. If you move the mouse over a particular trade in the diagram, all associated data is displayed.
Figure 9 shows an example of how such a diagram looks in practice. Selected in this case was the key figure MAE. Both profit and loss trades are shown. As can be seen immediately, the wining trades have a maximum drawdown of 20,000 USD. In contrast, the losing trades include trades that have much larger drawdowns during the holding period. Based on the distribution of the diagram the trader recognizes that open positions with a loss of about 20,000 USD² are not sustainable to end up with a profit.
²On request the performance can be shown in any other currency.
FIGURE 9: MAE DIAGRAM.
With the MAE diagram winner trades (green) and losing trades (red) can be analyzed. On the X-axis is the drawdown in US dollars, on the Y-axis, the actual P&L of each closed trade is shown. A percentage representation is also possible.
The same analysis can be done with the MFE metric. The relationship between MFE and profit gives valuable information about the quality of exit rules. Simple example: If there is a large number of trades with a runup above 100,000 USD, but is closed with only a fractional profit or even a loss, the exit rules should be improved because the exit is too late.
The following chart shows which runup each trade has had during the holding period and how high the profit or loss was when the trade was closed.
FIGURE 10: MFE DIAGRAM.
The x-axis of the MFE diagram shows the runup of each trade in US dollars, while the actual P&L of the closed trade is shown on the y-axis. Touching a certain trade (see marking in orange), the detail data will be displayed.
Further recommended reading on this topic:
- Sweeney, John. “Where To Put Your Stops”, Technical Analysis of STOCKS & COMMODITIES, Volume 3, October 1987.
- Sweeney, John. “Using Maximum Adverse Excursions For Stops”, Technical Analysis of STOCKS & COMMODITIES, Volume 5, April 1987.
- Zamansky, Leo J., and David C. Stendahl. “Evaluating System Efficiency”, Technical Analysis of STOCKS & COMMODITIES, Volume 15, October 1997.
NEW INDICATORS FOR EVEN MORE POWER ANALYSIS.
Tradesignal has about 200 pre-installed indicators that cover almost all areas. This wide range is even extended periodically. The new version 7.6. provides four new indicators that we would like to explain now.
01. STRATEGY DRAWDOWN INDICATOR (STRADD).
The quality of a trading strategy can be measured and assessed using a variety of metrics. The focus is on two opposite poles:
The generated return and the associated risk. With the new Strategy drawdown indicator the course of the current and maximum drawdown of a trading strategy is shown as a histogram. It provides a quick overview of the risk behavior of the underlying strategy. In the properties section you can determine whether the drawdown should be visualized in absolute or percentage terms. The following settings are available:
- Yearly (One calendar year serves as calculation basis. When a new year starts, the drawdown is reset to zero and calculation starts from the beginning.)
- Monthly (One calendar month serves as calculation basis. When a new month starts, the drawdown is reset to zero and calculation starts from the beginning.)
- Daily (One day serves as calculation basis. Each new day the drawdown is reset to zero and calculation starts from the beginning. Only useful for daytrading strategies.)
- Never (there is no reset of the maximum drawdown.)
The following figure shows the quantitative strategy applied to the gold price. The new strategy drawdown indicator (STRADD) is displayed below the candlestick chart. Grey bars represent the current drawdown, while the red line represents the maximum drawdown of the year 2014 (reset mode was set to “yearly”).
FIGURE 11: STRATEGY DRAWDOWN INDICATOR.
The strategy drawdown indicator shows the current and maximum drawdown of a trading strategy.
02. STRATEGY PROFIT & LOSS INDICATOR (STRAPL).
Another indicator that facilitates risk-return analysis, while providing evidence of the robustness of an algorithmic trading strategy, is the strategy profit & loss indicator. It shows the equity curve of a trading strategy not only as an overall result, but also separately for the long and short side.
Thus, traders and portfolio managers can see at a glance whether the strategy works equally well on both sides and how much long trades and short trades contribute to the entire equity curve.
FIGURE 12: STRATEGY PROFIT & LOSS INDICATOR.
The strategy profit & loss indicator visualizes the total equity curve (black) of a trading strategy. Short trades and long trades are separated and shown by individual equity curves (green/red).
03. ANALYZE FORWARD CURVES WITH THE EXTENDED FORWARD CURVE INDICATOR (FCURV).
The popular forward curve indicator was subjected to an update recently. With the new function PlotShift you can move the forward curve by a user-defined number of bars into the past.
