Make the Missing Link BackTesting Reports Come Alive · Tweaking the strategy to add your own rules ... You can even use the strategy implemented in TradeStation EasyLanguage® to

1 Copyright 2008-2011 Own Mountain Trading Company. TradeStation and EasyLanguage are trademarks of TradeStation Group, Inc. Material intended for educational purposes, not investment advice. http://www.backtestingreport.com/termsofuse.htm.

Make the Missing Link BackTesting Reports Come Alive

By using a Custom TradeStation® Workspace

After following these instructions, you will have Charts displaying the Exponential Moving Average (EMA) crossovers

corresponding to the popular settings of the MACD and MACDH Histogram Color-coded price bars indicating buy and sell signals for this backtested strategy Scans to show which stocks in your symbol list got a buy signal and a sell signal TradeStation strategy implementing the best of the strategies backtested in this issue

o Note: Implementation modified to backtest one market at a time. The TradeStation Workspace applies what you learned in the Missing Link BackTesting Report. You can further your education about moving averages and MACD by Seeing the strategies in action on your favorite charts Tweaking the strategy to add your own rules Check results over your own dates and stocks with Strategy Performance Report Forward testing by tracking buy and sell signals as they occur in the future You can even use the strategy implemented in TradeStation EasyLanguage® to automatically execute trades in your TradeStation account, although this is not recommended. To understand the strategies and their hypothetical past performance see the Backtesting Report titled “The Missing Link Between MAs and MACD”. Before actually investing with these strategies, you are strongly advised to read the Moving Average and MACD BackTesting Reports, consider the risk of loss, maybe even consult a professional for advice. Ultimately, you make your own decisions about your own money.

Install TradeStation

If you don’t already have TradeStation, you will need to download and set it up. Please see

www.tradestation.com for more information. The custom software from BackTesting Report

supports version 8.6 Build 2525 or later. Source code is also included in text files if you need to

use an earlier version of TradeStation. Most people can just follow the instructions below.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

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Install BackTesting Report Custom WorkSpace and EasyLanguage Scripts

1. Click the download link or access the CD-ROM folder to find BTR7_TradeStation.exe. After agreeing to license terms, download and unzip according to the instructions below. Then import the BTR7_MISSING_LINK_MA_MACD_V84_OR_LATER.ELD file into TradeStation and put the .tsw files in the TradeStation MyWork folder. The instructions below apply to the BTR7_TradeStation.exe files you download in this step.

a. (Firefox: You may need to Save then Run.)

b.

c. First browse for location and pick an easy temporary location like the Desktop

d.

e. 2. Import the ELD files into TradeStation (before opening the workspace):


a. Choose File->Import/Export EasyLanguage from the TradeStation menu b. Choose “Import EasyLanguage file (ELD,ELS,ELA)” and click Next

c. Browse to find ELD file in the v8.6_or_later folder on Desktop from step 2:

d. Click Next to Import everything


e. Import add-ins with names that start with “BTR” and “BTR7”. Don’t replace the TradeStation built in functions. Click “Finish”

f. If it asks if you want to replace other functions, answer No.

3. Put the *.tsw workspace files into the TradeStation folder MyWork :

4. On the TradeStation menu, click File->Open WorkSpace and choose BTR7_Missing_Link_MA_MACD.tsw from the list of files in MyWork


Understanding the BTR7 Workspace and Strategy

Figure 1-TradeStation Screenshot

On the price chart, buy signals are green, sell signals from moving averages crossing downwards are red and sell signals from the price falling below the 200 day MA are not shown. The neutral-colored bars are ignored in this strategy. The stop price for the life of the trade is calculated based on the average true range (ATR) on the day of the buy signal. It is displayed above the price for the life of the trade. To reposition it for readability, left click to select it and drag it to where you want it. If it won’t go where you want it, right click and select Snap Mode to turn it off. The middle indicator is the MACD lines and histogram. Note how the MACD lines cross zero at the same time that the moving averages in the top pane cross each other. The bottom indicator is volume. A buy signal only takes place if volume is above 500,000 shares. If you change the timeframe on the chart, you probably want to change this parameter in the strategy. For intra-day, set it to 1. Alerts are set on the ShowMe. TradeStation will tell you when the MACD lines cross zero.

Scanning for MACD Zero Crossings and EMA Crossovers with RadarScreen

A workspace is set up to use TradeStation’s RadarScreen to scan a symbol list for the EMA crossovers that form the basis of the MACD. This is in a separate workspace because


RadarScreen consumes the computer’s resources and places unique requirements for custom EasyLanguage indicators. To scan the market, open the BTR_Missing_Link_MA_MACD_RadarScreen workspace. The workspace comes configured with the components of the S&P500 as a symbol list to scan, however, you can insert any symbol list for which you have data. Just select a row on RadarScan, right click, choose Insert Symbol list and pick from the list or simply type a symbol into a blank row. The third column in the RadarScreen row presents the results of the scan for the EMA crossovers. A white “-9999” indicates nothing detected. A green number indicates a cross up and the number is the position size calculated using the risk amount and the ATR stop distance given as inputs (defaults are $1000 and 3 ATR respectively). A red “0.00” indicates either a cross down or the price going below the 200-day MA. See Figure 2 for an example.

Figure 2 - RadarScreen buy and sell signals

Known Issue: The results of the RadarScreen scan and the strategy on the chart do not always agree. When there is a difference, the chart strategy reflects the results in the MACD Divergences BackTesting Report. Neither this strategy nor documentation is a recommendation to buy or sell any securities. It is a way to learn more about the stock market and technical indicators. To understand exactly what is implemented in this strategy and it’s hypothetical past performance see the Missing Link Backtesting Report.



Advanced Instructions

Changing Parameter Settings

To change parameter values of the strategy, follow these steps: 1. Right click on the chart 2. Choose Format Strategies 3. Click the Format button 4. Change parameters as desired

BackTesting

The strategy is all set to backtest. The TradeStation results summary is available from the menu: View->Strategy Performance Report. See TradeStation document for complete information on how to read the strategy report.

Documents

Make the Missing Link BackTesting Reports Come Alive · Tweaking the strategy to add your own rules ... You can even use the strategy implemented in TradeStation EasyLanguage® to