By enabling LIBBT, you can instruct TradeStation to "look inside" each bar better to estimate the sequence prices within the bar.

For example, if you have a 15-minute bar, enabling the LIBBT feature can give you a one-minute resolution for each bar. Put another way, the backtesting engine will evaluate your trailing stop on a minute-by-minute basis within a single bar. This results in a more accurate simulation of your trailing stop's behavior in a live trading environment, reducing the gap between backtested and actual results.

Set this feature if your strategy relies on order types that could be influenced by the sequence of prices within a bar. Trailing stops are the obvious choice. Also, if your strategy uses profit targets and a hard stop. The backtesting engine must estimate which one might be hit first; thus, using LIBBT becomes critical.

You don't have to use the LIBBT setting if your strategy only uses "next bar at open" to enter and exit trades. Likewise, the LIBBT setting is unnecessary if your strategy uses "next bar at open" with a single hard stop loss.

By understanding these nuances and employing features like LIBBT, you can significantly improve the reliability of your trading strategies, ensuring that your backtested results are more aligned with live trading outcomes.

The combination summing code is given at the end of the article. The results are shown in Figure 4.

Since there appears to be only one curve, it means the two results are identical – precisely what we wanted! So, this proves the summing template can be used effectively to trade two strategies in one “master strategy.” Plus, the method is not limited to two strategies – the developer can actually combine as many strategies as he or she desires.

One important note: In the example above, I assumed zero commissions and slippage. So, when you combine strategies, the results should be identical. In reality, though, with commissions and slippage the master strategy will actually have slightly better results, since occasionally conflicting trade signals will cancel out, instead of each being executed.

To recap the method:

1. Create strategy number 1 in the summing strategy format given in part 2.
2. Create strategy numbers 2-N in the summing format.
3. Combine the N strategies together in a new strategy. Care must be taken to have different variable names associated with each strategy. One way to do this is to identify strategy number 1 variables with the suffix “01,” strategy number 2 with “02,” etc.
4. Insert the master summing strategy created in step 3.
5. Compare the equity curve of step 4 with the sum of equity curves of strategies in steps 1-2. This check ensures that the strategies were combined correctly.
6. If the results are the same, then the strategy can safely be traded. Now you are trading two or more strategies with the same instrument in the same account! Tradestation Trade Manager can still be used to check that actual positions match the strategy.

The key to using this method effectively is to create the strategies from the start with the summing code. That is, create it with the end goal of adding it to other strategies. Then, you can run your standard development process (I use my rigorous Strategy Factory process to develop and fully test each strategy) on each component strategy. Once this is done, these component strategies can be added together to create one master strategy – one that will faithfully trade all strategies at the same time.

EasyLanguage Code Download:

The workspace and strategy are availble to subscribers of EasyLanguage Mastery. It's free to join!

When you download the TradeStation WorkSpace and files first, try running each of the summing strategies by itself. Then run strategies 1 and 2 together in that chart. You will see that the results look nothing like they should. Then run Master strategy 03. You will see that its results match strategy 1 plus the results of strategy 2.

If you would like to learn more about building trading systems be sure to get a copy of my latest book, Building Winning Algorithmic Trading Systems.

Other Articles in This Series

Trading Multiple Strategies With The Same Instrument – Part 1 [Updated For 2021]
Trading Multiple Strategies With The Same Instrument – Part 2 [Updated For 2021]

Today’s article will focus on the first three steps, and the final article in this series will focus on the fourth step.

For the baseline normal strategy we will just use the simple strategy described in part 1 – a simple momentum strategy with a stoploss. This is typical of a very simple strategy. We will not include a profit target, but the conversion process from a typical strategy to a summing strategy could easily handle this. This simple strategy produces the equity curve shown in Figure 2.

