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Manual - Kase StatWare

1. Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range The percentage 0 01 1 that a potential slopeFilter 0 01 0 to 0 05 momentum peak s value has to be versus surrounding bars to be considered a momentum peak Distance between price swing and tolerance 2 0 to 4 momentum peak for divergences and KCDpeaks to be valid Number of bars between confirmed swings ees 2 idee for divergences lookback for divergence The number of swings that can take place for MaxBridgingPeaks 2 1 to5 la divergence to be considered bridging See Bridging Illustration Minimum value that momentum must Peaktiitet 13 o gt overcome to be considered a potential peak id 1 0 32700 Identification number for DLL reference 6 2 2 2 KaseCD_peak A KCDpeak is a pinpointed overbought or oversold signal that is generated when the momentum value of the KaseCD rises above the overbought oversold threshold The overbought oversold threshold is the lesser of the peakFixed or the peakStdDev When momentum peaks above this threshold and there is a price peak within tolerance a KCDpeak will be triggered Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range Standard deviations of momentum u
2. e eee eeeeeeeeeeeeeeeeeceneeeesteeeeneees 54 Unable to See the Indicators Well saiccssscscedsssssecedsanaiersasisdansaavsadsadhoscedasepoadesanedantes 55 My Indicators Take a Very Long Time to Initiate 0 ee eeeeeeeeeereeeeeeeeeeeeees 55 CHAPTER 1 Getting Started 1 1 Manual Conventions e Bold Cold is used to identify indicator names e Bold Bold Italic is used to identify menu names command buttons tabs etc e Courier Courier is used to identify names of indicator inputs 1 2 Activation and Deactivation of Indicators If you have been sent or given StatWare in a deactivated format at a conference or as part of a promotion and would like to activate your trial please contact the Kase Call Center If you are currently on a trial the indicators will automatically deactivate at the end of your trial period unless you contact the Kase Call Center to commence a lease If you are already leasing StatWare a new password file will be sent to you prior to the expiration of your current one If for any reason you do not receive a timely password file please contact the Kase Call Center Please refer to Chapter 3 Importing Password File Updates for more information on how to prevent your indicators from deactivating If you are upgrading from a previous version of StatWare you may remove your old StatWare indicators by right clicking on their names in the Open Easy Language dialog box found in the File menu and selecting Dele
3. aye K pette Tg mia jeet i KasePO_V981 150 00 50 00 am 150 00 E 0 8 15 The KaseCD is a sensitive second derivative indicator calculated in the same way as the MACD histogram is calculated from a moving average oscillator Namely the KaseCD is the difference between the KasePO and its average just as the MACD is the difference between an exponential 16 moving average oscillator and its average Because the KaseCD automatically adapts to changing market conditions it can be seen to generate cleaner crossover signals and more reliable divergences than the MACD Automated Divergence Function The KasePO and KaseCD include an algorithm that automatically draws bullish and bearish divergences between peaks on the price chart This highly sophisticated function will also trigger alerts if enabled through TradeStation whenever a divergence is plotted Divergences for the KasePO are defaulted to plot as green lines and for the KaseCD as red lines 4 1 3 1 KasePO and KaseCD Inputs ShowAllDivs Many times after a divergence has taken place additional divergences will form from the same starting peak Setting ShowA1l1Divs to true will show all the divergences from a given starting peak Setting ShowAllDivs to false will show only the most recent divergence from a given starting peak slopeFilter Rounded or insignificant histogram peaks can be filtered out by requiring a certain
