This mini-eBook
describes in detail a complete trading system based on a way to measure the “efficiency” of price movement of
financial instruments. For the purposes of testing this system, the S&P 500
Exchange Traded Fund (SPY) was used. The concepts and ideas presented, however,
could be applied to any liquid financial instrument or list of financial instruments where historical price data is readily
available.
A trading system
consists of the following main components
- Beliefs and Idea
- Tradable Instrument List
- Setup
- Entry
- Position Sizing
- Exits
Each component
of the system will be discussed specifically for the Efficiency System idea presented.
The actual
code for the system is written in TradeStation® EasyLanguage® and is included at the end of this eBook and is available as
an EasyLanguage® Document (ELD) by contacting us.
Formatting Conventions
The following
formatting conventions have been used for different parts of this eBook.
Trading system
code is represented using the Courier font, for example:
if Close[1] > High then
Formulas are
represented in bold, for example:
Distance Traveled
= å True Range over Time
Period
Spreadsheet
formulas are represented by the small Courier font, for example:
=MAXIMUM(F2,ABSOLUTE(E1-C2),ABSOLUTE(E1-D2))
