Advanced MetaStock Training Seminar

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Advanced MetaStock Training Seminar

• Rick Klink

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Seminar Outline

• 8.45 MetaStock Formula Language
• 10.15 Break
• 10.30 System Design Analysis
• 12.00 Lunch
• 1.15 MetaStock System Tools
• 2.00 Special Guest Robert Deel
• 2.45 Break
• 3.00 Tips Tricks
• 4.30 Conclusion

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Advanced MetaStock Training Seminar

• Standard Indicators
• Custom Indicators
• System Tests
• Explorations
• Experts

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Advanced MetaStock Training Seminar

• Formulas for Popular Chart Studies
• Theory of Systematic Trading
• System Testing and Development
• Strategy Testing and Development

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Formula Language - Basics

• Indicator Profiles
• Mathematical Operators
• Indicator Parameters

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Price Array Identifiers

• Long Name Abbreviation
• Open O
• High H
• Low L
• Close C
• Volume V
• Open Interest OI
• Data Array Identifier P
• Previous Value PREV

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Price Array Examples

• mov( Close , 10 , simple )
• mov( C, 10 , S )
• if (High gt ref (High,-1 ), mov ( High , 20 ,
  simple) , 0)
• if (H gt ref (H,-1 ), mov ( H , 20 , S) , 0)
• Stdev ( Volume , 20 )
• Stdev ( V , 20 )

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Price Array Examples

• Data Array Identifier - used to reference any
  indicator or price plot
• Mov( P, 12, E ) Mov( P, 26, E )
• Useful for advanced System Testing and
  Explorations

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Mathematical Operators

• Addition
• - Subtraction (or negative)
• Multiplication
• / Division

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Mathematical Operators

• ( H L ) / 2
• mov(C, 10 , S ) - mov( C, 20 ,S ) / (H L C)
• Close ((1.02 High) - High)

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Operator Precedence

• Order in which operators are calculated
• - Negative Values
• Multiplication
• / Division
• Addition
• - Subtraction
• lt Less Than
• gt Greater Than
• lt Less Than or Equal to
• gt Greater Than or Equal to

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Operator Precedence

• Equal to
• ltgt Not Equal to
• And Logical And
• Or Logical Or
• Variable Assignment Operator

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Order of Calculation

• Inner most calculation first
• H L / 2 L / 2 H
• (H L) / 2
• Use (parenthesis) to control precedence

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Using Variables

• ADX Average Directional Movement
• MDI Minus Directional Movement
• PDI Plus Directional Movement

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Using Variables
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Formula Call Functions
MetaStock Indicator Builder
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Formula Call Functions

• Approximately 200 call functions !!
• MACD Indicator
• Syntax- macd( )
• Function- Calculates the predefined MACD
  Indicator
• Example- The formula MACD( ) returns the
  value of the MACD indicator (i.e. the
  solid line).

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Formula Call Functions

• Sqrt ( Close )
• RSI ( 14 )
• Mov ( Close , 10 , S )
• BBandTop ( Close , 20 , E , 2.0 )
• You can even call your own custom indicators !

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Indicator Builder
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Indicator Builder
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Indicator Builder
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Formula Call Functions

• Standard MACD Mov(C,12,E)- Mov(C,26,E)
• MACD Special MACD()-Mov(MACD(),9,E)
• Fml(MACD Special)

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Formula Call Functions

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Conditional Statements

• If statements
• And statements
• Referencing Custom Indicators

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Indicator Builder
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Indicator Builder
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Indicator Builder
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Nesting Functions

• Substitute an indicator for a price series !
• Stdev( Stoch (5,3) , 10 )
• Mov( RSI (15) ,10 , S )
• Mov( Mov( RSI (15) , 20 ,W ) , 10 , S )

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Security Data Function
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Security Data Function
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Security Data Function
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Security Data Function
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Security Data Function
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Security Data Function
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Formula Wizard
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15-Minute Break
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Nature of Trading Systems
In Search of the Holy Grail
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In search of the Holy Grail

• The bad news There is no Holy Grail
• The good news The Holy Grail of trading systems
  does not have to be one that produces a large
  proportion of winning trades
• Looking for profitability in the long-term

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Nature of Trading Systems

• Many traders measure their success in trading by
  wealth, rather than in terms of their ability to
  develop and maintain an effective trading
  strategy.