This is the curve we will try to mimic with the summing strategy. It is important to note that we say “mimic” and not “duplicate.” For example, for various reasons it is not possible to correctly use Tradestation stoploss functions when combining multiple strategies. So, we will attempt to get close to the original strategy, but the summing strategy performance may be better, or it may be worse. That is the price we must pay to reach the end objective.

In looking at the original strategy, the entry – a simple “buy the next bar at market” – should be fairly easy to implement. The stop loss order will be a bit more difficult. This is because the stop loss is active. The whole bar, and the new strategy will only act at end of bars.

To keep the conversion simple, I am going to use “sell next bar at market” to replicate the stops. This will mean there is no stop in the market when you actually trade it live. This could be a deal breaker for some people, but in reality the difference between using actual stop losses and simply exiting the next bar at market is not troublesome in most strategies. If it is significant, the pseudo stop price can be adjusted to more closely match the original strategy. Again, though, we are giving up the power of the stoploss function to be able to more easily create the summing strategy.

Figure 3 shows the original strategy created for step 1.

Below shows the summing strategy created for step 2.

{TRY TO MIMIC THIS

If close>close[5] then buy next bar at market;
If close<close[5] then sellshort next bar at market;

setstoploss(1000);}


input: stopl(1000),ncons01(1);

var: PositionAtEnd01(0),LongEntry(0),ShortEntry(0);

//this is the current position we should be at the start of the bar
//PositionAtEnd01[1];

//Entry rule
// If Condition1 then begin Condition1 is your buy signal

If close>close[5] then begin
PositionAtEnd01=1; //should be long at open of next bar
If PositionAtEnd01[1]<>1 then LongEntry=Close-stopl/BigPointValue; //reset longentry only if New trade
End;


// If Condition2 then begin Condition2 is your sellshort signal
If close<close[5] then begin
PositionAtEnd01=-1; //should be short at open of next bar
If PositionAtEnd01[1]<>-1 then ShortEntry=Close+stopl/BigPointValue; //reset shortentry only if New trade
End;

//now check current position and see if pseudo stop was hit- if it was, then make sure position at open of next bar is flat
If (positionAtEnd01[1]=1 ) and Close<=LongEntry then PositionAtEnd01=0;
If (positionAtEnd01[1]=-1 ) and Close>=ShortEntry then PositionAtEnd01=0;

//now at this point, we have three possibilities
//PositionAtEnd01=1 means at open of next bar, we should be LONG ncons01 contracts
//PositionAtEnd01=-1 means at open of next bar, we should be SHORT ncons01 contracts
//PositionAtEnd01=0 means at open of next bar, we should be FLAT


//***********************************************
//we have to figure out how many long or short we should be
var:totalcons(0),currentcons(0),constobuy(0),constosellshort(0);

totalcons=0;
If PositionAtEnd01=1 then totalcons=ncons01;
If PositionAtEnd01=-1 then totalcons=-ncons01;

//so now totalcons should be the final position, after all is said and done


CurrentCons=CurrentContracts*Marketposition; //this is our current posirion at the close of the current bar

//print(date," ",totalcons," ",currentcons);


//first figure out how many contracts to buy or sell to get to right NET LONG position
constobuy=0;

If TotalCons>0 then begin
If currentcons<=0 then constobuy= totalcons;
If currentcons>0 then begin
//we are long, but have to decrease our long position (but still stay long)
if totalcons<currentcons then begin Sell currentcontracts-totalcons contracts total next bar at market;
end;

If totalcons>currentcons then constobuy= totalcons-currentcons;
end;

buy constobuy contracts next bar at market;
end;


//next figure out how many contracts to buy or sell to get to right NET SHORT position
constosellshort=0;

If TotalCons<0 then begin
If currentcons>=0 then constosellshort= -totalcons;

If currentcons<0 then begin
if totalcons>currentcons then begin
//we are short, but have to decrease our short position (but still stay Short)
Buytocover (currentcontracts+totalcons) contracts total next bar at market;
end;


If totalcons<currentcons then constosellshort= -(totalcons-currentcons) ;
end;


sellshort constosellshort contracts next bar at market;
end;


//if we should be flat overall, then exit all existing contracts


If TotalCons=0 then Sell All contracts next bar at market;
If TotalCons=0 then BuyToCover All contracts next bar at market;

By examining the code, it should be pretty clear what is going on – order statements like “buy next bar at market” are replaced with counters/summing variables, and at the end of the code, the counters/summing variables are converted back into buy and sell statements.

