However, the parameters for the buy signals will bedifferent than those for the sell signals, because of thepropensity for markets to fall faster than they rise. Therange for the last
bars will be defined as the highesthigh of the last
bars (including the current bar) minusthe lowest low of the last
bars (including the current bar).The buy price is determined by adding a percentageof the range of the last
bars to the current close — thepreviously described volatility-adjusted technique. If the next bar’s price exceeds the buy price, the systemissues a buy signal. The sell price is determined bysubtracting a percentage (a
percentage thanthe buy percentage) of the range of the last
bars fromthe current close. If the next bar’s price falls below thesell price, the system issues a sell signal.The resulting Multibar Channel Breakout systemwill trade the S&P500 E-Mini futures on an intraday basis using one-minute bars. The TradeStation Code isshown in Figure 1 (opposite page).
Multibar Channel Breakout rules
This is a stop-and-reverse system, meaning it is alwaysin the market: When a sell signal occurs, long tradesare exited and a short trade is entered; when a buy sig-nal occurs, short trades are exited and a long trade isentered. These are the system’s parameters:
= the price range over the last
= the price range over the last
= the percentage multiplier of the BRange for buysignals;
= the percentage multiplier of the SRange for sellsignals;
= the current price;
= c + bx*BRange;
= c - sx*SRange
The number of lookback bars (including the cur-rent bar) for buy signals.
The number of lookback bars (including thecurrent bar) for sell signals.Notice that not only are the percentage multipliersfor long (bx) and short trades (sx) different, the look- back periods the system references for buys (n) andsells (m) are also different. The trade rules are simple:
1. Buy rule:
Buy the next bar at buyCh, stop.
2. Sell rule:
Sell the next bar at sellCh, stop.
3. Intraday bar exit rule:
Exit the position on theclose (no overnight trades).Although it may not be immediately obvious, this sys-tem avoids the opening gap whipsaw problem —trades being triggered because of large gap openings
ACTIVE TRADER •
The system triggered more short trades during the test, but pro-duced profits on long trades, as well.
TABLE 1 MULTIBAR RANGE BREAKOUT SYSTEMPERFORMANCE SUMMARY, JULY 7 TO AUG. 1, 2003
All trades Long trades Short tradesTotal net profit $4,912.50 $1,450.00 $3,462.50Gross profit $6,637.50 $1,912.50 $4,725.00Gross loss($1,725.00) ($462.50) ($1,262.50)Profit factor 3.85 4.14 3.74Open position P/L $0.00 $0.00 $0.00Total number of trades 55 20 35Percent profitable 58.18% 55.00% 60.00%Winning trades 3211 21Losing trades 22 9 13Even trades 1 0 1Avg. trade net profit $89.32 $72.50 $98.93Avg. winning trade $207.42 $173.86 $225.00Avg. losing trade($78.41) ($51.39) ($97.12)Ratio avg. winning/avg. losing 2.65 3.38 2.32Largest winning trade $700.00 $362.50 $700.00Largest losing trade($300.00) ($125.00) ($300.00)Largest winner as% of gross profit 10.55% 18.95% 14.81%Largest loser as% of gross loss 17.39% 27.03% 23.76%Net profit as% of largest loss 1,637.50% 1,160.00% 1,154.17%Max. consecutivewinning trades 5 5 4Max. consecutivelosing trades 5 2 3Avg. bars intotal trades 134.96 45.8 185.91Avg. bars inwinning trades 166.88 69.18 218.05Avg. bars inlosing trades 91.95 17.22 143.69Max. drawdown(intraday peak to valley)($887.50) ($862.50) ($975.00)Max. drawdown(trade close to trade close)($300.00) ($175.00) ($400.00)Max. trade drawdown($475.00) ($475.00) ($362.50)