Journal of Technical Analysis - Market Technicians Association

What is the impact of waiting for both cloud and Chikou Span filter, and to exit trades aggressively on adverse conditions?
This is the only method where filters were used on trade exit. The result is a clear decline in losses. Both the duration of losing trades and the amount of losses is
reduced. Both the average loss and the maximum drawdown are the smallest among the methods tested in this study. This makes this method particularly attractive.
The total profit is not the highest, but in light of the risk reduction and capital preservation is quite acceptable at $55,289 and compares to the highest profit in this
test (see table 1), $89,342 and the lowest profit at $15,010.
II-C
Trade entry on Kijun Sen/Tanken Sen crossover, adding the position relative to the cloud as filter. (above the cloud for buy, under the cloud for sell) Exit on
reverse Kijun Sen/Tenkan Sen crossover, with no other condition. This signal is named “tk 3” in this paper. (see figure 10)
What is the impact of delaying the entry until the cloud confirms the outlook?
Figure 10: Three examples of unfavorable long trades on tk3, on copper futures. The filter based on the close and not the
position of the crossover relative to the cloud results in whipsaws on this kind of situation.
(The indicators below the price chart “tk_sht3”and “tk_lgt3” represent the total profit (green) or loss (red) as a line, and the
closed profit (green) or loss (red) as a histogram, for respectively the short system and the long system)
We can think of this system as attempting to capture the resumption of established medium-term trends after the end of short-term counter-trend corrections.
This method provides the second highest total net profit. This is coming from the highest average profit of all six methods, the second highest percentage of
winning trades. The number of trades is less than half the number of trades in the first test, “tk1”, which did not have use the cloud nor the Chikou Span as entry
filter, and this reduction was quite beneficial.
Despite the entry filter, the average trade duration is the second highest of all six methods. The average loss is also the second highest, which is impacting the
overall results of this method substantially. A comparison with the second test, “tk2” immediately above, suggests that this method would strongly benefit from
earlier exit of losing trades.
Separately, the trade system used the position of the daily settlement relative to the cloud as the trade entry filter, not the position of the crossover relative to
the cloud, which would have been a stronger filter. This was chosen for an easier calculation. While it may not seem like a substantial difference, figure 10 on the
previous page illustrates that trades are entered in sideways markets, where the cloud is not at its best performance. When the cloud is thin, and the crossover occurs
either inside or under the cloud, strength towards the close can result in a close above the cloud, and longs are entered. The resulting losses remain small, but without
these, tk3 would have had higher total profits in this test.
II-D
Trade entry on Kijun Sen/Tanken Sen crossover, adding the position relative to the cloud as filter. (under the cloud for buy, above the cloud for sell) Exit on
reverse Kijun Sen/Tenkan Sen crossover, with no other condition. This signal is named ”tk4” in this paper. (see figure 11)
What is the impact of an aggressive entry, attempting to capture the move early in the trend?
Jo u r n a l of Technical Analysis • 2008 • Issue 65 47