In this blog, we will look at a great example of how studying the charts help fine-tune and improve the performance we can extract out of the automated alerts.

In the figure below, we can see that a buy alert of type 6 was issued for Atmel Corporation (ATML) yesterday (9/1) at 1:45 pm.
The alert number is 62909168611. So the average profit from the 86 trades used to compile the statistics for this strategy on ATML is 1.6%. The average trade duration is 1.1 trading days. With a Trade Ratio of 2.9 and a profit ratio of 0.9, the odds (TR times PR) is pretty good. Actually, for strategy for which we find PR values less than 1, like in this case, it means than early exit cut-offs are being used.
Learn all about alerts from our manual.

From the figure we can see what has triggered the automated alert. Keep in mind that the automated alerts have only very little intelligence for safety built into them. That is why it is easily possible to improve their performance using the charts. In the figure below, it is clear that the fast oscillators have some downside and they'll have an immediate impact on the price. So waiting for a couple of hours till they come down makes sense.

In terms of the slower oscillators and the Daily Model (golden in left bottom panel),  this trade looks safe to take. Let us double check the safety by considering the End-of-Day charts for ATML for 8/31. Since we are going to delay the entry, we do have time to check out the End-of-day charts for safety :-) Our end-of-day charts consider only the daily closing prices as input to generate the oscillators while the Intraday charts have 15-min price data as input.

The buy trade looks very safe from the end-of-day chart perspective.

By 3:45pm yesterday (9/1) as we see below, the fast oscillators have indeed come down and brought the price to a slightly better entry point. Our oscillators can be trusted to move consistently. Their impact on the price depends on how dominant they are and how other oscillators are poised.

So lets say we take the trade before market close at this price.
As expected, ATML moved up after market open today (9/2). In the chart below at 10:30am, we see that fast oscillators are poised to go down. So it is a good time to take our profits and exit.

The automated exit alert came in 15 minutes later when the oscillator that triggered it in the first place had turned. But the fast oscillators have already dragged down the price over 1%.

So if we had blindly followed the automated alerts with entry at $5.98 and exit at $6.08, the profit would have been 1.7%.

But by consulting the charts and fine-tuning the entry to $5.95 and exit to $6.14, the profit would have been 3.2% for just 45 minutes in the market! Almost double the profits!

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The markets have opened September with a bang and NASDAQ was trading over 2.5% up in the morning session just as our Composite Index charts had indicated yesterday!

Before we get to today's NASDAQ charts, here are 6 round trip trades our automated alerts(entry and exit) delivered since yesterday (8/31). There are three buys as seen from the positive alert numbers and three shorts. To learn more about alert numbers, visit this blog or check out our manual.

No.  Ticker          Alert                Entry Price        Entry Time      Exit Price       Exit Time      Profit %

1.     STMP     56508184513        $11.05              11:40               $11.25           15.53            1.8%

2.     AMKR     62316314911        $5.23                10:28               $5.29            12:00(9/1)      1.1%

3.     CRNT      79912142204       $8.55                12:58              $8.75            10:25(9/1)       2.3%

4.     RFMD     -54008206007        $4.9                  14:07               $4.85            15:07            1.0%
 
5.     ATML      -72811164206        $5.87                14:09               $5.79            15:39            1.3%

6.     BBY      -54507074404         $31.65                14:10              $31.38           14:57            0.8%

This performance is from blindly following the alert. As we have seen in an earlier blog entry, the performance can be improved by fine tuning the automated alert entries and exits by consulting the charts. You will notice that the alerts listed above have odds (i.e. TR*PR) above 3.

Now let us look at the NASDAQ Composite charts. In the Intraday chart below, we can see that the Pink oscillator has surged and its magnitude has been redistributed into two components: Violet and Green. Remember that Green had disappeared yesterday because of lack of magnitude.

And here is the End-of-Day chart from yesterday. The top left panel has been zoomed in to show the upward crossing point.

From the charts above, you can access the movement of the market for the future. Keep in mind that the faster oscillators have immediate impact but the Price/Index is always the sum of the oscillators and the indicators.

In a month, our service delivers well over 200 round trip alerts.
By using the Promo Code: FALL2010 you can subscribe for just $49.99 per month.
Plus there is a 30-day risk free trial for you to get to know the system and test it out! SIGN UP NOW!!