Some of the code for the bottom section looks overly complex, and it is that way by necessity. Tradestation has some weird quirks with order placement that must be accounted for. For example, let’s say you have a strategy with two separate buy statements triggered, corresponding to different conditions. So, now you’d be long two contracts, one from each entry. If you later wanted to exit (sell) only one of these contracts, a statement such as “sell 1 contract next bar at market;” will actually sell one contract from each entry.

So, the architecture of Tradestation makes keeping track of orders and where they come from pretty difficult. Thus, the code at the bottom of the summing strategy is complicated. In the end, the accuracy of this code can be determined by comparing the individual summing strategies with the single “master” summing strategy. That will be demonstrated in part 3.

Figure 4 shows the equity curve for each of the strategies. As you can see, the results are fairly similar – close enough for us to accept the summing strategy of Figure 4 in lieu of the original strategy of Figure 3.

Eventually, as the trader gets more comfortable with this conversion process, he or she can start out from the beginning with the summing strategy, bypassing the original strategy completely. If this strategy produces acceptable performance results, there really is no need to create the original strategy. A sample template for an individual summing strategy is shown in the code at the bottom of the article.

Now that we can convert a “normal” strategy into a format that can work with a summing strategy, we can combine multiple strategies into one large strategy. That will be tackled in the final part of this article series.

If you would like to learn more about building trading systems be sure to get a copy of my latest book, Building Winning Algorithmic Trading Systems.

Other Articles in This Series

Trading Multiple Strategies With The Same Instrument – Part 1 [Updated For 2021]

So, how could you do this – trade 2 strategies in the same market at the same time- in Tradestation? There are quite a few options to do this. Unfortunately, all have advantages and, most importantly, disadvantages.

Option 1 would be to insert the two strategies on the same chart. That leads to decent results in this particular case, as shown in Figure 4. But, it does not equal the equity curve we want (although in this case it is fairly similar), shown earlier in Figure 3. In general, this is not a good alternative. Too many times, inserting two strategies on the same chart will lead to terrible results.

Option 2 would be to combine the code for each strategy into one “super code” and trade that.  The code for each would be cut and pasted into the “master” code, with no changes at all.  With this technique, however, the resulting strategy still does not mimic the curve we want.  This is especially true if the strategy uses Tradestation reserved words, such as openpositionprofit  and market position.  This method is just another disappointment.

Option 3 is to trade each strategy, in a separate chart, in the same account.  Depending on the code, though, this option can be fraught with disaster.  For example, you cannot use the Trade Manager Position Match feature any longer, so you’ll never know if your real life positions match both strategies.  And that is just the tip of the iceberg. Stop losses, market position based rules and many other nuances in Tradestation make this a very difficult alternative.  The end result with this option, based on my personal trading experience, is that it just is not a feasible option.

Option 4 is to trade each strategy in its own chart window, and use a third party tool to manage or enter the positions.  This is a good solution, but there is a fee for this 3^rd party software. Some possible software packages that may help you with this option:

• http://www.independenttrader.com/
• http://www.traderssoft.com/wp/ts/software/software-ts9/
• http://www.ninjatrader.com

Of the three, I have only used the Ninjatrader option to send orders from Tradestation thru Ninja to another broker.  But, I did not use this interface specifically to trade multiple strategies with one instrument.  One of these solutions may work for your particular case.

