A Slightly More Eloquent Approach to Programming Our Pyramiding E-Mini DayTrading Algorithm.

Okay let’s see how I was able to add some eloquence to the brute force approach to this pyramiding algorithm.  The original code included multiple entry directives and a ton of hard coded numerical values.   So let me show you how I was able to refine the logic/code and in doing so make it much more flexible.  We might lose a little bit of the readability, but we can compensate by using extra commentary.

First off, let’s add flexibility by employing input variables.  In this case, we need to inform the algorithm the distance from the open to add additional positions and the max number of entries allowed for the day.

inputs : pyramidDistance(5),maxDailyEntries(3);

Now we need to set somethings up for the first bar of the day.  Comparing the date of today with the date of yesterday is a good way to do this.

if d<>d[1] then 
begin
	canSell = true;
	sellMult = 1;
	sellStop = -999999;
	entries = 0;
end;
First bar of the day housekeeping.

Here is a neat way to keep track of the number of entries as they occur throughout the trading day.  Remember the function EntriesToday(date) will not provide the information we need.

mp = marketPosition * currentShares;

if mp[1] <> mp and mp <> 0 then entries = entries + 1;
How to track the number of entries for today.

If the last bar’s mp[1] is not equal to the current bar’s mp then and mp is not equal to zero then we know we have added on another entry.  Okay now let’s think about eliminating the “brute force” approach.

Instead of placing multiple order entry directives I  only want to use one with a variable stop level.  This stop level will be guided by the variable SellMult.  We start the day with a wacky sell stop level and then calculate it based on the SellMult variable and PyramidDistance input.

if low <= sellStop  then
begin
	sellMult = sellMult + 1;
end;

sellStop = openD(0) - sellMult * pyramidDistance;
Calculate and adapt sell stop level as we go along.

So on the first bar of the day the sellStop = openD(0) – sellMult * pyramidDistance or sellStop = openD(0) – 1 * 5.  Or 5 handles below the open.  Note you an change the pyramidDistance input and make it three to match the previous examples.

if entries = maxDailyEntries then canSell = false;
if time < sess1EndTime and canSell then sellShort 1 contract next bar at sellStop stop;
if mp <=-1 {and barsSinceEntry > 0} then buyToCover next bar at sellStop + 2* pyramidDistance stop;

setexitonclose;
That's it! Pretty simple isn't it?

Ok, we need to tell the computer to turn off the ability to place orders if one of two things happens:  1) we have reached the maxDailyEntries or 2) time >= sess1EndTime.    You could make the time to stop entering trades an input as well.  If neither criteria applies then place an order to sellShort at our sellStop level.   If price goes below our sell stop level then we know we have been filled and the new sellStop level needs to be recalculated.  See how we use a calculation to adapt the stop level with a single order placement directive?  This is where the eloquence comes into play.  QED.

Now you code the opposite side and then see if you can make money  (hypothetically speaking of course) with it.  If you think about it, why does this not work.  And the not so obvious reason is that it trades too much.  Other than trading too much it makes perfect sense – buy or sell by taking a nibbles at the market.  If the market takes off then take a big bite.  The execution costs of the nibbles are just way too great.  So we need to think of a filtering process to determine when it is either better to buy or sell or when to trade at all.  Good Luck with this ES [emini S&P ]day trading algorithm!