4. senneesneeeesee 37 5 6 3 Exit Signal 2B PeakOut Late In the Direction of Trend ee eeeeeeeeee 38 5 6 4 Exit Signal 3 6 CD pe ale cazzcet tests coccccoccacteustaceebcidereshietessucieeela A tecstaiieraald 38 5 6 5 Exit Signal 4 PeakOut Early In the Direction of Trend 39 5 0 6 FE rial 5 No Signal aces sic snaipw dacs ec acinad arar ENE anes 39 5 6 7 Inactivity Exit Guidelines as cs octet celta aldara eed pent daee Rl aannid eee 39 5 6 8 Position Holders Daily Chart Exit Rules and Stops cece eeeeeeeeeeeeeteeeetees 39 5 6 9 Choppy Market Trading Guidelines 0 ccsseccsscsecasasersecsosasvensensssevinersatacaseriens 40 5 7 Trading with the Kase Candlestick Indicators ssseeeeeseeeseeeeeseeesesrresreererressreee 40 Chapter 6 Kase StatWare Functions 6 1 6 2 6 3 6 4 Introduction to Kase StatWare Functions seseessesressessessrseresrersrsererreeseesresreeseese 43 Momentum Indicators KasePO and KaseCD 00 cee eeceeeseceseceeeeeeeeeeseeenaeeneenees 43 Entry Signals Kase Easy Entry System KEES ee eeeeseeeeeeeeeeneeeeaeeneetees 50 Rigorous Exit System The Dev Stops cccscscccccceze cachceneicicercuscceserssachaneecaGtenutaldentvase 52 Chapter 7 Troubleshooting 7 1 T2 7 3 7 4 7 5 General Problems sensere aiea e E EE E E EEE 54 Indicators Coming Up Zero Nothing Is Plotting eeeeeeeeeseeeeeserererersrrerrrresees 54 Indicator has been added but is Not Plotting
5. the body of the star is within the body the open close range of the Harami line Harami Line amp Star Bearish Harami Line amp Star Bullish ma ch 4 3 6 1 Color and Style Defaults Plot name Description Color Type BearHarami Marks pattern Green Cross below low BullHarami Marks pattern Green Cross above High 29 4 3 7 The Kase Piercing and Dark Cloud Cover KasePierDkC_v981 These patterns are similar to engulfing line except here the second Harami line only must close at or beyond the midpoint of the first Harami line s body A piercing pattern is similar to a bullish engulfing line and a dark cloud cover similar to a bearish engulfing line Piercing Pattern Bullish Dark Cloud Cover Bearish 4 3 7 1 Color and Style Defaults Plot name Description Color Type Piercing Bullish Piercing Pattern Dark red Cross below low DarkCld Dark Cloud Cover Dark red Cross above high 30 CHAPTER 5 Trading Guidelines 5 1 Introduction to Trading with StatWare StatWare is a set of trading indicators that can be combined in a systematic manner The guidelines below are meant to give guidance as to how to put together an initial system to get started Once comfortable with StatWare you can modify our suggested guidelines to suit your individual style The guidelines outlined revolve around three basic steps Entering the trade managing the trade and exiting t
6. This manual was written for TradeStation 9 5 and refers to Version 9 8 1 of the StatWare indicators Users of older versions of TradeStation may notice slight differences between the manual and the program We make every effort to keep our manual up to date and accurate If you have any questions or experience any problems please contact our offices Kase and Company Inc phone 505 237 1600 fax 866 526 2350 email kase kaseco com Introduction Trading is primarily a function of three tasks entry money management and exit You will find that the Indicators in the Kase StatWareo package will help you to perform all three tasks in a more efficient and successful manner Where many older indicators are based on empirical observations we now have the ability to derive indicators from the natural structure of the market itself Patterns that were difficult to observe with primitive tools now emerge with computer based statistical examination This manual has been written to explain the StatWareo indicators and to give traders an increased understanding of the markets in order to diminish risk and increase profits Keep in mind that the Kase indicators are tools that support a methodology and not a black box system A trader s personality and experience will play a role in his or her experience in using Kase StatWaree Kase s Trading Philosophy It is Kase and Company Inc s philosophy to view the markets scient