Option 5 is to trade each strategy in its own chart, in its own account.  So, if I had 3 ES strategies, I would trade each strategy in a separate account, meaning I’d need 3 accounts.  This is the method I have primarily used.  It has its advantages – it makes bookkeeping each strategy a bit easier, and the strategies can be tracked fairly easily in Tradestation’s Trade Manager.

But, the approach also has its downside.  For instance, it is a very non-optimal way to use margin.  If I go long in one account 1 contract of ES, that ties up $5060 in margin.  And if I go short 1 ES in another account, it would tie up another $5060.  So, I end up with 2 positions, in opposite directions, meaning in reality I am net flat, and instead of needing $10,120 in margin, I should need $0!

Although there may be other potential solutions to the problem, I am going to with Option 6.  This solution involves summing up position in multiple strategies, and then just trading to reach the net position.  For example, if strategy #1 was long, that would be +1.  If strategy #2 was also long, that would be +1 also.  Summed up, that would mean you should be +2, or long 2 contracts.

The nice thing about this solution is that you could potentially trade many strategies at the same time, and have the result traded through and depicted on only one chart.  So, each individual strategy could be evaluated separately (using the Strategy Factory process, I teach for example), and then it could be “added” to other profitable strategies.

In theory, that seems like an easy proposition.  Just sum up positions, and trade the net.  But, reality is quite a bit tougher, due to the way Tradestation works, and also just due to the nature of the problem.

In the next installment of this series, we will take the first step towards creating a “super” strategy that trades 2 strategies – creating strategies that perform similarly to the original strategies of Figure 1 and 2, but that will lend themselves to being combined into the super, master strategy.

If you would like to learn more about building trading systems be sure to get a copy of my latest book, Building Winning Algorithmic Trading Systems.

Other Articles in This Series

Trading Multiple Strategies With The Same Instrument – Part 2 [Updated For 2021]

In this article, I’ll discuss some of the basics, and provide a few handy tools for you to use in your automation. This article is far from complete coverage of automation (the perils of unattended trading, and the use of virtual private servers are aspects of automated trading deserving of their own articles, for example). I’ll use the TradeStation platform for all examples and coding, but the concepts apply to all trading software platforms.

First Things First

When you tested your strategy, you likely used a continuous contract of some sort for your market data. In TradeStation, the back adjusted continuous contract (my favorite type) is denoted with a prefix “@”. So, for example the Crude Oil continuous contract is @CL.

Unfortunately, you cannot trade the live symbol, “@CL” since TradeStation needs to know which contract month you would want to trade. Thankfully, they provide continuous monthly contracts, such as “@CLV14” for October, 2014 and “@CLX14” for November, 2014. Each is identical to @CL when it is the front contract.

So, for actual trading use the symbols such as @CLX14, depending on the current contract month.

Are You Trading The Right Contract?

Since you tested your strategy with the @CL symbol, which always trades the lead contract, you want to make sure your live trading matches up with it. If the current month is November, you don’t want to trade the December contract, since then you are introducing the Nov-Dec spread dynamics into your trading, which is not what you tested. Always trade only what you tested!

So, how do you monitor that you are trading the correct contract? It obviously can get hairy when multiple strategies, multiple instruments, and multiple charts are involved. To assist me with this, I created a simple paint bar indicator which you can find at the end of the article.

All you have to do is have the contract you want to trade (@CLV14) as data1, and the perpetual continuous contract (@CL) as data2 in your chart. Remember the order is important, since you can only trade data1. The indicator monitors for any difference between these two data streams. As long as October “V” is the current month, the indicator will not plot anything. But, when the contract rolls to November “X”, the paint bar will paint a green bar in the data1 portion of the chart, as shown in Figure 2. That is your signal to roll the position.

