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Thursday, December 27, 2012

TIS Squeeze Darvas Setup Indicator

On this New Post I will explain the Squeeze Darvas Setup and how to trade it with an Indicator for Ninjatrader

The Name of the Setup is Darvas_Squeeze and the indicators needed are :

  • Squeeze Indicator
  • Darvas Indicator
For the purpose of this explanation I will be using TIS_Squeeze and TIS_Darvas but any general Squeeze and Darvas indicators will work fine.

If you are not sure how a Squeeze indicator works, it is very easy to understand, in fact, if you don't have a squeeze indicator, with just a Keltner and a Bollinger is possible to know when there is a squeeze signal condition :

On the following picture we can see a blue envelope ( Keltner Channel) and a green band ( Bollinger Band ).

When the Keltner is bigger ( containing inside) the Bollinger then there is a Squeeze Signal ( red dot on the Squeeze Indicator at the bottom ).

The rectangles are the Darvas boxes, and these are used to define the breakout zone ;

The way to trade this setup is using bracket orders ;
Buy Stop above the box and Sell Stop below the box.
We can use an offset in ticks, where the orders must be placed from the box ; N ticks above for the Buy Stop and N ticks below for the Sell Stop.

So, the logic to trade this setup is as follows :
  1. Wait for a Squeeze Condition ( Red Dot )
  2. Place Buy Stop over Box + Offset
  3. Place Sell Stop below Box - Offset
  4. If one orders get filled, cancel the other
  5. If no more Squeeze condition ( no more red dots ) and orders are not filled, the trade is cancelled
About the settings to use, the Darvas don't need any input parameter, the only inputs needed are for the Squeeze ( Period, Bollinger Standard Deviation and Keltner Multiplier ).
The period is the same for Keltner and Bollinger.
Some good settings to start with are : a period of 20 , a Keltner Multiplier of 1.5 and a Bollinger Standard Deviation of 2.

Please post any comments, suggestions, and question here...
Also if you have a good combination of settings and want to share them, please post them here...

This setup can be traded using the Combo Indicator TIS_Combo_Darvas_Squeeze


Thursday, December 20, 2012

Best Indicator for NinjaTrader

Several people asked me about which is the best indicator to use...
In my humble opinion it is not related to a specific indicator but to a group of indicators, and the most important is to choose the correct ones and how to set them all together to find an edge.
In the following example I will show you how the Small Range Setup uses a different group of indicators to filter a setup from different scopes ;

The following is a GOLD ( GC 02-13 ) Chart of today ( Dec 20, 2012 ) 

On this setup I use a trendline ( blue exponential moving average )
an envelope ( gold envelope of 8 ticks size around a 17 moving average )
and Donchian Channel of 13 bars.
When the envelope is all below the trendline we are in sell mode...
A bar can trigger a signal, only if it is making equal or higher high for a short, so we check that the high of bar must be touching the Donchian Channel.
If all of these conditions align, then we place a sell stop 2 ticks below the signal bar...
If price continues against our entry we don't get a fill, just another bar with better entry, until the envelope touches the trendline again and the trade is discarded.
On this example, we keep moving our entry up for several bars until we get a fill at 1659.4
The stop must be placed 2 ticks above the high of the entry bar ; 1660.8 so we are risking 1.4 points = $140 per contract.
We usually should go for 1.5 to 2 times the range of the chart as first target ( 15 to 20 ticks ). On this example the move was enough to get 6 points ( $600 ) per contract.
I created a dedicated indicator to follow this setup that does all the calculations, paint the bars, show the indicators used and also places a diamond where you need to place the order... Really easy... More info Here
On instruments like gold or crude oil we should always take into account the option of using trailing stops, because these markets offer great potential.
There are several ways to manage a trailing stop, and that may be one of my next posts...


