We are very thankful for the educational contributions from our friends over at Shark Indicators. They have been a great provider of both written, live and video content over the past several months! We received the following post that is a bit unique in a sense that it was actually written by one of their subscribers! If you have not had a chance to check out the revolutionary tools they are putting in the hands of individual traders, we definitely recommend you checking out - www.SharkIndicators.com
Guest post by Dano (Bloodhound User):
I have been futures trading for just over 5 years now, and let me tell you, I have had some pretty horrifying experiences with it. I have blown out accounts and been so stressed-out that my hair would literally fall out. In the beginning, when I came across a statistic that read something like “90% of all day-traders blow out 90% of their account within the first year”, I thought to myself, “Well, that is because those of the 90% were idiots! I am a genius, so I will definitely be in the top percentile of the 10%! Surely, I will figure this thing out and be a millionaire in no time flat!” Trading can be very humbling, can’t it be? And we can be our own worst enemy. I now understand the actual number to be closer to 95% habitually lose money. It takes serious drive, determination, and dedication to become a part of that 5% of day-traders that actually make money trading.
Now let’s say you have a profitable trading plan. You have manually gone through at least 90 days of data and marked up every trade on your chart that met your clearly defined entry and exit rules. It was profitable and would have made quite a bit of money. But, when you trade it forward with live data (hopefully in a simulated account!), you find yourself entering late and exiting late (or early), missing trades, and even taking trades that do not come close to meeting your rules—trades you go back over and think to yourself, “What in the world was I thinking jumping in like that?!” You end up losing money. If only you could automate your rules and completely take the human element out of your trading, you know it would be a success. Maybe you know enough about strategy creation within NinjaTrader that you can put together some basic rules, but when it comes to developing your specific rules into the proper sequences of NinjaScript code, you are at a total loss. This was the boat I was in until about a month ago when I discovered Bloodhound from SharkIndicators. I had no idea anything like this even existed. In order to even have been able to have done what I have done within the past month, I would have had to spend at least a couple of years learning how to program. And even if I became an excellent programmer, I still would not be able to write new code, compile it, see the results, make changes, compile it again, view the results, etc. nearly as quickly as I could with Bloodhound. You can literally see the changes you are making to your strategy instantly while you add new solvers for indicators, add new function nodes, and then add new logic nodes to connect different solvers and nodes together! This product is unparalleled and it is the single most useful tool for trading I have ever come across.
We would all just love to see result like this, wouldn’t we?
In this article, I show you how I put together the simplest of all profitable systems using just a few basic indicators with a few basic rules. I am not going to completely give it away, but if you are even the slightest bit familiar with using Bloodhound, I am sure that, with the information provided within this article, you will be able to replicate this simple system for use as a basic template, adding your favorite indicators, and experimenting with other entry and exit logic as you attempt to make it more and more profitable. It would be EXTREMELY FOOLISH to use this system to trade live with real money. All the results you read here are strictly hypothetical and were created using historical data. Trust me, true performance with real money will not be as good.
The chart type below is what is called a UniRenko Bar which is set to T=1,R=3,O=1. You can find it at Big Mike’s Trading Forum in the Elite section.
The three moving averages are the following:
White Line: 20 period Lin Reg
Dark Violet Line: 80 period Lin Reg
Dodger Blue Line: 55 period EMA
I want to enter the market where all three of these lines converge with one another. So in order to “mark” these areas, I’ll need to determine which of the solvers listed below in Bloodhound will be appropriate for this task. So far, Bloodhound has 14 different solvers.
Indicator Change in Slope
Regression Channel Position
Regression Channel Width
Dorschden Swing Trend
Dorschden Swing Volitility
Time Session Solver
The “Indicator Comparison” solver is the one we want in this case, as we want to highlight the area where the Lin Reg 20 is within a certain range of the EMA 55. Our first step is to rename it “LnRg20/EMA55 Comp”. Since we want to show a precise range, we set the “Small Amount” to the number of ticks we want to use for our range and then set the “(A-B) Neutral” equal to 1 under both the Long and Short Output. The best way to learn the many nuances within this solver is to simply experiment with different settings until you understand exactly how each of them changes the output.
We copy that solver, rename it “LnRg20/LnRg80 Comp” and change Indicator B to a Lin Reg 80, and then decide the tick range we want to use. You can go back and experiment with these values until you find a performance you’re happy with…We use the same solver for comparing the EMA 55 with the Lin Reg 80.
For our entry signal, we are simply using an “Indicator Inflection” solver. But rather than using an indicator, we’re just going to use Closing Price. So this solver is going to mark every bar where the closing price reverses direction—it marks every “reversal bar”. You can change the “Lookback Period” in this solver to if you want to extend the signal forward. The more you increase this number, the more entry signals will show up once you combine all of the solvers together within the “Logic Board”. However, many of those extra signals could possibly be losing trades. Again, you can experiment with these values for yourself.
Now let’s add one more filter using an “Indicator Slope” solver so that when the EMA 55 is sloping upwards we can take only longs, and oppositely when it is sloping downwards we can take only shorts.
And now we join them all together using an “And” Logic Node (and there are 8 different Logic Nodes for use with differing conditions) to show the signal for our entries.
Next, you’ll need to create a new Logic Template within this file and name it “Exits”. My exit strategy is the simplest of all possible exit strategies. I literally use just one solver. You could easily figure it out by studying the chart below and tinkering within Bloodhound…
Now we can add the strategy that comes with Bloodhound, SIRaven, and add our template we just created using our Entry Logic and Exit Logic, setting the “Enter Only When Flat” to “True” and “Enabled” to “True” and then we can test its performance and see how it would have done.
So now that we have run the strategy, let’s back test it and see the performance read-out.
In case that is too small to read, here it is!
Many of us understand that this is not a very accurate performance report since we’re using UniRenko bars which don’t have a “True Open”. However, since we’re using a 1tick UniRenko bar chart, if we set the “Slippage” in the strategies panel to 1 tick, we will receive more accurate results (at least for the ES—for the CL it would probably need to be closer to 1.5 or 2 ticks since that is a more thinly traded market). So let’s do that.
And now let’s measure this somewhat more accurate performance over the past 4 months.
This is where most strategies using these custom Renko bars fall apart—slippage. But, this one has managed to remain profitable! Here is a larger print-out.
Here is the graph for this strategy:
Using Bloodhound, I was able to build this strategy from scratch in less than two hours. If I already had the rules that we used for these three Moving Averages clearly defined beforehand, I could have built this in less than 10 minutes with Bloodhound. In all actuality, this really isn’t even a very good example of just how incredibly useful Bloodhound can be. The kind of complexity that is possible inside Bloodhound will blow your mind. You can put together literally any strategy you could possibly think of using the Solvers, Function Nodes, and Logic Nodes within Bloodhound. And once you have done that, you can then test your performance results using their complementary strategy, SIRaven. In the next article, I will show you how to add a very novel solver within Bloodhound to this system and see if we can’t make this even more profitable.
Thanks for reading,