The Match Game

Another critical part to successful automated trading is making sure that the strategy position and the real life position match. TradeStation provides a decent way to monitor this, as shown in Figure 3. But, in staring at the charts all day, I found it easy to forget to check the Trade Manager window. So, I created another paint bar indicator, included at the end of the article. It monitors the strategy position and the real world position, and draws a big red bar when there is a mismatch. An example of this is shown in Figure 4.

Unfortunately, this “position mismatch” indicator is a little too good, and gives false alarms quite often. I actually like that aspect, as it keeps me constantly checking positions, but it is left to the reader to improve upon the accuracy of the indicator. The good thing about the version given at the end of the article is that it does not seem to miss position mismatches – better to have a few false alarms than a major miss!

Rollover Time!

These indicators are especially useful when you have to rollover. They will tell you when to roll, and will ensure you do it correctly. I’ll show that below with an example.

On September 17th, the CL strategy was long 1 contract of October Crude Oil, @CLV14. At the close of September 17, TradeStation rolled the October contract to November. I was alerted to that fact by the green bar, shown in Figure 5. Remember, the green bar shows a mismatch in continuous contracts. So, that was my cue to roll.

Normally, I would use the exchange supplied spread to roll a position, in this case I would sell the October-November spread. That would make me flat in October, and long in November. The exchange supplied spreads are the safest and usually cheapest way to roll. Unfortunately, the TradeStation 9.x platform does not support this, so you have to “leg” in and out of the position in order to roll.

So, my first step is to exit my October long. After I do that, my chart was as shown in Figure 6. The big red bar told me there was a mismatch in position.

The next step is to change the data1 stream to @CLX14. This will eliminate the green bar (which was hidden behind the red bar), but the red bar persists, as shown in Figure 7.

That is telling me I need to do something in November, namely buy. I did that in Figure 7, and I was filled in Figure 8. But you will notice the red bar persists. Now, I simply turn the indicator off and then back on, and end up with Figure 9. No red bar, no green bar. Everything is good!

Conclusion

Of course, there is a lot more to automated trading than just synching up continuous contracts and monitoring live vs. strategy positions. But, these are two critical aspects that many people never fully get a handle on. Properly managing positions and contract rollovers can be critical to your success. As you trade 5, 10, or 50 or more strategies, you’ll be thankful you have these tools to help you monitor your rollovers and your positions.

If you would like to learn more about building trading systems be sure to get a copy of my latest book, Building Winning Algorithmic Trading Systems.

— Kevin J. Davey of KJ Trading Systems

You're never going to know for sure. Building a trading model is not like building a software program to operate a bank, or an engineering project to build a home. Those are activity constraints that are 100% understood, validated, and documented. The end result is predictable.

However, with trading you're dealing with uncertainty. This is very different and it's what most people experience. In short, you have to always take a leap into the unknown. Most people find that very difficult to do. Thus, they can never be good traders.

I know that I tend to have a perfectionist mindset. Thus, it's challenging to accept something that's not perfect such as your trading models. No trading models are ever going to be 100%! This thinking becomes a roadblock or excuse for not pushing forward. I know people who have been building systems for over a year or more yet, don't trade live, and it's a mistake, in my opinion.

Trade Live Now!

When it comes to getting started in system trading, I always tell new system traders this:

It's essential to bring a trading model to the live market sooner rather than later. 

You may have even heard me say this before. Again, my advice would be to start trading one of your better strategies on a small starter account as soon as possible.

Doing this will provide you with valuable experience. For example, you'll feel the emotions of live trading. You'll get accustomed to your platform, strategy, and yourself when your money is at risk. As a result, you build the required confidence to grow as a trader. The only way to attain confidence is to "do". Reading about trading or building strategies that have nice backtest is fantasy. You need to move into the realm of reality.

Your first system does not need to be perfect, far from it. Your first system is not going to be perfect or even ideal. You may lose money. That's OK. You have a small account, and losing money is part of this game. Make mistakes now with a single system, trading a single contract on a small account.

