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33

able 9.2. Open Positions

Symbol

Signal

Position

Entry Price

Last

Profit

Entry Time

AMHC

Acme SE R

Short 1100

20.5

20.05

495 0

2/2 2002 4:00 PM

Acme LEV

Long 1050

34.375

35.37

1044.75

2/20/2002 4

AcmeLEM

Long 1400

41.375

41.34

-49 0

2/25/2002 4:00 PM

BREL

Acme LE R

Long 1000

1B.7S

18.79

40.00

2/21/2002 4 0

Acme LE M

Long 1300

43.79

1027

2/25/2002 4:00 PM

COGN

AcmeLEM

Long 1900

25.25

25.39

266.00

2 5/2002 4:00 PM

AcmeLEM

Long 1000

54.25

55 43

1180.00

2 5/2 024 0 .

Acme LE M

Long 1500

41.75

41.74

-15 0

2/21/2002 Am PM

ESIO

AcmeLEM

Long 1300

31.625

31.28

-448.50

2/25/2002 4 0

ESRX

Acme LEV

Long 1000

52.5

53.7

1200.00

2/20/2002 4 0 PM

AcmeLEM

Long 700

79.875

81.96

1459.50

2/25/2002 4 0

IMPH

Acme SE FB

Short 900

35.125

34.9

202.50

2/21/2002 4:00 PM

lONA

Acme LE M

Long 1400

16.25

16.15

-140.00

2 5/2002 4:00 PM

Acme LE V

Long 1600

43.375

43.22

-248 0

2/20/3002 4 0 PM

MER(i

Acme LE M

Long 900

33.75

34.63

792 0

2/2V2002 40PM

ORBK

Acme SE N

Short 1400

23.75

23.98

-322.00

2/25/2002 4:00 PM

PCAR

AemeLEFB

Long 900

69.5

70.88

1242.00

2/25/2002 4

This example ihnstrates se-eral important points when analyzing trades for the next day. First, alwaj-s examine the condition offhe market and sectors to get a sense ofthe signals that wiU be triggered the fohowing d. Second, run each of the Acme sjstems unfiltered for the broad market and sector indices, e.g., the HOLDRS. Finahy, highlight any stocks that are running against the general market trend; these stocks are bucking the market for a reason.

Figure 9... N.is(l.i.C..iupi.siU- Index Rcvcrs.il

4U)I l»KS ... .4.1,....,., 1

l-4,..l,...K.-.V,..-.. ..,- ..

111... ....

<.md.i.l...- M.. VV.I. .1.1.1..-.

... ...ll I l.i.,i..l.....I..,i. Il.

L- l>ll. WWIV l.i.l.ll-. ...til

Symbol

Signal

Order

Last

Time Placed

EASI

leLE FB

Buy 1000 at 39.125 Stop

37.79

2/26 002 2-06 AM

leLEFB

Buy 1200 at 65.375 Stop

64. »

