S&P 500 Analysis & ETF Trading

[kiy]

In search of a system...
I put a link to this guy's site on the Intro page a week ago...he has focus...
http://www.informedtrades.com/633815-creating-serious-automated-trading-system.html

Hello Friends,

I am in the process of creating a serious Automated Trading System which would run 24x5 on currency market.

I've worked hard on creating a blueprint, backtesting different indicators and strategies, analysing currency pairs etc lately. More on this later on my blog.

So, I would like to know if someone from Informedtrades Family is interested. Perhaps you can share ideas and help me. There are a lot of combinations to be analysed so it is going to be a serious work.

THEME:
Short term trading based on entry and exit on intraday timeframes, aiming to capture around 50% - 70% of the daily moves.

THE BLUEPRINT:
Clearly defining the system. Entry Criteria, Exit Criteria, Scaling (if any), Hedging Criteria (If any) and Position Sizing.

Clearly identifying the market's personality based on the ATR, Volatility, Spread to ATR ratio and time frames.

The idea is to match the system with market's personality to give us an edge. It does not matter if the edge is big or small so long as there is a good Risk-Reward/ Win-Loss Ratio. Once there is an edge, it is all about playing the numbers.

System:

I've decided to use Moving Averages. Sure they lag. But there's a way to reduce the lag. The Faster MA will come from a much smaller time frame compared to the Slower MA.
Also, I'm planning to, may be include Zerolag MA as the slower MA and a simple moving average as the Faster MA.

What's the key? SENSITIVITY.
Moving averages are more sensitive to price compared to other indicators like SAR, MACD or RSI. Every cross over is not a trend. But every trend has a cross over.

The aim of system is simple. It is two-fold:
Keep us on the right side of the market.
And Maintain a good Risk-Reward Ratio.

Barriers:
There is one major Barrier in this system. The whipsaw. So to avoid it, we would filter out the markets with the first criteria: Spread to ATR ratio. Markets will be filtered on this basis first. We should be looking for minimum 1:20 or so.

Second Criteria for filtering would be a trending time frame. If a time frame trends more periodically, it is a better choice over slow range bound timeframes.

Once we have these two met, we can then assign values to the Averages. Whichever perform best, depending on backtesting.

The trading platform will be TradeStation II from FXCM. I see it works better than MT4. I have more tools available. Both for indicators and strategies.

Regards,
Abhi

P.S. I'll keep posting more ideas on this blueprint as they come along.

In search of a system...