FUTURESEXAMINER.COM

Figure 1: www.futuresexaminer.com

"What's the best trading system out there?" Many of you have called the editorial staff at STOCKS & COMMODITIES to ask this question, but unfortunately, there is no right answer. It's an individual thing: It all depends on what you trade and what you consider to be good. And given the plethora of trading systems out there, it's really difficult, if not impossible, for me to come up with a definitive answer. For starters, I haven't tried every single trading system out there, and to make it more difficult, most of the systems are proprietary, which makes it impossible to figure out how well they work. But recently, I came across www.FuturesExaminer.com, a site where several futures trading systems are ranked. I'm sure most of you have heard of Futures Truth, a publication that ranks trading systems. Well, FuturesExaminer.com has taken a similar approach by bringing the results online. The number of systems ranked, at this point, doesn't even come close to the number of systems ranked in Futures Truth (as of this writing, only 16 systems were tracked), but some features available on the site are worth mentioning.

As a registered user of this service, you can see the performance results of each of the systems tracked. You can do this by either viewing the results of all the systems or by baskets - that is, groups of systems. These baskets are already created, but you also have the flexibility to create your own baskets. The results are displayed in a tabular format displaying the system name, account size, months of data, drawdown in dollars, trades per year, average profit/loss per year, various ratios (Sharpe, Sterling, Sortino), and figure of merit.

That last one is an unusual term, but you'll find the definition on the site. If you click on the system name, FuturesExaminer will display details about the system such as the type of trading (swing, intraday, position), the commodity contracts traded, the system developer's name, and the cost of the system. You can also view, for each basket, the system statistics, monthly profit/loss, multi-charts showing the performance of each system in the basket, and single charts (performance of each individual system). The site has an extensive help file that you can refer to when in doubt.

It certainly is handy to have such a service available at your fingertips. Next time you're wondering how a trading system performs, visit this site and see if FuturesExaminer has tracked it. If the system isn't listed, you might want to email Ken Morin, the website founder, and suggest he take a look. And if you are the proud owner of a trading system, you may consider having it tracked here.

-Jayanthi Gopalakrishnan, Editor

PROPHET PATTERNS IN PROPHET.NET

There is an irony in trying to introduce Prophet Patterns, which is one of the newer modules in Prophet.net - aka the "complete technical analysis suite in a browser" - developed by Prophet Financial Systems. That irony lies in the fact that it is difficult to talk about one component of this "suite" - such as Prophet Patterns - without talking about its relationship to other components in the suite.

That's not to say that these components are dependent upon one another. While each component - JavaCharts, MarketMatrix, or Linked WatchLists - is impressive in and of itself, the greatest efficiency and usefulness with Prophet.net comes to the trader or analyst who is able to move seamlessly from component to component.

With that, consider yourself introduced to Prophet.net's Prophet Patterns (Figure 1). Prophet Patterns helps traders spot 12 of the most commonly traded chart patterns in both daily and intraday time frames. Using a variety of proprietary algorithms, Prophet Patterns not only locates ascending and descending triangles, upward and downward channels, falling and rising wedges, head & shoulders tops and bottoms, triangles, rectangles, triple bottoms, and triple tops; the program also lets traders know the direction of the price movement, the anticipated advance or decline in the stock, and - vitally - the time frame during which this movement is expected to occur.

Figure 1: The main page of prophet.net's prophet patterns

And whether a trader elects to trade these patterns as they appear, or to use Prophet Patterns as a screener to narrow the universe of stocks to those that might be more profitably traded, it is hard to deny that Prophet Patterns can provide traders with a discriminating set of second eyes that will help them locate both opportunities and stocks that might have otherwise slipped beneath their gaze.

SOOTH SCANNING

Prophet Patterns is available to Prophet.net members as an add-on. Intraday ("ST") and daily ("DX") versions are available separately for $29.95 a month at each of Prophet.net's three membership levels (bronze, silver, and gold), and are available as a package at these same membership levels for $49.95 a month. Those who enjoy using Prophet.net's free services (the basic package) can subscribe to either Prophet Patterns versions for $44.90, or subscribe to both for $64.90.

How easy is Prophet Patterns to operate? The "Automated Chart Scanning" window used by Prophet Patterns couldn't be more straightforward. This window allows the trader to choose the period to be studied (intraday or end of day), which patterns the system will scan for, whether the system should scan for bullish or bearish patterns, whether the pattern is a continuation or reversal move, and if the breakout should have already been completed at the time of the scan or still be emerging.