2W2002 2-06AM

CECO

leLEFB

Buy 1200 at 37.750 Stop

37.05

2/26/2002 2 6 AM

BOBJ

leLEIH

Buy 1100 at 36.500 Stop

36.1

2 6 AM

ORBK

Acrr

leLER

Buy 1500 at 24.750 Stop

23.98

2/26/2002 2 6 AM

CACI

leLER

Buy 800 at 36.000 Stop

34.81

2/20/2002 2 06 AM

Acme LE R

Buy 1400 at 34.000 Stop

33.52

2/26 0022:06

ORBK

Acrr

eLER

Buy 1400 at 24.750 Stop

23.98

2/36/2002 2 AM

lONA

Acme LE R

Buy 1400 at 17.000 Stop

16.15

mttma /

Acme LE R

Buy 1500 at 42.375 Stop

41.74

2 6/20022:06/

CMNT

AcmeLER

Buy 1300 at 12.625 Stop

11.45

2/26/2002 2:06/

Acme LE V

at 108.750 Stop

108.44

2/26/2002 2 6/

leLEV

Buy 1000 at 49.500 Stop

49.15

2/26/2002 2:06 AM

CBRL

Acme LE V

Buy2300at31500 Stop

31.15

2/26/2002 2:06 /

AcmeLX

Sell 1050 at Market

35.37

2/26/2002 2:06 AM

ESRX

Acir

SeU 1000 at Market

53.7

2/26/2002 2-.06 AM

AcmeLX

Sell 1600 at Market

43.22

6/2 02 2*6/

/U:raeLX+

Sell 750 at 43.375 Limit

41.74

2/26/2002 2 06 /

For each open positicm. we re\iew the profit targets and stop losses drawn on the chart. The Trade Manager cahs ihQAcmeKxitTai-ts fimction to mark each price level with a horizontal trend hne. This function ahows the caher to specify a stop loss price, a first profit taiget price, and a second profit taiget price. Trade entries are drawn with the. AcmeEntryTai-ts fimction. The trader can identify a stop price or hmit price on the chart with the same horizontal hne.

Figure 9.4 shows an example ofa stop loss for an Acme V entrj, denoted by LX- at aprice of34.65. The horizontal hne is drawn underthe low ofthe bar, adjusted downward for the ExitFactormu\tip\ied by the ATR. The chart also shows an Acme N short entry, denoted by SE N Stop. This is an example ofa "stop and reverse" trade. The short entry serves a dual purpose by selling out the long entry and simultaneously taking the short position. When executing the trade, the short entry order is entered as double the size of the long position

Table 9.3 shows ah ofthe active orders generated for Februar} 2\ 2002. The window shows both entrj and axit orders, consisting of stop orders, hmit orders, and market orders. Three of the stocks (BCC, ESRX, and ITG) have market orders; these stocks have reached the end ofthe holding period. i.e., the profit taiget and stop loss orders never tiiered. The top half ofthe window shows long entries, and the last entr\ in the window (DST) shows a limit order for a single-bar profit taiget.

Table 9.3. Active Orders



Figure 9.5 shows a multi-bar profit target denoted by L:-:++, the single-bar profit target maikedby LX+, and a stop loss maikedby LX- forthe Acme N long entrj.

JCCLAST-Oaily 02/25/2002

35 35.600 35.400 -35.200 3S.D00 34.D00 34.600 34400 -34200 -34D00 33.800

Figure 9.4. oise Cascade Position Open Orders

UMiusT-D»iy

After the scanner has generated new signals for the next day, the trader reviews the charts to select the best candidates using quahtative and quantitative criteria i.e., experience matched with measures such as volatilitj, ATR, and hquiditj. The end-of-day scan for Februarj 26"" generated fourteen new long orders and fourteen new short orders, as shown in Tables 9.4 and 9.5, respectively.

Table 9.4. NewL ong Orders

Symbol

Signal

Order

Tinu Placed

EASl

Acme LE FB

Buy 1000 at 39.125 Stop

37.79

2/26/2002 2*6 AM

Acme LE FB

Buy 1200 at 65.375 Stop

64,66

2 6/20022:06

CECO

Acme LE FB

Buy 1200 at 37.750 Stop

37.05

2/26/2002 2:06 AM

BOB]

