multitimeframe adventures / synthetic “stop and limit” order
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hi all,
while trading dax futures on the “short” side with some of my algos I noticed quite substantial difference to my disadvantage (not that big when trading on the “long” side) between real results and backtest, and figured out that the diffirence is basically due to the slippage. those algos enter positions with stop order – and my oberservation was that I have very frequently slippage of at least 2 points, almost no entries are with no slippage (exactly stop-level), and many, really many are bigger and much bigger than 2 points, like 4-5-6 and sometimes even more than 10 points. well, that is really a lot! and then I observed that prices frequently slip within seconds and very heavy through my stop-level, yet I notice as well, that they almost always come back very soon to my stop-level, too. I was thinking then about solution, thinking about what if I enter my positions with limit order – just how to implement it? because according to my knowledge, with PRC/PRT/IG/IB combined “stop and limit” order is not supported. but then – hipp hipp hooray! – multitimeframe (MTF) came into my mind! one can make synthethic “stop and limit” order with MTF! you make all your calculations on higher time frame, in particular there you calculate the “stop level” for entry – and at the lowest possible time frame whenever prices reach/cross your “stop level” you let the algo place real limit order for entry.
cool, I thought, transformed my algo from pure 10min TF to 1sec+10min, backtested – all looking fine, kicked it off live – nothing happens. WTF is happening with this MTF?.. after long thinking and testing I figured out that the issue is: there are too few bars loading in order to make my calculations on 10min TF. as you might know, on MTF live “only” max 10k bars are loading – base being the lower TF. on 1sec TF it’s not even full 1 day, and for my calculations I need data from past day(s)… the issue seems to be: yep, you can combine even 1sec with 1hour or 1day or 1month TF, as long as on those higher TFs you access as “data” PRT’s/PRC’s default indicators, but not your own calculations trying to reach that far into the past, as your own calculations can be performed only on past 10k bars – in case above on 10k past 1sec bars – and their equivalent on higher TF. ok, I don’t use any indicators at all, so I moved to 10sec bars as lower TF instead of 1sec, so I have enough past data for my own calculations. and hell – it worked! it worked very well in live trading, ecactly as expected, and that is the reason I share this experience, for all those who might be interested in the general concept using MTF as tool in order to place synthetic “stop and limit” order.
what might be the issue with lower TF being 10sec instead of 1sec. one has anyway the issue with limit orders that entry might “never” happen, one misses the trade completely (or gets filled with less contracts than intended). and the chance for missing the entry is simply bigger when one operates on 10sec TF than operating on of 1sec – in those 10sec markets might simply move too much and “never” come back. ideally I would aim to operate with 1 tick as lower “TF” just in order to have biggest chance for intended entry – but one cannot combine 1tick with some TF measured in sec, min, hours etc.. but as far as my backtest and live experience showed, I do not see serious disadvantages, at least not yet, some things got even better than without this kind of synthetic “stop and limit”. I have now to leave my pc, but in few days I will come back with some stats, which might be of some interest.
cheers
justisan
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