MACH-TREND PLATINUM PRO IS NINJATRADER 8 READY

THE LOW FREQUENCY TRADING MODEL THAT GIVE EXCEPTIONALLY HIGH RISK-REWARD RATIOS

I am sure most of you will agree with this comment, but please correct me if I am wrong.

The single most annoying factor about trend following is the following scenario...

Our trend system signals a buy, so we buy, up she goes and we move up our stops to lock in the big gains and we feel happy that the trend will go much higher, then the uptrend makes a sudden larger than usual deflection and takes out the stop making us enter into a short trade.

The trend then begins up again and our short stop gets hit with a small but highly annoying loser, and we go long again making another nice profit. The "pig in the middle short trade" may have reduced the profit overall taken out of this difficult up trend by as much as 50%.

How many times does this happen to traders? Very often I am certain.  I don't know about you, but with me it becomes my mission in life to figure out different ways to remove the "pig in the middle" short trade from an otherwise "nice up  trend".

We have all doubtless experienced this situation many times and this is known as a "whipsaw trade". The usual response by the trader is to use slower systems and wider stops to give trades more space to breath. Or sometimes the trader will make the mistake speeding up his model to try and catch every little twist and turn, which results in a nightmare commission eating system which just over trades, making the brokers richer and the trader impoverished..

                                                                                                                    A conversation with market wizards volume 1 trader  Ed Seykota about this dilemma spawned his memorable comment,  "To prevent whipsaws, stop trading"

Reading between the lines of this comment, what he meant to say was he has had this problem many times, and nothing can be done about other than to stop trading altogether.

Whilst this statement is very valid, in the sense that removing whipsaw completely is virtually impossible, there are many things we can do to reduce it.

Mach-Trend is designed to minimize whipsaw by as much as 30%:

Using it can often it reduces whipsaws as much as 30% and in certain nice trending markets it can often achieve a 100% whipsaw reduction..

Rather than just slowing down a system, today's super fast computing speed enables us to make millions of calculations in the blink of an eye, so putting this new found speed and technology to good use Mach-Trend has reduced the problem considerably.

How does it work?

Please forget about such useless terms as "industry standard" or "general trading strategy performance" as this product is monitoring a special trend algorithm and monitoring the urgency of the price action within the trend. In simple terms it is constantly buzzing away asking "Is this reversal going anywhere, is it serious".  Its job is to follow instructions to stay on board the trend unless something really gives it hard evidence to reverse its position.

The key is to use intelligence in the code, instead of just making it desensitized to small movements. It has some real difference to the usual filters and is very robust in most  market conditions that will be encountered.

How does it affect system ratios?

Mach-Trend is a high performance system when applied correctly to high beta markets.

The risk reward ratios it can achieve are not often found in regular trend following models and as the trading frequency is very low it is capable of riding some extremely difficult to read trends in an effortless manner.

In today's volatile and robotic noise ridden markets a trend following system can be considered quite good if it can achieve 35-40% wins and 2.2 to 2.7 : 1 risk / reward ratios.

Mach-Trend is capable of completely blowing these "industry standard" ratios out of the water

NinjaTrader system report below.

In this example when applied to volatile stock, Mach-Trend achieves 48% winning trades and a 24.71 risk reward ratio

Over a period of 15 years Mach-Trend completed only 31 trades but managed very well to lock onto to all the major winning trends.

( Commissions are not included in this test, however with only 31 trades it becomes of very low significance)

How does it perform on more "ordinary" markets?

Mach-Trend is a very clever system which when applied to dull markets generally behaves itself very well.

However a trader must understand that to achieve exceptional ratios, one must find exceptional markets to apply systems too.

I have always tried very hard to explain the importance of market selection as it is of paramount importance to get good results, many people with intelligence bordering on the genius level have not understood me on this point, and the more I think about it the more incredulous it seems.

A word of advice: To catch more fish, go where the fish are. To catch more trends, go where the trends are.

Example of a "typical non trending stock" optimization GOOG

Mach-Trend applied to Google stock on daily data since 2005. This stock can never be defined as one having good trending action as it is traded by every man and his dog, every mans sisters dog and every mans dogs puppies.

Such popularity causes excessive  NOISE and PERTURBATION which makes it score very low on the list of trend follower friendly markets.

Doing a course test with only length and delay being optimized the following parameters showed the highest profits.

