Trading Systems


A Trading System is a set of rules that define entry and exit of trading positions.

Stockalyze Professional comes with many built-in Trading Systems. But if you want to define your own then you can use Trading System Editor to create new or modify existing Trading Systems.

In Stockalyze Professional you can use simple graphical user interface (GUI) to define a Trading System. We will see this happening in just a while.

Manage Trading Systems

Go to 'Tools->Manage Trading Systems ...'.

Trading Systems dialog

Manage Trading Systems menu item

Manage Trading Systems dialog

Manage Trading System dialog lists all Trading Systems that Stockalyze Professional is aware of. You can modify them and add your own.

Manage Trading Systems dialog

Manage Trading Systems dialog

You will also see this dialog whenever you will want to use a Trading System. For example when using features like Signal Marker, Stock Idea Finder, Simple System Tester, etc.

We will now learn how to add a new Trading System with an example.

Example

We will create a new Trading System based on MACD. This Trading System is already present in Stockalyze Professional but we will still create it to learn about using Trading System GUI editor.

Before we continue let's first finalize the definition of our MACD based Trading System.

  • Name of Trading System will be MyMACD.
  • Trading System will support both long and short positions.
  • Long entry will get triggered when MACD crosses MACDSignal line from below.
  • Long exit will get triggered when MACD crosses MACDSignal line from above.
  • Conditions for short entry will be same as conditions for long exit.
  • Conditions for short exit will be same as conditions for long entry.

Since we want to create a Trading System based on MACD it is recommended that you read about MACD in Stockalyze Indicators Help document.

Click 'New ...' button on Manage Trading Systems dialog and in the dialog that appears enter MyMACD as name and click OK.

Creating new Trading System

Create new Trading System

Trading System Editor

In Trading System Editor dialog you can define the new Trading System as per definition of Trading System we finalized above.

Few jargon before we continue.

Jargon:

Data Series: Series of any data, e.g. series of opening prices, series of high prices, series of trading volumes, etc. are all data series. Outputs of indicators are also data series. There is another special data series called fixed value series which is a series of same number.

Condition: In most cases a Condition is simply a relationship between two data-series. There are some Conditions where only one data-series is involved. And the relationship is a Condition Operator; we will learn about this later.

Signal: A Signal consists of one or more Conditions. If a Signal definition contains more than one Conditions then we also need to specify whether all Conditions must be true or any can be true to make the Signal trigger.

Trading System: A Trading System is a set of Signals for each of Long Entry, Long Exit, Short Entry, and Short Exit trading situations. If Trading System does not support both long and short positions then it consists only two Signals otherwise it contains all four Signals.

Trading System Editor

Trading System Editor

In Trading System Editor dialog supply the description of the Trading System. Also select the type of trading positions this Trading System supports. For our example we will select 'Both long and short positions'.

Then you need to define the Signals for all trading situations that this Trading System supports.

Let's click on 'Add ...' button in Long Entry tab to add a Condition for Long Entry Signal.

Condition Editor

In Condition Editor Dialog you can define a Condition of a Signal.

Condition Editor Dialog

Condition Editor Dialog

Condition Editor Dialog contains three drop-down lists. First one is for first data-series and second one for the name of Condition Operator and third one is for second data-series. Let's first see what are Condition Operators available, to do that click on second drop-down list.

Condition Editor with list of condition operators.

Condition Editor with list of condition operators.

Condition Operators:

CrossOverDown: First data series crosses second data from above.

CrossOverUp: First data series crosses second data from below.

Above: First data series is above second data series.

Below: First data series is below second data series.

Equal: first data series becomes equal to second data series.

MovesUp: First data series moves up.

MovesDown: First data series moves down.

MovesUp and MovesDown are two operators that involve only one data series.

We have already decided that Long Entry Signal will get triggered when MACD crosses MACDSignal line from below. So our Condition for Long Entry will be that MACD crosses MACDSignal from below. In language of Condition Editor the same thing can be said as MACD CrossOverUp MACDSignal.

So, we need to set MACD in first drop-down, CrossOverUp in second, and MACDSignal in third drop down.

But first drop down does not contain MACD. We will have to add it. Click on first drop down and select 'Add Indicator'.

Condition Editor Dialog to add indicator in data list

Condition Editor Dialog to add indicator in data list

After this an Indicator Selection dialog will appear. Select MACD and leave parameters unchanged when Indicator Configuration dialog appears, you can actually change configurations but for now we will leave them unchanged. Click OK on Indicator Configuration dialog. After that select CrossOverUp in second drop-down list and MACDSignal in third drop-down list.

Condition Editor Dialog defining condition for MACD buy signal

Condition Editor Dialog defining condition for MACD buy signal

Click OK on Condition Editor Dialog to complete defining Condition for Long Entry Signal.

Trading System Editor with MACD Long Entry defined

Trading System Editor with MACD Long Entry Signal defined

In the same way define Long Exit Signal. This time Condition Editor will already contain MACD and other data series related to MACD indicator.

Trading System Editor with MACD Long Exit defined

Trading System Editor with MACD Long Exit defined

In Short Entry tab we will make sure 'Same as long exit' is checked. Because we have decided above that Signal for Short Entry will be same as Signal for Long Exit.

Trading System Editor with MACD Short Entry defined

Trading System Editor with MACD Short Entry defined

Similarly in Short Exit tab we will make sure 'Same as long entry' is checked. Because we have decided above that Signal for Short Exit will be same as Signal for Long Entry.

Trading System Editor with MACD Short Exit defined

Trading System Editor with MACD Short Exit defined

Now Click OK. Notice that MyMACD is now present in the list of Manage Trading Systems dialog.

Trading Systems list containing MyMACD

Trading Systems list containing MyMACD

Fixed value series:

For defining some Trading Systems you may need to use a data-series which is series of same number. We call such data-series as 'Fixed' value series. For example Long Entry Signal for RSI based Trading System can be defined as when RSI crosses 30 from below.

To define such Conditions the third drop down list in Condition Editor dialog also contains some fixed numbers and an 'Other fixed value' menu item to define Fixed value series for number not already present in the list.

Condition Editor with Fixed value list

Condition Editor with Fixed value list

This way you can define 'Fixed' value data-series.

Hope you have become familiar with this powerful tool of Stockalyze Professional. Try defining your own Trading Systems that you were longing to do in this easy way but could not do for lack of good software.