How Anthony Trongone Uses eSignal to Make Proactive Trades

With 40+ years of trading experience, I understand that the trade you actually make is not necessarily the trade that your intellect tells you to make. Emotions often overpower us, and we find ourselves being reactive instead of proactive traders.

Because the market often defies logic, realistic traders embrace its capriciousness. Therefore, to survive as an active trader, always allow the market to pursue its own course; you cannot deflect its movement.

So, let me highlight some of the less well known, but extremely powerful, features within eSignal that help me execute my trading decisions with fewer emotional distractions.

An important element for me is the amount of time I have available for trading, which constantly changes. Administering MBA programs and my consulting work necessitate traveling to China approximately every 6 weeks. I often have to revise my strategy to accommodate my busy schedule. The downloading feature in eSignal offers me the flexibility to paste multiple time frames into Excel or SPSS, which can accommodate the 12-hour time difference.

Any time you entertain a particular hypothesis, perform a statistical analysis to confirm your suppositions. Because you are trying to formulate decisions in a brisk trading climate, simple analysis works best at reducing emotional distractions. I can best illustrate this with the following question: If a $42 stock finishes the regular trading session with a closing price within 7 cents of its lowest price, how does the overnight session perform?

After finding the answer to that with analysis, you can make a more knowledgeable trading decision on the basis of your findings. More importantly, with such a simple strategy, it becomes easier to apply the ice-cold reasoning necessary for enduring success.

With a daily average of 88.8 million shares, “the cues” are an accurate barometer of trading technology stocks with active volume. The purpose of this widely popular ETF is to replicate the movements of the NASDAQ 100 index.

In 1,200 trading days, the cues fell $9.00 to $42.45 on March 3, 2006. The highest price was $50.45 on May 23, 2001; its average closing price was $34.53. Even without running analysis, just on its face, it certainly gives you the impression of trading in a winless environment; however, by taking a long position in the overnight session (i.e., from the closing bell [4:00 p.m. ET] to the sound of the opening bell [9:30 a.m. ET]), you can produce remarkable results.

The parameters are easy to spot! They come into play whenever the closing price (at 4:00 p.m.) of the cues is within seven cents (<= $0.07) of the lowest price of the trading day (9:30 a.m. – 4:00 p.m. ET). When this occurs, you take a long position by trading the overnight session.

In the 1,200 trading days, there were 110 winning trades, in comparison to 57 losing trades in the overnight session, with an average gain of $51.87 for each 1,000-share long position. From the following study, you can see how you can make a more knowledgeable trading decision when the facts are at your disposal.

The statistics are impressive, especially considering that we have 1,200 days of results. But, what has it done for us recently? eSignal gives us the flexibility of either using its back testing feature or exporting the prices of a stock or futures contract directly into Excel for further examination. Either way, it removes the guesswork from trading by allowing us to examine the effectiveness of a prospective trading strategy by testing its results before putting cash to work.

The Future Ain’t What It Used to Be

As you continue to trade, you will refine different trading systems. Given that economic indicators are often shifting in divergent directions, it is difficult to apply a formula that will be consistently profitable. As Yogi Berra would say, “The future ain’t what it used to be.” Because a system will not work in all trading environments, it is necessary to periodically perform a study of its effectiveness in today’s market conditions.

After reviewing the results of the 120 days, you can see how this system has lost some of its shine. An analysis of the previous 120 days shows a significantly smaller average gain (from $51.87 with 1,200 days to $25.00 with 120). Such a noticeable decline makes me cautious; therefore, a review of the previous 30 days (specifically showing me the results of the overnight trading session) is necessary.

This eSignal chart allows you to see recent movements in the OVS, and you have the flexibility to adjust the time frame to your personal preference. You can see its importance when you inspect the recent performance of the OVS, how it reacts to a rise or fall in the regular session, and its ability to hold lines of support or resistance.

Because eSignal gives us pre-market as well as post-market pricing, we can use this information to run a more thorough analysis. For instance, when applying the parameters of this system (closing – lowest price <= $0.07), we can increase our profitability by taking a long position in the cues starting at 5:00 p.m. ET and offsetting it at 9:00 a.m. ET of the following trading day.

(Note: Because there were two days with no change, the record = 14 - 8 - 2).

We can get additional information by using eSignal’s exporting feature, which gives us the opportunity to run a more extensive analysis. Because I do in-depth analysis before making trading decisions, its flexible (minutes, hours or days) downloading capabilities are indispensable.

Often, financial news can prove to be a serious menace to our trading plans. If you are good at reacting to headline news, eSignal is essential because it allows you to customize the news window. Because I trade the cues, I restrict the headline stories to companies in the NASDAQ 100 and eliminate extraneous information.

Finally, eSignal displays price movements, streaming quotations and headline news with my direct access brokerage company. This seamless integration between my broker account and my eSignal application allows me to concentrate on my trading screen without having to switch to another window to execute my trades; therefore, after making my trading decision, I can pounce aggressively and without hesitation.

As a strong advocate of technical analysis, I religiously search for a mismatch between the percentages. But, before putting my capital to work, I always assess a system’s running performance. By undertaking this necessary precaution, I can put my technical skills into play, adjusting my strategy according to recent patterns of success or failure.