inputs : pyramidDistance(5),maxDailyEntries(3);
vars: mp(0),icnt(0),sellStop(0),sellMult(0),canSell(true),entries(0);

if d<>d[1] then 
begin
	canSell = true;
	sellMult = 1;
	sellStop = -999999;
	entries = 0;
end;

mp = marketPosition * currentShares;

if mp[1] <> mp and mp <> 0 then entries = entries + 1;
if mp[1] = -1 and mp[0] = 0 then canSell = false;
if time > 1430 then canSell = false;

if low <= sellStop  then
begin
	sellMult = sellMult + 1;
end;

sellStop = openD(0) - sellMult * pyramidDistance;
if entries = maxDailyEntries then canSell = false;
if time < sess1EndTime and canSell then sellShort 1 contract next bar at sellStop stop;
if mp <=-1 {and barsSinceEntry > 0} then buyToCover next bar at sellStop + 2* pyramidDistance stop;

setexitonclose;
Much More Flexible Code

Long Entry Logic and EasyLanguage Code for Pyramiding Algorithm

Sorry for the delay in getting this up on the web.  Here is the flip side of the pyramiding day trade scheme from the buy side perspective.  I simply flipped the rules.  In some cases, to keep the programming a little cleaner I like to keep the buy and sellShort logic in two separate strategies.  So with this chart make sure you insert both strategies.

And here is the code:

vars: mp(0),lastTradePrice(0),canBuy(true);

mp = marketPosition * currentContracts;

if date[0] <> date[1] then
begin
	canBuy = true;
end;

if mp = 1 then canBuy = false; 
if time > 1430 then canBuy = false;

if mp = 0 and canBuy = true then buy next bar at OpenD(0) + 3 stop;
if mp = 1 then buy next bar at OpenD(0) + 6 stop;
if mp = 2 then buy next bar at OpenD(0) + 9 stop;

if mp = 1 then lastTradePrice = OpenD(0) + 3;
if mp = 2 then lastTradePrice = OpenD(0) + 6;
if mp = 3 then lastTradePrice = OpenD(0) + 9;


if mp <> 0 then sell next bar at lastTradePrice - 3 stop;

if mp = 3 and barsSinceEntry > 0 and highD(0) > lastTradePrice + 3 then sell next bar at highD(0) - 3 stop;

setExitOnClose;
Pyramiding 3 Handles Up and Trailing Stop

EasyLanguage Code for Pyramiding a Day-Trading System w/video [PART-2]

 

Check out the latest video on Pyramiding.

Here is the finalized tutorial on building the pyramiding ES-day-trade system that was presented in the last post.

I will admit this video should be half as long as the end result.  I get a bit long-winded.  However, I think there are some good pointers that should save you some time when programming a similar system.

EasyLanguage Source:

Here is the final code from the video:

vars: mp(0),lastTradePrice(0),canSell(true);

mp = marketPosition * currentContracts;

if date[0] <> date[1] then
begin
	canSell = true;  // canSell on every day
end;

if mp = -1 then canSell = false; // one trade on - no more
if time > 1430 then canSell = false; //no entries afte 230 central

if mp = 0 and canSell = true then sellShort next bar at OpenD(0) - 3 stop;

if mp = -1 then sellShort next bar at OpenD(0) - 6 stop; //add 1
if mp = -2 then sellShort next bar at OpenD(0) - 9 stop; //add 2

if mp = -1 then lastTradePrice = OpenD(0) - 3; //keep track of entryPrice
if mp = -2 then lastTradePrice = OpenD(0) - 6;
if mp = -3 then lastTradePrice = OpenD(0) - 9;


if mp <> 0 then buyToCover next bar at lastTradePrice + 3 stop; // 3 handle risk on last trade

// next line provides a threshold prior to engaging trailing stop
if mp = -3 and barsSinceEntry > 0 and lowD(0) < lastTradePrice - 3 then buyToCover next bar at lowD(0) + 3 stop;

setExitOnClose;
EasyLanguage for Pyramiding and Day-Trading ES

What we learned here:

  • can’t use entriesToday(date) to determine last entry price
  • must use logic to not issue an order to execute on the first bar of the next day
  • mp = marketPosition * currentContracts is powerful stuff!

In the next few days, I will publish the long side version of this code and also a more eloquent approach to the programming that will allow for future modifications and flexibility.

Let me know how it works out for you.

Take this code and add some filters to prevent trading every day or a filter to only allow long entries!