7. 4 2 4 The Kase Reversal Amounts KRev_v981 T and K ccccccccccesseeeeeesseeeees 25 4 3 Candlestick Indicators enie easiness 26 4 3 2 The Kase Engulfing Candlestick Lines KaseEngulfing v981 26 4 3 4 The Kase Evening amp Morning Star KaseEveMrnStr_v981 oense 27 4 3 5 The Kase Hammer and Hanging Man Patterns KaseHamHang_v981 28 4 3 6 The Kase Harami Line and Stars KaseHarami_v981 ccccesseeeeeseeeeees 29 4 3 7 The Kase Piercing and Dark Cloud Cover KasePierDkC_v981 30 CHAPTER 5 Trading Guidelines 5 1 Introduction to Trading with Stat Ware cccessecesccecssececseneeceeeeecseeeeesneeeeeaeees 31 32 Setting UP CHANS sise e ERE AA EAA 31 5 3 Entenne a Trade ercis a E eee a 31 5 3 1 Initiating a Trade from a Flat Position eee eeeseecsececeeeeeceeeeeseeeeeeeteeeesaes 32 5 3 25 REBUY SYSED een E iene eg ae eee 32 3 3 3 R v rsal SIC MAIS dsp scsvsecnsasedsuncasvsecsaccannantersvesnsanabiandaaadasaaaciaasemiyelasgaeteancastissens 33 5 4 Placing and Managing OSs snccsscecusosecnagcensvaancasatignedseszaascteccaatonvicestonetvanccavsadetoney 33 5 5 Selb Uc chsciedastevedssdeepaacrawabaWsabebendiaiinadcadedieaieteited aahescedastaced sapesad meduneaciaaponenaes 34 5 0 Exiting a Irade samene n a eee ete oa eae ae 36 5 6 1 Exit Signal 1 Divergence on KasePO AND KaseCD ssesseeeeseressresseessee 37 5 6 2 Exit Signal 2A Single Divergence on KasePO OR KaseCD
8. 2 normal bearish 1 weak bearish 0 no signal 1 weak bullish 2 normal bullish KasePO_ value double N A momentum value of KasePO histogram KasePO_poval double N A value of KasePO overbought oversold threshold 6 2 1 1 KasePO_divergence Bullish and bearish divergences are the strongest signals generated by the KasePO Bearish divergences take place when prices rise to new price swing highs are within numBars of one another and line up within tolerance of momentum peaks that are declining both momentum peaks must be positive Bullish divergences take place when prices fall to new price swing lows are within numBars of one another and line up within tolerance of momentum peaks that are rising both momentum peaks must be negative Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range The percentage 0 01 1 that a potential sioperiltee 0 01 0 to 0 05 momentum peak s value has to be versus surrounding bars to be considered a momentum peak Distance between price swing and momentum pote ranoe Ois peak for divergences and PeakOuts to be valid eee ee 55 34 to 89 Number of bars between confirmed swings for divergences lookback for divergence The number of swings that can take place for a MaxBridgingPeaks 2 1 to5 divergence to be co
9. RESPONSIBLE FOR ANY TYPOGRAPHICAL ERRORS EXPRESSIONS OF OPINION ARE SUBJECT TO CHANGE WITHOUT NOTICE National Futures Association Compliance Rule 2 29 Interpretive Notice 56
10. bars less than 500 you might want to see if a Fibonacci number such as 89 ticks per bar works for you For tick volume bars larger than 500 the suggestion is to use round numbers 2 5 KaseBar Charts TradeStation 8 now includes KaseBars KaseBars are equal TrueRange bars previously known as Kase Universal Bars The KaseBar method creates bars with a TrueRange based on an input Target Range target by the user such as 10 cents 20 points etc and uses only real price data KaseBar charts look like traditional bar except that because the Target Range dictates the size of each bar the bars are all approximately the same size True Range The KaseBars can be generated by using one minute as the smallest building block or Interval for bars or one tick if looking back 26 days or less because of TradeStation s tick data limits There are a number of ways to set the Target Range 1 As a guideline the target range should be no less than five times the average difference between ticks or the range of a five minute bar So for example if a typical tick chart looked like this 10 12 14 12 14 16 then the average tick difference is 2 and the minimum range one would use is 10 2 Set up the normal time or tick volume chart you would usually use such as 15 minute 30 minute or 610 tick etc Plot the Average TrueRange ATR on that chart Whatever the ATR is of the chart you normally use shoul