Acme LEM

Buy 1100 at 36.500 Stop

36.1

2/26/2002 2:06 AM

Acme LE R

Buy 1500 at 24.750 Stop

23.98

2/26/2002 2:06 AM

CACI

Acme LE R

Buy 800 at 36.000 Stop

34.81

2*6 AM

Acme LE R

Buy 1400 at 34.000 Stop

33.S2

2/26/2002 2:06 AM

Acme LE R

Buy 1400 at 24.750 Stop

23.98

2 6

lONA

Acme LE R

Buy 1400 at 17.000 Stop

16-15

2 6 0022;06

Acme LE R

Buy 1500 at 42.375 Stop

41.74

2/26/2002 2 6 AM

CMNT

Acme LE R

Buy 1300 at 12.625 Stop

11.45

2/26/2002 2:06 AM

Acme LEV

Buy 600 at 108.750 Stop

108.44

2/26/2002 2:06 AM

Acme LE V

Buy 1000 at 49.500 Stop

49.15

2/26/2002 2:06 AM

Acme LEV

Buy 2300 at 31.500 Stop

3115

2/26 003 2 6

Table9.5.New Short Orders

8

Signal

Order

Last

Tinu Placed

CACI

Acme SE R

Sdl 800 at 33.125 Stop

34.81

2/26/2002 2*6 AM

lONA

Acme SE R

Sdl 1400 at 14 750 Stop

16.1S

2/26 02 2:06

CMNT

Acme SE R

SeQ 1300 at 10.250 Stop

11.45

2/26/2002 2 6 AM

Acme SE R

Sdl 1400 at 32.125 Stop

33.52

2/26/2002 2:06 AM

Acme SER

Sdl 1500 at 40.375 Stop

41.74

2/26002 2:06/

ORBK

Acme SE R

Sdl 1500 at 23.125 Stop

23.98

2/26/2002 2*6 AM

CYTC

Acme SE N

Sdl 1600 at 22.500 Stop

22.96

2/26 0022*6

MCSl

Acme SE N

Sdl 1700 at 19.750 Stop

20.19

2/26/2002 2*6 AM

Acme SE N

Sdl 800 at 44.875 Stop

45.72

2/26/2002 2*6 AM

OVER

Acme SE N

SeU 700 at 26.375 Stop

27.30

2/26/2002 2 6 AM

AIJLAC

/\i.ne SE N

Sdl l41W;it 21.000 Si..),

21.64

2 6/2002 2:06 /

IJVI-

Ai-nit- si; M

Sl-I] IIMKI 1 Si.>>

4H 1)6

2/26/2( 2 2-J)6AM

Amu.-.si: Ill

SlII 261)1).It 2l)2Sn Siiiji

}.{\

A.ui.Sllll

Sdl ImH)ji tDoJ-iSiiij,

II /1

I ik. AM



Starting with the EASI chart in Figure 9.6, we see a slightly ascending triple top, and the last three bars show highs near the upper float channel. The float box extends backto Januarj 22*, two dajs before a strong up move. As a result, the chart is at a point where the float has tumed o-er and has consohdated near the highs for the past two weeks. As shown on the chart, the buy stop is 0.625 abyve the upper float channel of 38.5. In conclusion, this is a promising chart, so we wih enter a trade on any signal.

The next chart is BOBJ, as shown in Figure 9.7 TradeStationhas generated along M entrjto buy 1100 shares at 36.5 stop. Although the stockis inadown-trend, the narrow bar limits risk, and the market has reversed course today. Still, the stock closed slightly lower on the day a weak stock in a strong market. As a result, this chart is a coin flip If a signal occurs, then we will enter the trade on

an "a-ahable equitj" basis. The trader should establish a priori how many new positions can be taken on any given day and then arrange the charts in order of perceived signal strength.

im UST4}aly 02/2S/2002 Acme Float Box(I.O)

- 8( 4 9.000 -3g.D00 I-37.D00 -36.D00

-34.D00 33.D00 32.000 31.000 39.000

9.6. Engineered Support Sjstems Entrj Order

lOBJ LAST-Daily 02/25/2002

1-1 11 - .7. ltuMii.-..(>l..-.i. Iiiiii ()id,-i

The number ofnew long orders and new short orders is encouraging because we want to see a balance between the two. Clearly, the market has periods where one can throw money at the wah. but these periods are extremaly rare. Most of the time, we want to hedge our portfoho with both long and short positions. In general, a trader can find several sectors with good volatility whhe other sectors languish. The shift in emphasis from investment to trading (e.g., money flow shifting into hedge funds) has encouraged the practice of hot money chasing two or three specific sectors

The next step is to review the charts with new orders. We wih not analyze every chart here but select only those with large ranges and high volatilities. E-entuahy, the trader wih instinctively weed out those stocks that do not have high risk/reward ratios. We selected the fohowing stocks for review (with their corresponding ATRs):

a Engineered Support Sjstems (EASkNasdaq) 1.83

a Business Objects (BOBJ:Nasdaq) 1.71

a Overture Ser%ices (OVER:Nasdaq) 2.87

a CACI International (CACkNasdaq) 2.24

The reader is encouraged to go tluough every chart to see how each ofthe trades panned out. Although automation eliminates much ofthe work, the new trader should re\iew as many charts as possible. Ifthe scanner generates too many potential entries, then hmit this number by tightening the fdters or by restricting the sjstem-specific parameters. First, increase the volatility parameters such as Historical Volatility and Average True Range Second, adjust any parameters that are range-restrictive such as the Range Percentage.

9.3.1 Chart Review



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