Pablo Maglio

Tuesday, December 18, 2012

Small Range Setup

New Setup : Small Range

This is an old setup focused to trade trending and/or impulsing markets in the direction of the trend.
The Entry Type uses Stop Orders as it is intended for fast volatile never returning markets like crude oil or gold.
This setup uses the following Tools :
  • A slow Moving Average to define the Trend (blue line)
  • An envelope around a fast moving average to define the trade / no-trade condition
  • A channel to verify that the entry bar is making an extreme of the move
  • A tool to calculate the range of the bar ( not used on range bars)
When the blue line is all outside the envelope, the setup has a trend. Otherwise it is in neutral state ; gray bars = do nothing.
If we have red bars and current bar is touching the upper channel, then we have a possible short entry.
When not using range bars we can add another condition ; signal bar must be of small range ;

The short entry is a Sell Stop some ticks below signal bar ( usually 2 to 3 ticks ).
If at next bar we have a better entry we move the order to new place, like on example above.
Once the entry is filled, the stop should be placed some ticks above the signal bar.
Using range chart is easy for this setup because the stop is a fixed value ; the range of bar + 2 times the offset. On a 9 range CL chart using 3 ticks as offset, the stop is 15 ( 9 + 2 x 3 )
I have a developed a special indicator for this setup on

Friday, December 14, 2012

The Indicator Store New Web Page

The Indicator Store estrena nuevo sitio
...ahora con muchos mas productos y facilidad de busqueda y compra.

The Indicator Store has new Web Page ! with a lot of products and an easy to use interface to browse and purchase.

Sunday, November 18, 2012

Thursday, November 15, 2012

Tuesday, September 18, 2012

Impulse Mode Setup

Impulse Mode

As we all know, one of the most profitable types of Market is the Impulse Mode.
Once the impulse mode is established, there are lower than average or not pullbacks at all, so it is very difficult to enter the market until the move is finished.
This is the reason why it is so important to determine when the market is ready to start an impulsive move and get into the last pullback.
The definition of this rule is critical to avoid to take a lot of fakes moves, but even taking several failures, the profit potential is so big that compensates taking several loses before the final winner.

The rule I use to define when a market is about to start a trending mode is the Bollinger Crossover and it works as follows ;
We need a fast moving average and a slow Bollinger Band. And the the settings we must find are those that make the fast moving average to stay inside of he Bollinger on sideways and even slow trending markets.
When we get a Bollinger crossover ( Fast moving average crossing outside of the Bollinger Band) , then the setup is trade ready in the direction of the crossover, and the entry is a limit order at the middle of the band
See attached picture :

I created a set of Indicators to trade this setup :
PM_Bollinger_XO : It draws vertical lines and triggers audible and text alerts at crossovers. It is possible to filter only the first signal on each direction ( like on the picture )
PM_Trend : It paints bar colors according to the setup

For those who like doing research ( like me ) or auto trading a setup, I also created the strategy PM_Impulse_v2 :

I will post my research on different markets here and if you want to share any setting, info , comment or suggestion, please feel free to do it...

Pablo Maglio

Thursday, September 6, 2012

Trading a Moving Average

Is it possible to define a trade system only with a moving average (MA) ?
That would be something like this ;
If price is above the MA then we place a limit order at its price value...
If price is below, then we place a sell limit at the MA price value...
We could also define a zone where no trades should be placed...
...let say, while price is too close the MA, then we have no trend ; so no trades.
If price goes far enough from the MA, then we have a defined trend, so we start chasing the MA.
Sounds easy...but ;
Can we find a combination of timeframe and period of MA that produces results ?

I created a long time ago a strategy that exploits that edge, it is called PM_EMA and its first purpose was just that ; find good moving averages to work with...

Using the Strategy Analyzer Tool on Ninjatrader we can run an optimization process where we test the strategy using a range of moving averages, and then create a chart where we can get the PnL vs period ( see attached picture )

The horizontal axis represents the period of an exponential moving average, the histogram is the Profit/Loss of trading it with fixed target and stop. The red line is the number of trades ( its value is on the right vertical axis ).
So we must find the best spots where the profit is maximized and the number of trades is low enough to cover the comisions...