11. confirming sell signal formed Confirming signals must be designated by an S for short and an L for long but can be first signals At that point the trade is scaled to the 45 minute chart and the stop placed at Dev3 and accelerated thereafter as appropriate 34 Scaling Up Confirmation Late CLG10 C 15 min 178 80 Second Sell First Sell papa a S 78 60 cs a we f s b78 50 78 40 4 78 30 78 20 t H7810 CLG10 C 45 min Confirming Sell 78 80 S 78 60 f L 78 40 t 78 20 78 00 7 1 00 1 30 2 00 2 30 3 00 Created with TradeStation The confirmation signal does not always come after the entry signal As shown on the left below the confirmation signal formed on the same bar as the second entry signal In this case the trade can be scaled to the longer bar length upon entry Scaling Up Confirmation Same Scaling Up Confirmation Early ELG10 C 15 mi CLGI0 C 15 min 5 pao traso j 4 praso r E 74 40 gt haoo ES t7360 f pt f ioe li f 13 L 73 20 iw 73 20 i n i a Buy 72 80 if First Buy Second Buy 72 80 CLG10 C 45 min First Buy CLG10 C 45 min b74 20 74 50 asso 74 00 74 00 i 73 50 73 00 j is gt Lae l z nfirming fna E Buy Qc n g 1130 12 00 12 30 13 00 13 30 9 30 10 00 10 30 11 00 1130 Created with TradeStation Created with TradeStation It is rare but in some instances the confirmation sig
12. is negative and an oversold threshold The KaseCD_poval is the lesser of the peakFixed and peakStdDev values Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range Standard deviations of momentum used to IpeakStdDev 2 1 to4 measure potential overbought oversold conditions for KCDpeak signals Fixed overbought oversold line The lpeakFixed 90 70 to 150 overbought oversold line for PeakOuts is the lesser of the peakFixed or the peakStdDev id 1 0 32700 Identification number for DLL reference 6 2 3 A note about Normal and Weak Momentum Signals Note that there are two grades of signal for all divergence PeakOut and KCDpeak signals normal and weak A normal signal takes place when the confirming price bar closes in the direction of the signal A weak signal is triggered when the confirming price bar closes against the direction of the signal For instance if a bearish signal takes place but the confirming price bar closes higher close is greater than open this would be triggered as a weak bearish signal These signals do not typically perform as well as normal signals 48 6 2 4 A Note about Momentum Divergence Bridging Bridging is a filter that is used to ensure that the price peaks for a divergence are taking place in the same general trend direction The MaxBridgingPeaks is the number of
13. or exit signals take place are set forth below in Section 5 6 5 5 Scaling Up Once a trade has been entered and at stop placed at Dev3 monitor for exits as described in Section 5 6 on the timing chart At the same time check the fast monitor for a confirming entry signal in the direction of the trade i e long or short Once a confirming signal is received on the longer bar length the trade can be scaled up to that chart by moving the stop to the respective Dev3 for the fast monitor The fast monitor may then be used to watch for exits Now begin to look for a confirming entry signal on the normal monitor chart and repeat the scaling process The goal is to continue scaling a trade to longer bar lengths so that premature exits or whipsaws can be avoided and profits can run as markets trend More risk is taken when stops are moved to Dev3 on the longer bar lengths but the confirming entry signals usually indicate the market is continuing to move in the profitable direction If no confirming signal is triggered on the longer bar lengths and there is an exit signal generated drop back to the flat position and monitor for a reentry as set forth in Section 5 3 1 The chart below shows a scaling situation where the confirming entry signal comes after a trade has been entered A 15 minute chart is shown on top and the 45 minute chart on the bottom Here a second sell signal triggered a short entry at 1 45 PM On the next 45 minute bar at 2 15 PM a
14. s stop levels 4 1 1 1 KDevStops Inputs NumBars is the number of bars used to calculate the average Double True Range DTR and its related standard deviation r Format Indicator KDevStops_v981T ESE Format Indicator KDevStops v981K exes General inputs Aerts Style Color Scaling Advanced General inputs Alerts Style Color Scaling Advanced Name Value Name Value NumBars 30 NumBars 30 Dev1 1 Dev1 21 Dev2 2 2 Dev2 55 Dev3 3 6 Dev3 8 9 BarsinFMA 10 BarsinSMA 21 BarsInFMA 10 BarsinSMA 21 Devil Dev2 and Dev3 are three stop levels associated with reversals equivalent to the input Value against the highest high if long or lowest low if short The default values of these variables are recommended most of the time However large gaps or large changes in price during short period can blow out the standard deviation in which case the stops may be narrowed to compensate for this by decreasing the Value For example Dev2 for v981T may be 11 decreased from 2 2 to 1 7 During very choppy markets where stops may be hit due to erratic market activity and not due to a statistically significant move the stops may be widened In this case Dev2 might be increased from 2 2 to 2 8 BarsInFMA and BarsInSMA are the number of bars used in the calculation fast and slow moving aver
