This post is based on a strategy available to students of TradeStation’s Master Class course, hosted by our educational affiliate YouCanTrade.
Most traders want to catch moments when the market changes direction. Did you know TradeStation can be programmed to detect and place orders when these turns occur?
The platform includes functionality for automated trading strategies covering a wide range of criteria and philosophies. Today’s strategy uses “Kase Key Reversals.”
This approach uses Kase price bars, which are based on price range rather than time intervals. Kase bars are drawn after price moves a certain number of ticks or points. It doesn’t matter if it takes an hour or five minutes. This helps see movement and trend clearly, passing over large periods of time without much activity.
Say price is trending higher and a Kase bar makes a new high, but then closes below the previous bar’s last price. The strategy would view that as a bearish reversal and potentially create a sell order.
The same would be true if prices are falling and aren’t able to hold a new low. The Kase Key Reversal would detect a big drop followed by a higher close and potentially create a buy order.
Taking Profits, Setting Stops
The strategy in this chart is called “@MC_Key Reversal LE SE.” It generates both long entries (LE) and short entries (SE).
Different inputs can change its behavior. One of the most important is the “Lookback period” for lows and highs. For example, if it’s set to 13, the strategy will look for the highest or lowest price in the last 13 bars to determine when a new high or low is made.
TradeStation includes other automated strategies to round out the functions. For example, the chart pictured also uses:
- Profit target: Lets users program an exit once a position has made a certain amount of money.
- Stop loss: Lets users program an exit once a position has lost a certain amount of money.
- Time Exit : Lets users program an exit once a certain number of bars have passed.
In conclusion, many traders analyze candlestick patterns in search of reversal patterns. Kase bars can help this process by passing over large periods of time without movement, and highlight spots were significant turns occur. TradeStation’s advanced technology can then automate orders to go long or short based on those signals.