Journal of Technical Analysis - Market Technicians Association

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Figure 11: Tk4, example on copper futures. Note how this allows capturing more of the decline, as the signal occurs much
earlier. (The indicators below the price chart “tk_sht43” and “tk_lgt4” 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.)
This resulted in the lowest total net profit in this test (see table 1), with a low percentage of winners. However, closer examination reveals that this system ranked
fifth -fairly low- for trade count, trade duration, average loss and maximum drawdown, and ranked in second for average profit, which are all potentially encouraging
results.
The Achilles heel of this system is that short-term corrections result in trade exits, but if the longer term trend is still up, the trade would not necessarily be reentered.
(For example, if the market is no longer under the cloud, but has risen inside, or above the cloud for long positions, and vice versa for short positions.) A
substantial part of the trend, the later part, when it is confirmed, is missed. Other re-entry conditions could be considered in a more complex system.
II-E
Trade entry on Kijun Sen/Tanken Sen crossover, adding the Chikou Span as filter. (Chikou Span above prices for buy, and under prices for sell). Exit on reverse
Kijun Sen/Tenkan Sen crossover, with no other condition. This signal is named ”tk5” in this paper. (see figure 12)
Figure 12: Tk5, example on Copper futures (The indicators below the price chart “tk_sht5” and “tk_lgt5” 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)
This method produced middle of the road results, and had average scores. Its weak points were the fairly low average profit and the high count.
Jo u r n a l of Technical Analysis • 2008 • Issue 65