15. slope in terms of percent of the histogram value to be met If that slope is less than slopeFilter the peak is considered too shallow and is filtered out A setting of 0 filters out no peaks A filter of 0 01 filters out all peaks less than 1 higher than the surrounding data tolerance For divergences or PeakOuts to be valid peaks in price and momentum must occur within a certain number of bars or tolerance of each other but not necessarily on the same bar The input variable tolerance represents the maximum number of bars allowed between price and histogram peaks for a valid divergence or PeakOut signal A default of 3 is set based on optimization tests Increasing tolerance will generate more signals and vice versa numBars This is the maximum number of bars between the swing highs or lows used to determine divergence So a setting of 40 means that divergence peaks that are within 40 bars of each other will show on the screen and those farther apart will not Increasing numBars will generate more signals and vice versa 17 Format Indicator KasePO_V981 MESS Format Indicator KaseCD_V981 ese General Inputs Alerts Style Color Scaling Advanced General Inputs Alerts Style Color _ Scaling Advanced Name Value Name Value Green DivLineColor Red Weak Div
16. to accelerate exits If the body straddles the midpoint or is below the midpoint use the confirmation point on the next bar to accelerate exits In the first example on the left the bearish Harami line and star is not complete because the midpoint of the Harami line has held on a closing basis Therefore stops can be placed at the completion point and or the confirmation point to accelerate exits Bearish Harami Line and Star Bullish Harami Line and Star Stops at Completion and Confirmation Stop at Confirmation soba H 270 00 CL C Daily s 124 50 i200 p1 260 00 12350 EA inane 4 250 00 123 00 7122 50 1 24175 422 00 231 o p ZRELA eee ee a H 230 00 121 50 Poego 4 220 00 420 50 SUSEDA Se E E E ee E E eee AEE EL N 4 210 00 419 50 4200 00 119 00 118 50 T 8 9 10 1 Created with TradeStation Created with TradeStation The example on the right shows an instance where the Harami line and star is completed but not yet confirmed Dev would be accelerated to the completion point Dev2 would become the lower of Dev1 or the confirmation point 42 CHAPTER 6 Kase StatWare Functions 6 1 Introduction to Kase StatWare Functions Kase StatWare is a discretionary system that follows guidelines but does not abide by hard rules The indicators are meant to enhance a trader s experience and help them make well informed tradin
17. 2 Save the file to a local directory 3 In TradeStation select File then select Import Export EasyLanguage from the menu The following dialog box will appear Import Export Wizard Please select a Wizard from the list below Import EasyLanquage from TradeStation orld com Import EasyLanquage file ELD ELS or ELA Export EasyLanquage Documents file ELD Export EasyLanquage Documents file ELD protected Description This opens the TradeStation orld E asyLanquage File Library from which you may import EasyLanguage analysis techniques and strategy components including techniques and strategies ae donated by others he ES iee Lote Jaimin 02u arra TradeStationworld is owned and operated by TradeStation isoro Lemgtiet 183 Technologies Inc an affiliate of TradeStation Securities Inc i Member NASD SIPC _NFA Neither TradeStation Securities nor TradeStation Technologies endorses or recommends any particular analysis technique strategy component or strategy 4 Highlight Import EasyLanguage File ELD ELS or ELA and click Next 5 Click the Browse button and navigate to the folder where you saved the new password file Highlight the file and click Open The path of the StatWare ELD file should now appear in the File Name box Click Next 6 Inthe next menu ensure that the box next to Function is checked Click Next 7 Now a function named passKey_v981 should appear Make sure that the box to the left of i