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This blog discusses how examining the charts in tandem with the automated alerts can help fine-tune our entries and exits and increase profits.
The story is best told in pictures :-)
The alerts are fully automated and should be primarily treated as a mechanism to draw our attention to charts bearing potential trades.

Consider the type 4 alert issued for Cantel Medical Corp (CMN) at 2:00 pm on 8/16. We can see that the estimated profit is 2.6% from the alert digits (6th and 7th digit).
To learn more or refresh about the significance of the alert number please visit this previous blog entry.

From the chart accompanying the alert shown below, we can see that there are several factors that indicate we wait a while before making this entry.

A much better entry point comes towards the end of the trading day as shown below

But if we wanted a clearer turn of the Black oscillator and don't want to risk staying in the market overnight, yet another entry point comes along the next day morning as shown below.

Notice that even in the chart above, the entry price of $14.45 is less that the $14.5 price at which the automated alert came in.

The market rallied on 8/17, so towards the end of the day a good exit opportunity can be seen in the chart below.

As mentioned in the chart above, the price stayed flat and then starts to drop as shown below. It would be prudent to exit without risking staying overnight as the very dominant Blue is showing signs of turning.

In the best case scenario of entry at $14.40 and exit at $14.80, the trade would have made a profit of 2.77%!

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Let's examine a chart of Bed, Bath & Beyond (BBBY) on 8/6/2010 at 1:45pm (the time can be seen on the timeline at the top). Right below the ticker on the top left, we can see that an alert of type 5 has been issued. From the digits of the alert, we can see that the average profit for this strategy for this stock historically has been 1.6%, For more information about the statistical information contained in the alert or just to refresh, please refer to this blog:

http://orthochronos.posterous.com/a-quick-stmp-shortage

For anyone who has seen our charts with its consistent oscillators and indicators, it is fairly intuitive to understand that we can form various trading strategies using the turning of the different dominant oscillators or a combination of them. Several such strategies were developed and applied to historical data of different stocks. The alerts come from the best of such time tested strategies. 

For example, based on the historical charts of a stock, let us say that there were good trading opportunities (price movements) based on say

1. A combination of Mid and Fast oscillators
2. The turning of the Mid oscillator
3. Combination of Mid and Black oscillators

Each of them is a particular trading strategy. Since the oscillators have different periods of oscillation, it is clear that these opportunities provide trades with different durations. For example the first strategy mentioned above would lead to trades with duration less than a trading day while the third one above leads to trades that take close to two trading days between entry and exit.

The main philosophy behind the trading strategies is that they are tractable, i.e. the user is able to understand by looking at the graph, why an alert came up.

Every trading technique has the following basic intelligence:

• Identifies dominant oscillators or combination of adjacent oscillators
• Ensures that the intraday model's slope is not strongly in the opposite direction
• Uses the faster oscillators to improve the entry point

Thus the alerts are meant to draw attention to charts that have great potential for trades. We can see that not many of the safety factors are built into this basic intelligence. We are continuously adding more safety factors and testing them over greater historical time period to improve the quality of the alerts.

However, it is important to conduct a quick and easy chart study to examine the safety of a potential trade. For example consider the alert of type 5 issued yesterday (8/4) at 11:30 for Ceragon Networks Ltd (CRNT). The alert and price is marked on the title of the bottom right panel and the time is marked on the time line at the top. The main points to note are included in the figure.

With the Blue menacing in this Intraday chart, let us consult the End-of-Day chart for CRNT from the closing of 8/3 for some more safety analysis.

The alert has drawn our attention to a potentially unsafe trade.

Below is the chart from 1:30 today (8/4) with the bottom right panel enlarged so that we can clearly see how the dominant Blue behaved and influenced the price.

We can also see that recently there has been an upward crossing point of the Black and Blue in the upward direction that produced an uptick in the price as expected.

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Take a look at this buy alert of type 4 issued for Arcelor Mittal (MT) at 1:45pm on 7/12.
The alert number 42713322619  tells us that the Trade Ratio(TR) for this strategy on MT historically is 2.7;
the Profit Ratio(PR) is 1.3; The average profit has been 3.2% from the 26 trades so far.
We can also see from the last two digits that average trade duration is 1.9 trading days.

