The CISCO DayTradingEngine™ uses the CISCO developed Pause Alert™ methodology
to identify short term, intra-day trading opportunities. A Pause Alert is a market generated
period of little or no net directional demand, a temporary pause in the day's up and down
price movement. The pause
is identified on a profile display as three time-frames sharing the same price (range). On
the CISCO CMaPS meta-profile display a Pause Alert is outlined in green. An Anticipation
Alert™ consists of two timeframes at the same price, outlined in yellow. The same color
coding applies to the CISCO DayTradingEngine™.
The goal of CISCO DayTradingEngine™ is to identify those numerous short term trading
opportunities present in most markets most days and particularly in the very active markets
such as emini SP, the Dow Index, currencies, etc. While each trader has their own attitude
toward risk and potential return, DTE provides the Platform for that critical first
step, recognition of a trading opportunity.
A beta test of DayTradingEngine™ methodology included two dozen volunteers examining
this trading tool for one month plus. This group generated a number of questions. This report
is a summary of those questions and the resulting (CISCO) answers.
Early morning usage question: How soon for trading.
..DayTradingEngine hours: 02:00 - 15:15.
..There must be adequate trading activity to support analysis. Minimum is 2 or 3 ticks/minute.
..It is always a No-no if the volume is too low.
..A low volume time is usually the evening after 15:15 Chicago time.
Pause Alerts:
.. Available at CISCO on the following scale:
.. Multi-Day: 5, 10, 15 & 20 days: Visual Graphic & Regular Bracket Screen
.. Multi-Day: 3: Value Analytics
.. In-Day: CMaPS: 30 minute bars; Pause Alert(green) and anticipation(yellow)
.. In-Day: CMaPS: 15 minute bars; (no green/yellow regions posted)
.. In-Day: DayTradingEngine 10 minutes and less; Pause Alert(green) and anticipation(yellow)
.... Shorter timeframes: play for lower stakes
.... In-Day trading: We advise you to occasionally go to CMaPS for an overview.
A Teaching Moment:
..Yesterday (Nov 2, 2009) EOD the UU (emini SP) showed a 5 day balance 106750 - 102750.
..(You could find this after 9 PM on the Regular Bracket Screen, later on Advice Engine.)
..This morning (Nov 3) the Beta Test program showed a predicted direction of UP
..and the yesterday close is shown as 103900.
A Market Condition of 'balance' overrides much other data--it is a
'strong' piece of information. A predicted direction of UP or DOWN
is unimportant so long as balance is maintained--since in a balance
the market's primary behavior is rotation. Rotation described the
market up to this writing (12 Noon).
Continuing the dialog for the market of Wednesday, Nov 4:
Several of you voiced some confusion about the process above.
For tomorrow, Nov 4, analyzing the emini SP, UU Dec:
Step 1 is to check if UU Dec is in balance
Main Page: Data
End-of-Day Data
End-of-Day Data
Regular Bracket Screen or Visual Graphic or Advice Engine
Find that UU Dec, 5 Day is in balance, limits 106200 & 102750
We expect rotation between the limits until such time that the
bulls drive the market higher or the bears drive it lower (a breakout).
In the meantime we can consider a short term sale around 106200 or
a short term buy around 102750. We know market condition and we can
make our trading set-up for tomorrow.
We can also factor Pause Alerts into these decisions.
Tomorrow: Trading with DayTradingEngine
.. DayTradingEngine hours are 02:00 to 15:15.
.. Flow Direction is Down (close yesterday was 104175).
.. If the market had not been in balance we would have been looking for Pause
.. trading on the short side. But the increased knowledge we have from the balance
.. makes us expect a 'rotational' market. Now a Pause Alert inside the upper/lower
.. limit region has much less directional impetus.
.. If there is a breakout, the impetus changes to that direction and hence a Pause Alert
.. would have a directional preference based on the balance limits.
..Remember. Knowing market condition is your most powerful tool. Regardless of how you
..trade, knowledge of market condition is always a starting point for your analysis.
Intra-day Reference Points
.. Several questions were asked about current intra-day reference points,
.. like the ones from end-of-day Visual Graphic, but calculated part-way through
.. the day. Maybe something like a half or quarter day.
Answer:
.. In complex markets: ref pts are related (feedback), self organizing.
.. Self organizing (feedback), takes time for information exchange.
.. If you cut down the time, to say, half a day, the role of volatility
.. is magnified and there may not be adequate time for any sort of
.. of equilibrium.
.. Think of the reference point, Point of Control. Many days it is quite
.. variable--so which do you believe, the value at 10 AM, Noon, 1 PM?
.. Due to market feedback and how reference points are affected, cutting the time
.. to an hour or other fraction of a day is a slippery slope. The market needs
.. time to come into equilibrium, even very short times like Pause alerts.
.. We have many years of experience with full days (profiles) and multiple days (Overlays)
.. as well as intra-day studies with Pause Alerts. One thing is clear, the shorter
.. the timeframe the larger the role of volatility. A redeeming feature of the
.. Pause Alert in the short time-frame is that we seek the point, the balance
.. point, where volatility is minimized. This is a special case. The balance point
.. would be hard to define (or does not exist) for most other reference points.