18. D WITH THE BENEFIT OF HINDSIGHT IN ADDITION HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING FOR EXAMPLE THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS THE RISK IN TRADING COMMODITIES OR DERIVATIVE PRODUCTS CAN BE SUBSTANTIAL BOTH TRADERS AND HEDGERS CAN BE SUBJECT TO MARK TO MARKET LOSSES AND THE RESULTANT CALLS FOR ADDITIONAL MARGIN DEPOSITS WHICH COULD POTENTIALLY EXCEED THE ORIGINAL DEPOSIT MADE ANYONE CONTEMPLATING THE USE OF SUCH INSTRUMENTS FOR EITHER SPECULATIVE OR HEDGING TRANSACTIONS SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH ACTIVITY IS SUITABLE BASED UPON COMMERCIAL REQUIREMENT AND THE FINANCIAL CONDITION OF THE PERSON OR ORGANIZATION SO ENGAGED INFORMATION CONTAINED HEREIN IS NOT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY COMMODITIES OR DERIVATIVES KASE AND COMPANY INC MAKES NO GUARANTEES EITHER EXPRESS OR IMPLIED REGARDING THE APPLICATION OF EITHER ITS SOFTWARE OR ITS ADVICE KASE WILL NOT BE
19. ES 2 3 AME FARGO Charts sssrinin a e e Ea a PA Tiek Volume Charts scree dance gs races tions caer sensu a EEA E EE TR 2 5 K s Bar a Geese eaecra tees ine E A ea 2 6 Adding Indicators to your Charts ccccisscscecsssssccesssnscessaasseanssanssacsoarencesoacsscessasoonsdones 2 7 Formatting th CACM Sissonne ensi er E Soca tees ede seen eee 2 8 Setting Up Indicators in Different Subgraphs esssesesssesssssssssessessseresseesssressree 2 9 Organizing Your Workspace s ssesessseesesssesesesesssressresseesseresseensstessenssesssseessseesseese CHAPTER 3 Importing PassKey Updates 3 1 PassKey LACS encora oia ea EEE O E E EE RE Ee nE aR 3 2 Importing New Pass Rey Files acca danas ness sacncntveqatageisciacysieortecdeusaanesueedadeienaceerss CHAPTER 4 The Indicators 4 1 Cor Indicatot Su iensor R Aa eae ad tome nie erated eee cea en 10 4 1 1 The Kase DevStops KDevStops_v981 T and K eee eee eeeeeeeeeeereeenneees 10 4 1 2 The Kase Easy Entry System KEES_v981 0000 ee eeeeeseeeeseeeeeceeeersoeerseeeeees 12 4 1 3 Kase Momentum Indicators KasePO_v981 and KaseCD_v981 15 4 2 Background ndicatofs scesa a cebu el auacenaees 20 4 2 1 The Kase Permission Stochastic KPermSto_v981 cccessccecessseeeeessseeeees 20 4 2 2 The Kase Permission Screen KPermFunction_v981 ccccceessececceeeeeeenees 21 4 5 KAaseowie KaseSwing_v981 scorceasonsaecnsteaesvancosastansearsonianaessertnannnetane 22
20. Holders Daily Chart Exit Rules and Stops The guidelines outlined above pertain specifically to day traders For the most part these rules can also be applied to position holders traders who hold a position for days to weeks but with minor variations to placing stops and exits Position holders can establish a trade by scaling up 39 from the normal monitor to the daily chart using the same scaling rules outlined in Section 5 5 Position holders can also use half and third day charts to monitor for exits and warning signals The list below outlines some of the slightly modified guidelines for position holders 1 When there are no exit signal setups set default stop to Dev 3 2 Use candlesticks to accelerate stops as necessary outlined in Section 5 7 below 3 If there is no profit in the trade after 3 to 5 bars exit on inactivity 5 6 9 Choppy Market Trading Guidelines Whenever the market is exhibiting corrective sideways or coalescing behavior it is prudent to modify the standard trading guidelines as follows Trade lighter volume e g 50 vs 100 Trade shorter bar lengths Exit more aggressively e g 100 instead of 80 Pe P oF Default to Dev2 instead of Dev3 5 7 Trading with the Kase Candlestick Indicators In addition to the DevStops Kase Candlesticks may be added to the trading strategy to fine tune exits Usually Kase Candlesticks are only incorporated in the strategy when the equivalent