I started this thread to all those followers as me to discuss the best settings we find about this setup.

Tuesday, August 21, 2012

Introducción a Sistemas de Tendencia

La mayoría de los Sistemas actuales de Trading utilizan uno o varios indicadores dedicados y reglas complejas. Muchas veces es necesario automatizarlos para poder seguirlos sin cometer errores. Para un principiante, lo mejor es empezar con un Sistema que utilice reglas claras y fáciles de aprender y seguir. En esta nota vamos a desarrollar un Sistema que opera en momentos que hay Tendencia definida y utiliza indicadores convencionales, de los que cualquier plataforma ofrece. Para seguir este sistema vamos a necesitar Bandas de Bollinger y Medias Exponenciales. Con este sistema no solo podremos definir la tendencia, sino también cuantificarla e incluso detectar cuando el mercado analizado pasa de un movimiento de tendencia fuerte a completamente impulsivo. Los movimientos impulsivos son los que más relación Ganancia/Riesgo ofrecen, y usualmente conviene operarlos con trailing stops en lugar de Objetivos fijos. A continuación veremos la confección del grafico para seguir este sistema. Dado un Mercado y un Marco de Tiempo comenzamos por agregar al gráfico 3 Bandas Exponenciales de Bollinger con Periodo 200 y Número de Desvío Standard 0.5 , 1 y 2. Luego agregamos una Media Exponencial Rápida de Periodo 17.

tabla 1
 tabla 1

Mientras la Media Exponencial rápida de periodo 17 “EMA(17)”se mueva dentro de la banda menor, el sistema está en modo neutral, y es un indicio de que el Mercado esta en consolidación. En cuanto la EMA(17) se salga de la primer banda, el sistema entra en modo tendencia ; Si superó la banda superior la tendencia es alcista, si superó la banda inferior, la tendencia es a la baja. En un caso simple de tendencia alcista, donde la EMA(17) no va mucho mas lejos de la primer banda sin llegar a atravesar marcadamente la segunda banda, la entrada de compra clásica es en la mitad de la banda, o sea en la EMA(200) con un Stop promedio ubicado entre la primer y segunda banda ; 

tabla 2
 tabla 2

Los objetivos también pueden determinarse con las Bandas de Bollinger, como se ve en el grafico adjunto, siendo cada una de las Bandas subsiguientes un posible objetivo. Para el caso particular de este ejemplo, luego del objetivo 2 hay una re-entrada en la EMA(200) ya que luego de obtener el objetivo 1 se volvió a producir un cruce de la EMA(17) con la primer Banda. En este caso esta entrada funcionó muy bien, aunque estadísticamente las mejores operaciones son las primeras luego de cada cambio de tendencia. En el ejemplo siguiente se puede observar un caso de Impulso : Cuando la EMA(17) no solo pasa la segunda Banda sino que casi toca o sobrepasa la tercera, podemos considerar que el mercado ha entrado en modo Impulso y que debemos buscar entradas más agresivas que en la EMA(200). Lo usual es utilizar la banda previamente atravesada como entrada y usar la misma o la anterior como trailing stop: 

tabla 3
 tabla 3

Este sistema, a pesar de ser sencillo no deja de tener muy buena performance. Puede utilizarse en cualquier mercado (Forex, Futuros o Índices de Acciones ) y en distintos Marcos de Tiempo. En el siguiente ejemplo puede verse este sistema aplicado al futuro del Crudo en un marco de Rango 5, donde cada operación tiene un riesgo máximo de 15 ticks ( usd 150 x contrato ) y objetivos del orden de 40 ticks ( usd 400 ). Este es un grafico muy rápido con muchas operaciones por día, lo cual demuestra que el sistema es aplicable a cualquier mercado. 

Por Pablo Maglio

Friday, August 17, 2012


One of my best strategies that can be configured to be profitable in all kind of markets, from crude oil to bonds
This is the performance on crude oil trading just 1 contract with 15 ticks of target and stop