Delays on Update:
.. 6-7 seconds is normal for a screen refresh. 20 seconds in not unusual on a loaded
.. machine during the trading day. While you are sitting there and the screen is
.. slow, you may have the feeling that you are missing something.
.. However, you should not be trading screen moves. You want to use the Balance
.. the Pause Alert, for your set-up. That, ideally, will be a resting stop (placed
.. with your broker) at a price you have chosen from balance (green) or anticipation
.. (yellow).
.. If you are biased to the down-side your entry point might be 4 ticks below the
.. lower limit of the balance (the green region). Once in, you place your protective
.. stop and keep moving it as the market goes your way. You may have other strategies,
.. such as price targets. Whatever your strategy, you should not trade the screen moves.
.. Your reactions are too slow and your emotions are not trustworthy.
.. An example: One way to trade breakouts from a Pause Alert
.. (The Pause Alert gives timing and shows the action point(s).)
.... a. Have an idea of the market flow direction & try to keep with it
.... b. Know what sort of breakout you will trade (maybe 4 ticks),
.... depends on time frame, your attitude toward risk.
.... c. Know your risk (maybe 5 ticks, maybe 10 ticks; your decision)
.... d. Know what you require for set-up, green or yellow
.... Look for trigger, green or yellow
.... e. Put a resting stop with your broker for entry
.... f. Upon entry: Put a resting stop with your broker for exit
.... g. Change the stop as open trade equity grows (if you trade that way)
.... h. Each entry is a test, a probe. Most often the probe is a
.... failure, a loss. Two failures out of three trades is a
.... reasonable norm.
.... i. Profitability comes from limited losses offset by larger gains.
Discussion of Flow Direction
Predicted Flow direction is a measure of the current market. That will,
of course, change, so it is a short timeframe (hours) prediction.
The goal is to have a good idea of the probable market flow over the near term.
On any day there is volatility, up and down price fluctuation, short runs within
the overall flow, etc.
Coming out of a Pause Alert, it helps to have an idea of the market's
direction, your preferred trading direction. (Exception: in a balanced
market your preferred direction depends on price location relative to
the balance limits. More discussion below.)
Having the odds in your favor:
Locating the Pause.
Knowing the flow direction or the balance limits.
Trading within a balance (3 day from Value Analytics), 5/10 day from Visual Graphics
Having a valid POC developing intra-day.
A Random test Today: ECZ, 03:00+ Oct 28
After close on Oct 27,
Close 148061,
Direction Down
Starting at 03:00 AM, (q period on CMaPS)
First price 148270,
Price ran down to a low 147540 in x period 6:30 - 6:59,
q period has 228 ticks, x period has 413 ticks, A period has 333 ticks,
(j period, 00:00 to 00:30, has 86 ticks, k period has 183 ticks)
When I started, about 08:20, the Pause (green) was 147890 - 147820 & I tracked it to
08:30 where the Pause was 147910 and the Anticipation (yellow) was 147950 - 147920.
I wondered what the track had been earlier and how much volume. Using CMaPS
starting at 03:00, q period, price was 148270 and that (30 min) period had 228 ticks.
Seven ticks per minute is plenty for day trading.
Price ran down to 147540 by 06:30 and that period had over 400 ticks.
All the way from early AM (00:30 and later) there was adequate data for analysis.
(During the day activity got as high as 600 ticks per 30 minutes.)
Conclusion: Flow direction was validated and there were plenty of Pause Alert
trading opportunities in the correct (flow) direction.
An update on beta_daytradingengine.html (your guide)
The links at the bottom of the page,
Beta for DayTradingEngine
are now annotated for easier reference.
Balances, Revisited
Earlier we spoke of the flow analysis when the market is in
balance. The important point is that so long as balance continues
the market price will rotate roughly between the Upper and Lower
balance limits.
We also noted that a list of balances for the day are found in the
Regular Bracket Screen after about 9 PM. Later in the Advice Engine.
We are testing adding those cases of balance as the last line of the
Flow Table report. Below is an example:
Case 1: Market is in Balance
FLOW DIRECTION SV12 2009 11 9
CLOSE 17595
Directional 9 2
Activity 1 4
Predicted Direction UP
5 Day Balance 17730 17270
Case 2: Market is not in Balance
FLOW DIRECTION UU12 2009 11 9
CLOSE 109175
Directional 7 4
Activity 2 3
Predicted Direction UP
No 5 Day Balance Today
Secondly, a number of you have noted that the CMaPS profile is
not updated after the Pause Alert data page is opened.
Continuously updating CMaPS can put quite a burden on the system,
a burden that does not have much payback because of the time
differentials. From time-to-time it can be useful to get a market overview
from CMaPS, as we noted in our earlier email. Hence, we have installed
a button on the display so that a user can update CMaPS as needed.
An advisory, thanks to several alert Beta Testers:
Some futures do not appear on the DayTradingEngine. The cut-off for
inclusion is less than 200 ticks for the day. Low volume is a dangerous
place for the daytader. A list of yesterday's tick volume is on the
CISCO main page.
Tick Status Table