In addition, the Automated Chart Scanning window provides a scan-rating system that lets traders determine which characteristics to "front-load" and emphasize in the scan and which to de-emphasize. These characteristics are rated on a 0-5 scale and include factors such as uniformity (how well the scanned stock conforms to the selected pattern or patterns), volume increase, breakout trend strength, initial trend strength, and an overall rating.

While there is nothing specific that explains the difference between a breakout trend strength rating of 3 and a breakout trend strength rating of 4, traders can experiment with the rating systems to find out which ratings produce the most (or fewest) stocks with tradable patterns without eliminating too many good candidates.

Once the criteria have been set, all the trader has to do is click on the "Scan for Patterns" button and, after a few moments, a list of stocks appears. These lists are numbered, and include the stock symbol, the name of the pattern, the direction, the trend, the length of the pattern in bars, and whether the signal is bullish or bearish. This is also where various predictions about the stock are displayed - such as the anticipated gain or loss in percentage and price terms, as well as the amount of time the system believes it will take for the pattern's breakout to be completed.

Finally, the list provides a pair of quality rankings next to each stock (Figure 2): a star system (1-4) on the overall quality of the pattern and likelihood for profit, and another graphic that lets traders see at a glance factors such as trend strength and uniformity (mentioned previously).

Figure 2: Details. The detail screen for each scan selection includes a star rating, stock symbol, pattern type, direction, and likely advance in percentage, price, and time.


PROPHETIC PATTERNS

One of the best things about Prophet.net's many modules and components is the way they are all linked, very much fulfilling the website's billing as the "complete technical analysis suite in your browser." How many times have you been working with one kind of chart, then had to close it to open up another window - perhaps a search or scan - then had to close the search/scan and go back to the chart? Actually, the better question is, how easily have you been able to move between the various tools you use to analyze the markets: whether those tools are quoteboards, charts, scanners or screeners, market profiles, option chains, or a combination of all of the above?

I have a difficult time thinking of a market analysis software package offered online that allows the trader to accomplish all this as easily as Prophet.net does. In many ways, it is the classic overstuffed menu: probably no individual trader will ever exploit all of the different modules and module combinations that Prophet.net provides. But just about all traders will benefit from the flexibility, scalability, and ease of movement that Prophet.net's various modules allow.

To this end, one excellent feature of Prophet Patterns is its workflow tips, which show how a trader might create a scan; sort the results of that scan by symbol, pattern, direction, trend, signal time, prediction, or quality; enlarge or analyze the charts of the various scan results; or send the scan results to a watchlist for an even more penetrating and comprehensive review. Prophet Patterns traders will note that when the Java charts are created from the scan results, the trendlines and pattern markings appear on the new chart. From here, traders can add other indicators or studies to help determine specific trading opportunities.

Traders who opt to move the scan results into a watchlist or Prophet.net's improved Market Matrix have other review and scanning capabilities that can be applied. For example, not only can traders access streaming Java charts through Market Matrix, but also exceptionally lengthy scan results can be further discriminated by applying ProphetScan, which is another Prophet.net module that provides for further screening by fundamental, technical, and intraday price action. Of course, many of the other modules - from ChartScope to Prophet.net Notes - can also be used with Prophet Patterns.

THE FINAL PROPHET-CY

One of my wife's favorite expressions, when finding herself in a store filled to the rafters with new and exciting things, is to jokingly warn me that she feels as though her head will explode. Traders who take the time to plumb the depths of Prophet.net's various modules and components - especially Prophet Patterns - will likely find themselves in a similarly dizzy and delighted state. Again, as someone who has used Prophet.net regularly (if not exclusively) for the past few years and still hasn't come close to exhausting the website's capacities, I want to underscore the relational aspect of the modules. As the section in Prophet Patterns on workflow tips makes plain, not only does combining the various modules help traders better understand the markets they are buying, selling, and hedging, but also these tips help remind traders of the importance of consistent, systematic approaches to the market.

Whether a trader is a short-term, intraday scalper; an intermediate-term swing trader or position speculator; or a long-term investor looking to maximize entries and exits, Prophet Patterns is an excellent example of the kind of market analysis tool that is truly applicable across the spectrum of trading styles, and systems, methods, and goals.

- David Penn, Technical Writer
--www.FuturesExaminer.com, --Prophet Patterns


Originally published in the October 2004 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2002, Technical Analysis, Inc.
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