21. LineColor Green Weak DivLineColor PeakOutTextColor Green PeakOutTextColor WeakPeakOut TextColor Darkgray WeakPeakOut TextColor ShowAllDivs False ShowAllDivs slopeFilter 0 01 i tolerance 12 numBars 55 peakStdDev 2 25 peak Fixed 200 shortCycle 8 longCycle 65 Bridgefilter 2 PeakFilter 0 Preview Preview lili nll Edt Easylanguage ok canst Hep Edt EasyLanguage ok canca Hep peakStdDev This is the number of standard deviations of the local data used to calculate PeakOut levels Increase the number of standard deviations to make the PeakOuts less sensitive and take place less often and vice versa peakFixed This is a baseline based on historical studies to calculate PeakOut levels Increase this setting to make the PeakOuts less sensitive and vice versa shortCycle and longCycle control the range of shortest and longest cycle lengths used to determine significant trend During very trendy markets lengthen the settings and during choppy oscillating markets shorten them BridgeFilter Bridging is a filter that is used to ensure that the price peaks for a divergence are taking place in the same general trend direction The BridgeFilter is the number of 18 allowable swings that take place between the beginning peak and high low peak of a divergence range The illustration below shows the peaks swings that the filter checks for a bullish divergence The logic is th
22. S for short triggers With the technology underlying KEES signals are confirmed 40 earlier than those using traditional methods Function Name Return Type Return Range Description KEES entry signal 3 first class short 2 second class short 1 warning short 0 no signal 1 warning long 2 second class long 3 first class long KEES bar status 4 first class short entry 3 first class short non entry 2 second class short entry 1 second class short non entry 0 no status 1 second class long non entry 2 second class long entry 3 first class long non entry 4 first class long entry KPermSto_permk double N A value of PermK akin to Stochastic K KPermSto_permd double N A value of PermD akin to Stochastic D status of longer bar length filter 1 short 0 neutral 1 long KEES_entry int 3 2 1 0 1 2 3 KEES_status int 4 3 2 1 0 1 2 3 4 KPermFunction int 1 0 1 6 3 1 KEES entry KEES examines a series of momentum indicators swings bar lengths and bar formations to color code each bar and then decide which bars are permissioned for long or short entries There are three classes of entries warning first class and second class A warning signal is the first 50 signal that takes place in a potential trend Frist class signals are bars that are permissioned in the direction of the trend on both the bar length being used and the synthetic l
23. ages These moving averages are used to default the DevStops to long when the FMA is above the SMA or short when the FMA is below the SMA During very trending markets the moving average can be limited from flipping by lengthening the value settings or during oscillating markets the moving averages can be made to flip sooner by shortening the value setting 4 1 1 2 KDevStops Color and Style Defaults Plot Name Description Color Type Warning Warning Line Stop Dark red Dashed line Dev1l First Level Stop Dark red Point Dev2 Second Level Stop Dark red Point Dev3 Third Level Stop Dark blue Point medium 4 1 2 The Kase Easy Entry System KEES_ v981 As the name implies KEES is an easy to use entry system It examines a combination of underlying momentum indicators as well as embeds signals from the Kase Permission Screen and KaseSwing KEES generates S s for valid short entries and L s for valid long entries which means the signal takes place after a valid swing For those wishing to have more information about the signals KEES defines two types of signals first class meaning that the signal is in the same direction as that of a higher bar length filter 12 and second class meaning that the signal is not in the same direction as a higher bar length filter Each bar has color coded points to denote first or second class long and short signals Small points are used for ba
24. ak Red Point KCD Histogram Dark Green Histogram PeakOut Line Overbought or oversold conditions Magenta Histogram 4 2 Background Indicators 4 2 1 The Kase Permission Stochastic KPermSto_v981 Trades taken in the direction of the major trend tend to be more successful than trades against the trend Thus it s good practice to screen trades with a longer bar length filter However this takes time and waiting for longer bars to complete can delay profitable entries To address these difficulties the Permission Stochastic was developed The algorithm behind the indicator 20 computes a synthetic longer bar length that updates upon the completion of each shorter bar and calculates a moving Stochastic that