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Trading Example with Predetermined Trading Plan
Prior to our trade,weve identified a series of
chart conditions that might represent a good
trading opportunity. Weve identified a possible
stop loss, entry point and profit target and
entry condition. With this strategy mapped out we
wait for our signal to enter the trade.
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On the 16th April, our buy signal is triggered
when the price closes at 3.55. The next day we
enter the trade. Weve set our profit target at
4.45, just under resistance that has been tested
several times over the last eighteen months. If
our profit target is hit, this will represent a
profit of 25, an amount well within out
profit-loss ratio.
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Initially, our trade rises and were on the way
to a profitable trade. However, after a strong
rally to 4.05, the rapid price rise stalls, then
closes downward with a strongly negative
day. Tension begins. We hope this is temporary
retracement, and we wait for the price to recover
and continue to rise.
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Our tension increases as prices plunge. Were now
trading under our buy price. Were feeling the
discomfort at having lost the profit of the
previous rally and hoping our share price will at
least stay above our stop loss. At least we know
that if we do exit at our stop loss, well
reserve capital to continue trading next time.
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Our tension turns to fear and pain as four
trading days later our price closes below our
stop loss. This is a clear triggering of our exit
signal. Exiting at this point will involve the
pain of taking a loss, but well be in a position
to trade again with our remaining capital.
However, we cant bring ourselves to exit, and we
stay in the trade.
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Over the next month the price continues to
plunge. We feel anger at not taking an initial
profit, at not exiting at our stop loss, and for
continually failing to exit during the downward
slide. Prices have appeared to bottom out,
however, so we hold on for a rise.
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After a short upward break, the drop continues.
At this point the pain becomes intolerable. We
exit finally, fearful of a further slide. A large
bite has been taken from our equity equaling 40
of the value of this trade.
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At the same time you finally exit, a large number
of other traders who were in the same losing
situation also decide they cant hang on anymore
and exit. Heavy selling follows and buyers move
in to snap up the bargains. This causes the price
to rise over the next two months. Having watched
this unfold after we sold, we now have a further
reason for kicking ourselves.
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Nature of Trading

• Our measurement of success must be made on the
  trading process and its effectiveness
• Trading the markets is a dangerous exercise
• The majority of traders lose money hence the
  importance of education and training

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Nature of Trading

• Look to embrace techniques that better position
  us to deal with the day to day pressure of
  trading.
• The more attuned we are to what successful
  trading looks like, the more likely we are to
  make reasoned judgments about our trading.

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Goal Setting

• Many traders measure their success in trading by
  wealth, rather than in terms of their ability to
  develop and maintain an effective trading
  strategy.

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Professional Traders

• Average of all professionals 0
• Average of the best 50 18
• Average of the best 25 30
• SP, Dow Jones 10

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Goal Setting

• 15 Annualized Return ????

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Nature of Trading

• Simulating actual trading and back testing of
  strategies is crucial to our success

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Fundamentals of System Design

• Lets look at the process of system testing
• Understand the key steps involved

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Fundamentals of System Design

• There are a number of key elements to developing
  high performance trading systems, and they are as
  follows

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Fundamentals of System Design

• Outcome Driven
• Structured Development Process
• Evaluate Performance
• Solid Statistical Foundation

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Risk Management
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Risk Management

• Risk 2 of Portfolio
• Total Portfolio Risk 20
• Risk Reward 21, preferably 31
• Adequately Capitalized
• Dont Average Down
• Pyramid Properly
• Use Actual Stops
• Be Willing to Stop Trading

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Seven Steps to System Testing

• Identify market conditions
• Consider trading ideas
• Build trading strategy
• Apply strategy to security
• Review strategys performance
• Optimize the strategy
• Money management and risk control.

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Step 1

• Identify Market Conditions
• - trending market conditions
• - volatile market conditions
• - range bound or sideways markets

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Step 2

• Consider Trading Ideas
• - New System
• - Existing System

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Step 3

• Build Trading System
• - Match to market conditions

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Step 4

• Apply Strategy to Security

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Step 5

• Review Performance

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Step 6

• Optimize the Strategy

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Step 7

• Money Management Risk Control

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1-Hour Lunch Break
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MetaStock System Tester

• The four steps to creating a strategy are
• Naming the strategy
• Defining signals
• Inputs
• Entries

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MetaStock Built-in Performance Systems

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Special Guest Robert Deel
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Advanced System Testing

• Trade Sim Value Add analysis features
• Testing a Portfolio of securities

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Tips and Tricks
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Advanced MetaStock Training Seminar

• Rick Klink