In this way, the change of the forward curve structure can be visualized and analyzed over time. On the chart below, the forward curve over the last 100 trading days is shown at intervals of 20 days.
BY THE WAY: Further information on Forward Curve, see our Algorithmic Trading Tips 09.
FIGURE 13: FORWARD CURVE INDICATOR.
With the renewed indicator forward curves can be shifted into the past, so the changes over time can be visualized and analysed easily. This example shows the transition from backwardation towards a contango structure in the oil market. The available parameters are explained below:
- Displacement: Defines the observation date of the forward curve 0 = current forward curve 10 = forward curve 10 periods ago, etc
- PlotShift: Specifies the time shift of the forward curve on the time axis 0 = current (no shift) 50 = shift of the forward curve 50 bars into the past
- Alignment: This feature enables the correct visualization of various futures with different expiration cycles in a single chart. (e.g. contract A monthly expiration, contract B quarterly expiration)
04. SEASONAL PROJECTION INDICATOR (SEPR).
The analysis of seasonal pattern provides traders, portfolio managers and analysts with valuable additional information within a holistic analysis approach. With Tradesignal it can be implemented quickly and practically. The new seasonal projection indicator (SEPR) calculates an average performance of the underlying security, making seasonal patterns visible. In order to enable comparisons with the historical course the seasonal pattern is projected on the current chart. In this way, the trader receives almost a “seasonal route”, which he can use for analysis and as an additional criterion to generate trading signals. By using the input “PeriodInYears” the user can specify the number of years to be included in the calculation of the seasonal performance charts. Figure 14 shows an example of the seasonal pattern of the DAX based on the last 20 years. The average percentage change is plotted on the left axis. Weakness in the summer (hence the saying “sell in may and go away”) and the strong year-end phase beginning in October, are clearly visible.
FIGURE 14: DAX SEASONAL PATTERN.
Using the seasonal projection indicator seasonal patterns can be revealed easily and compared with the the current chart. The second parameter “Year Shift” allows the calculation period of the indicator to be moved backwards. By default, this input is set to 0. An increase by 1 enables displacement of the calculation period by one year into the past. This way, the stability of the seasonal pattern depending on the relevant calculation period can be checked easily. Another application is that it is possible, by the use of both previously presented parameters, to compare the current trading year with a single year from the past year. The multiple insertion of the indicator is very interesting in a chart too, because it reveals possible changes in the seasonality pattern. On the following figure the indicator was inserted four times into the chart, each with different settings of the parameter “PeriodInYears”. The result is a clear example that the seasonality has remained relatively stable with gold at least, in the past.
FIGURE 15: GOLD 5-, 10- AND 30-YEARS SEASONAL PATTERN.
The repeated use of the indicator on a chart, changes to the seasonality can be quickly and easily visible. The seasonal projections can be shown both in absolute (in points or currency units) or percentage terms by using the “Value” parameter. Especially with seasonal charts that are based on a long history, the percentage adjustment is recommended due to the different historical price levels.
NEW FEATURES FOR EQUILLA PROGRAMMERS.
Zum Abschluss möchten wir allen Programmierern einige Neuerungen im Bereich der Programmiersprache Equilla präsentieren. Die Finally, we would like to present some new features in the field of programming Equilla. The following commands should expand the existing range of different tools and offer even more possibilities for creating your own indicators and trading strategies.
- IsEvaluatingFirstScannerItem() This function will return true if this is the first row to be evaluated when performing a scan. This method is useful since it allows scripts to perform start-up actions in a scan (such as drawing headers in CSV files).n.
- FilledOrderDrawdown(position, n) Returns the drawdown of the nth filled order within the specified position counting backwards from the current position (which would be position=0).
- FilledOrderRunup(position, n) Returns the runup of the nth filled order within the specified position counting backwards from the current position (which would be position=0).
TRADESIGNAL – THE PERFECT CHOICE FOR QUANTITATIVE TRADING.
With the latest version 7.6 Tradesignal presents the perfect software for all traders, portfolio managers and analysts who deal with quantitative trading strategies and want to make objective, proven investment decisions. Have you put your workstation up to date? If not, we encourage you today to perform an update. Also download the current version of DataConnect today. (DataConnect version 5.10.0 is required for the use of the new Tradesignal version.)
If you are not yet a Tradesignal customer, we will gladly provide you with a trial version.
That’s it for today. Take care, take profit and “auf Wiedersehen”.