Length 33, Delay 20 ( note this delay value is very very high) which illustrates just how much "noise" is present in Google stock price, a more suitable market would show better results with a much lower delay value usually  around 2 to 6.  

In this test skew direction is not optimized and value was set to 0.

Guess how many trades in 7 years?

Your broker will really hate you for using this system as you wont be needing to listen to his annoying nagging voice

"Hello Sir I advise you take some profits now prices are high"    Now you know what to tell him....you do know right?

He will make very little commissions from you if you use Mach-Trend, and after all it is your money so why give it all away to your greedy broker?

Example of a "typical stock" optimization GOOG

Mach-Trend found most joy using a low frequency and did only 7 trades in 7 years.

The profitable winning trades were 57% and the risk reward ratio was an astounding 14.85 : 1, any of you who have read Paul Tudors Jones interview in market wizards will remember he would always look for at least five to one reward to risk ratios before putting a trade on.

See report below.

( Commissions are not included in this test, but with only 7 trades you know that dealing costs will amount to peanuts )

Why only 7 trades?

Mach-Trend has a setting called "delay" which casts a stroke of genius into its algorithm. 

I was very pleased when I thought of this idea as it adds a very important logical argument to this model which enhances its performance considerably.

Delay in this test  above is set to 20 and length was set to 33.

To help you understand what this setting means it is best explained in graphical form show in the four charts below.

Clearly you can now understand that increasing delay reduces trading F ( F = Frequency )

Mach-Trend can be adjusted to trade more or less frequently by using the delay feature. The greater the delay setting used the more space your trade will be given while the trend is "in no mans land" or "undefined" or what most would call "un-clear price action".  You know those average days? When there is not clear buy or sell signal where prices just meander around aimlessly?

Those are the days which make your broker rich and drain your trading account slowly.

This feature is a key part of the flexibility of Mach-Trend which helps you keep on a trend during those days when everyone is in a panic and making mistakes, This keeps you away from the noise and erratic movements common in the choppy noisy markets of today.

 MACH-TREND SKEW FEATURE Can be set to bias for up-trends and down-trends

MACH-TREND WITH A LONG TRADE BIAS ( SKEW VALUE =  -NEGATIVE )

MACH-TREND WITH A SHORT TRADE BIAS ( SKEW VALUE =  +POSITIVE )

Skew direction feature = +2

Length 30

Mach-Trend in the example below is set to skew + 2 which give its a bias to take short trades earlier and take long trades later. ( This setting would be used if a bear market was in progress)

Skew direction feature = +6

Length 30

Mach-Trend in the example below is set to skew + 6 which give its a bias to take short trades earlier and take long trades later. ( This setting would be used if the user perceived a bear market was in force )

Clearly you can see below as the uptrend slows down at the end of 2010 Mach-Trend attempts to go short three times  until catching the real sell off on the fourth try.

• Perfect gift for Valentines day!
• More useful than other typical Valentines gifts

• It really locks on to the major trends!
• Simple to use
• Four versions from beginner to pro
• Robust intelligent system
• Exceptionally high risk - reward ratio

How does it affect F?

F = Trading frequency, and high F values can kill a good strategy stone dead just by racking up dealing costs from the bid ask spread.

The larger profit we get relative to commissions and spreads the better off we are. Over trading for a few ticks, will mean profit to cost ratios fall away so far that even if we trade well we don't make anything.

Black holes in trading

Stephen Hawking IQ 160+

Stephen Hawking has long been warning us of the dangers of black holes, and who am I to disagree with him? 

He talked of their existence long before anyone had ever seen one, and when the first one appeared on the hubble telescope the whole world realised he was a genius and not a madman as most critics had assumed.

Hawking apparently bet a years subscription of Penthouse magazine with his friend Kip Thorne, that a black hole would not be found. Hawking's bet was lost and Penrose collected the magazines.

Hawking got the black hole guru status, so it was win-win for him.

(F) consumes your profits just as the black hole consumes a star

A black hole consuming a star

It now become obvious how important it is to reduce F ( frequency ) as we can see the number of trades has drastically fallen, and therefore the money we give to the black hole is reduced.

What I refer to as the black hole are dealing costs, time, data costs etc.  Yes time, as high frequency models require much more time and attention.

The less money that gets poured into the greedy all consuming black hole, then better it will be for us.

I hope this has illustrated the point about (F) Frequency killing trading profits and making brokers rich.