Think of it this way, when you first begin any new skill, your first attempts are not great. That's OK. Learn and improve over time. You'll need to iterate over the process to gain experience and confidence.

Just pick one decent strategy and get going. The experience of live trading will be invaluable. In fact, it's the only way to move forward.

If you want to play baseball, you have to put in the time going up to the plate and swinging at pitches during a live game. Even if you strike out, it's a valuable experience. You can't be an airplane pilot by only flying in a flight simulator. You need real time in the sky. You can't be a surgeon by only reading books. You need to work with real people. 

Likewise, you can't just think your way to being a better trader. You have to experience it. That means putting money on the line.

Now, get out there and trade live.

Myth #1: I'm Going To Get Rich Quick!

I hate to burst your bubble but, here is the truth: System trading is not a get-rich gimmick. 

You're not going to take a $10,000 trading account and quit your job next month as a successful day trader. You're not even going to turn the $10,000 starting capital into a $50,000 account in one year. 

I have people contact me and want a system that returns 20% or 30% per year with minimal drawdown. Some ask me for even more amazing returns per year. Surely it can be done, right? Well, maybe, but it's the exception, not the norm. Let's be clear about expectations about returns by putting things into perspective.

The S&P has returned on average, 8% per year for the past 80 years. Our job as traders is to do better than that while reducing our exposure and risk.

Managed futures might do around 11% per year. The very best fund managers might do between 11%-20% on any given year. Remember, these are very people backed by technology and money. Consistently producing returns like these people is difficult.

So, keep your profit expectations realistic. Making 11% per year consistently, that's good. At 20% per year consistently, you are rocking it!

Myth #2: Trade A Small Account and Make BIG Returns

Starting with a small trading account is excellent as a new trader. You're going to make mistakes, and you're likely going to lose some of that money. Maybe a lot of it. So, risk a small trading account to learn your trading platform, the computer language, and how strategies function on the live market. Make those mistakes now, on the small account.

However, don't expect to make money to live off from a small account. This small account is your training ground or what I like to say, that's tuition money! Maybe with a $20,000 account, you'll start to pay for your trading expenses such as leasing server space, taking courses, and buying books. You'll need a trading account that consists of hundreds of thousands of dollars to make a living from trading. But do start small until you become profitable. 

Don't expect to become professional in the next month or two. Like anything worth pursuing in life, it's going to take time. Your journey from newbie to successful system trader is likely to take years. It's going to take much work as well. Do you have the time? Do you have the will? You're going to find out!

Becoming successful will not necessarily come easy. Between the psychological issues that can haunt traders to the technical know-how required, you have some work ahead of you.

Think of it this way, if you want to get paid well for anything in life, such as being a neurosurgeon or top athlete, you don't suddenly become those people on a whim. You have to earn it through learning your craft and practicing your craft every day. You become a successful trader after first failing as an average trader and then moving up.

So many people are looking for that one single system that generates a steady stream of cash for them month after month. Well, that's NOT how it works. Trading systems go through phases where they have winning months and then losing months. These losing months are drawdown periods. Sometimes sound systems lose your money for 6 months or longer! How to survive this?

You need to create a portfolio of trading systems. We've all seen the graphs from financial advisors where they show you a pie chart. This pie chart breaks down your investment portfolio divided between large-cap stocks, small-cap stocks, international stocks, U.S. bonds, and a gold ETF. This approche is designed to help smooth out your equity curve in your investment account. In other words, lessen the impact of those drawdowns. In short, when you have uncorrelated assets in your portfolio, you make your overall equity curve smoother.

Well, you need to create a portfolio like that for your trading. You need a portfolio of trading systems. The goal is to diversify your portfolio across uncorrelated markets, different trading styles, and even different timeframes. Doing this reduces those drawdowns, and you're much more likely to bring in a consistent profit every month. You'll still go through periods where you're making a lot of cash and other periods where your portfolio is not doing as well. But overall, you're in much better shape.

Conclusion