With is information, lets examine the graph for the trigger of the alert and its safety.
In the bottom left chart we can see that in the recent past, the price has correlated well with the Pink and Black oscillators.
Now, this alert comes from a combination of these two with the Pink having just crossed the Black upwards as we can see clearly in the top left chart.
The gray residue has touched the lower bound in the bottom right chart. The yellow DTI line is indicating at upward trend.
So, though the Blue oscillator is still slowly moving south, considering the high quality of the alert (from the TR and PR) and correlation of price with Black and Pink, this trade looks good to take. The entry price you can see below is $29.45.

The exit for this alert was issued today(7/14) morning at 11:15 am, so the trade last roughly two trading days as average duration had indicated.
In graph below, we can see that the price has continued its correlation with Pink and Black. The exit alert is issued as the Black is now turning down and so are the fast oscillators on the top right. The exit price is $30.31. So the profit is 2.9% slightly lower than the average for this strategy!

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This alert of type 6 (62815114909) issued for CPRT yesterday (7/12) at 2:45pm with the price at $35.7. Let's examine the chart at that time. The Mid Pink oscillator is in an upswing so is the Black oscillator as can be seen in the top left chart. We can see that the Pink oscillator had an amplitude of 1% in the recent past. So when its components (mid A and mid B) match up, it can be quite dominant.The fast oscillators on the top right chart are also moving up.

From the bottom right chart, we can see that the Blue and Red oscillators are moving down, but the gray residue that is consistent in its swings has gone below the lower bounds. We can also see that the Black oscillator has just had a crossing point with the Blue. Now look at the 4-day trend indicating DTI line in yellow. It is strongly upwards. In the bottom left chart, we can see how the Daily Model in golden yellow is still in an upward trend. When the indications from Daily Model and DTI line are very clear like that, we may avoid consulting the end-of-day charts.
Considering these factors, this is a safe short term buy. Note from the last two digits of the alert that average trade duration for this strategy on CPRT has been 0.9 trading days over the past 49 trades. The average profit is 1.1%

Now consider the exit alert that was delivered at 10:45 am on 7/13. We can see that the Mid Pink in the top left chart has regained its dominance. The closing price for this trade suggested by the alert is $36.25 (as seen on the title of the bottom right panel), so a profit of 1.5% for being in the market 2.5 hours! Our ticker table was predominantly green yesterday, so today's upswing of the market at open produced profits for several "green" alerts like GTI, CAT etc. Since earnings season has commenced, its good to make sure that alerts we are taking don't have earnings report due within the possible trade duration.

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Check out this buy alert issued for ticker CBRL at 12:45pm on 7/7 when the price is $45.8 as we can see below. Also from the title of the bottom right chart enlarged, we can see that it is an alert of type 4 (i.e. first digit of 41618284427). Remember that the 11 digit alert contains all the historical statistical info about the strategy behind the alert. 
You can learn more or revise about the alerts from the manual in the Help section at www.orthochronos.com

We can see from the last two digits of the alert that the average trade duration for this strategy is 2.7 trading days. This alert has been issued clearly because the Slow Black and Slow Red oscillators have both started to turn upwards. In the enlarged chart we can also see that the residue in grey has been moving consistently between the bounds and has now begun upward movement.. So we have the direction and trigger for the trade from the alert, now let us look for safety of this suggested trade.

The DTI line in yellow in the chart is slightly upwards, so most importantly it is not against a buy. Since this alert is based on the slower oscillators, it is good to check for safety of such a trade from the End-of-Day chart for CBRL on 7/6 (the previous day to the alert). This chart is shown below.

In the above end-of-day graph, we can see that the Fast oscillators in the top right chart have nearly bottomed out. In the top left chart, we see the dominant Pink oscillator turning upwards. Thus the next upswing of Fast oscillators will have the safe support of this Mid Pink oscillator. We also know that CBRL does not having any earning announcement in the near future. So this buy alert is safe to take.

The exit for the alert was issued on 7/9 at 11:00am as shown below at a price of $47.52. Exits are always indicated by first digit followed by all zeros. So in this example it is 40000000000.

We can see that the exist alert comes from the Slow Black oscillator turning down. Thus though the Slow Blue oscillator is still moving up and yellow DTI line indicates upward movement, it makes safe sense to exit. After all, the trade made a profit of 3.7% in less than 2 days! Refer back to the original alert and we can see that the strategy behind the alert has historical profit average of 2.8% from 44 trades.

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