Explanation of Mach-Trend platinum pro for NinjaTrader7 special features

After the Mach-Trend paint bar is added to a chart in NinjaTrader 7  the chart bars or candles will highlight to indicate changes in trend, basis of the Mach-Trend algorithm. The user can configure the colours to suit their preferences.

After the Mach-Trend paint bar, indicator or Mach system is added a chart in NinjaTrader 7 the user can configure the period required to suit their preferences. Shorter periods will produce more trend changes than longer periods.

When this feature is used in Mach Trend Platinum pro and GOLD, the user can optimise performance of Mach trend to make greatest profits.

After the Mach-Trend indicator plot is added to a chart in NinjaTrader 7 the plot will display over the chart and when the trend changes direction the indicator will move up or down and the plot colour will change to indicate trend direction basis of the Mach-Trend algorithm. The user can configure the colours required to suit their preferences.

After the Mach-Trend system (Strategy)  is added to a chart in NinjaTrader 7, there will be arrows showing where the trend has changed direction,  the system can be optimised for period, delay, and skew for optimal performance. The system can be set to long trades only, short trades only or both.

The 5% rule function for short trade exits is included as a TRUE or FALSE input which are displayed as 1 = True and 0 = False

This is an optional choice for the user to configure if required. 

The system can be set to long trades only, short trades only or both. This is to cater for trader who have the fear of short selling, this is not unusual as a trader with no stop can suffer a potentially unlimited loss with a losing short trade that goes wrong. Using stops is a simple cure for this drama!

After the Mach-Trend Platinum pro or Gold Strategy  is added to a chart in NinjaTrader 7, the user can alter the skew function which is one of the optimizable inputs provided. This adds a "Trend skew" feature to the Mach-system which enables the user to make the system biased in the chosen direction.

For example, if there is a strong bull market in progress, then engaging in short selling is generally a losing game. Henceforth if the skew feature is set to s negative minus number, then the system will enter long much easier than it would enter a short trade. This feature is also reversible for use in bear markets. This feature appears as an INPUT value within the strategy and can be optimised for best performance.

After the Mach-Trend Platinum Pro or Gold Strategy is added to a chart in NinjaTrader 7 the user can alter the delay function which is one of the optimizable inputs provided. This adds a "Trend lag" feature to the Mach-system which enables the user to make the system faster or slower without changing the actual period input.

In simple terms, creating a dead-zone in a trading system where it the trend is neither quantified as up or down, allows breathing space for your position. The system will stay in its previous mode of long or short while inside this dead-zone and will not change direction until the trend has changed direction in a quantifiable manner.

The user can further reduce commissions and trading F by increasing delay, or speed up the system if the price action is reasonable clean without fake signals. 

5% rule short exit feature

After the Mach-Trend system (Strategy)  is added to a chart in NinjaTrader 7 the user can engage the 5% rule input feature which will close out a short trade once it has fallen by 95% after which the system will stay "flat" until the next long or short signal is observed.

This feature would not often be activated in actual trading apart from cases such as the 2008 decline or in stocks such as Enron. This input has a 1 or 0  field in the strategy.

The 5% rule was coined by option writers who had a preference to exit short options once the profit had exceeded 95% of the paid price as there was little reward and a lot of risk if they chose to hold onto them instead.

Mach-Trend Platinum Pro Strategy paint bar feature shows the clarity of using it suits the novice trade just as it does the expert.  getting a long trade while all the volatile price action was leaping around. When the evidence supported a new uptrend it jumped on board and locked onto the trend. It would be a mistake to label this a trend predictor as it is obvious that nobody can predict what the central banks and governments will do next to us investors, they cornerstone is that it recognises patterns in trends and locks nicely onto them.

The result is obvious: Two massive winning trades

Above:

Mach-Trend Platinum Pro stays in a long trade from $3.25 for almost 3 years and exits at $25.90  but please note, given that MachTrend is fractal in the same was a moving average is, this chart could just as easily be 10 tick chart of the Micro Nasdaq futures to help you scalp your daily quota more easily.

Probably your broker would have called you about 50 times during this period asking if you want to take a profit.......you know what to tell him

Above:

Mach-Trend Platinum Pro Strategy tracks forex trends very nicely too. Two trades giving over 400 pips profit in a few weeks. As Jesse Livemore wisely said, the money is not made in the trading but in the holding and waiting of your forex trade to run to maturity. Markets all get the effect of demand supply imbalances and this is what creates those long trends you can ride on. Other indicators such as relative strength index or money flow index just don't have this quality to hold on for long periods.

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