can be used to effectively screens trades on a longer bar length 4 2 1 1 Kase Permission Stochastic Inputs multiplier determines the number of shorter bars included in the longer bar length used in the Permission Stochastic Higher values result in more short bars being used in the calculation of the longer bars For example if using a 20 minute bar for trading a setting of 3 would result in a longer bar length of 60 minutes t The longer the higher level filter multiplier the less sensitive the indicator will be to shorter term price action The default input is 5 length is the number of longer bars used to calculate the Permission Stochastic Its default value is 9 To slow the indicator and make
25. allowable swings that take place between the beginning peak and high low peak of a divergence range The illustration below shows the peaks swings that the filter checks for a bullish divergence The logic is the opposite for bearish divergence In this illustration the SL1 Swing Low 1 and SL2 Swing Low 2 are price swings that are being compared for divergence by Kase s divergence algorithm momentum is not shown but is assumed to be rising for a bullish divergence like this The bridging filter checks the number of swings or peaks between SLI and HH highest high between SLI and SL2 If the number of bridging peaks is equal to or greater than the value set for MaxBridgingPeaks then the divergence is considered to be bridging and is nullified The idea here is that SL1 was a swing that took place during an uptrend and SL2 took place during a downtrend Therefore the two swing lows should not be compared for a valid divergence signal 49 Setting MaxBridgingPeaks to zero 0 will nullify all divergences The higher these variables are set the more swings the algorithm will allow between SL1 and HH 6 3 Entry Signals Kase Easy Entry System KEES Kase s StatWare takes a range of entry signals including swings momentum crossovers bar patterns and a higher bar length filter and condenses them into an easy to use system of colored dots blue shades for upward biased and red for downward with L for long and
26. ation number for DLL reference 6 2 1 3 KasePO_value The value of the KasePO indicates the strength of momentum The KasePO yields either positive or negative momentum and has a zero line It is normally plotted as a histogram Unlike other momentum indicators it is not bound between 0 and 100 Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range id 1 0 32700 Identification number for DLL reference 6 2 1 4 KasePO_poval The KasePO_poval or PeakOut value is the value of the overbought oversold threshold for the KasePO When momentum is positive the KasePO_poval is positive and an overbought threshold When momentum is negative the KasePO_poval is negative and an oversold threshold The KasePO_poval is the lesser of the peakFixed and peakStdDev values 45 Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range Standard deviations of momentum used to measure IpeakStdDev 2 25 1to4 potential overbought oversold conditions for PeakOut signals Fixed overbought oversold line The overbought oversold lpeakFixed 200 100 to 300 line for PeakOuts is the lesser of the peakFixed or the lpeakStdDev id 1 0 32700 Identification number for DLL reference 6 2 2 KaseCD Th
27. bar candlestick pattern includes a Harami line which is a large body candlestick in the direction of the original trend a gap which is usually an exhaustion gap a star followed by another gap usually a breakaway gap and then another Harami line in the opposite direction For this pattern to be considered complete the second Harami line must close at or beyond the midpoint of the initial Harami line s body Morning Star Bullish Evening Star Bearish 4 4 3 4 1 Color and Style Defaults Plot name Description Color Type MorStar Morning Star Red Cross below low EveStar Evening Star Red Cross on high 27 4 3 5 The Kase Hammer and Hanging Man Patterns KaseHamHang_v981 These patterns are stars with long lower shadows A hammer occurs after down moves and is bullish and the Hanging Man occurs after up moves and is bearish Often these patterns are leading indicators that occur two or three bars prior to a reversal Also they are often found as components of larger patterns such as morning and evening stars Hammer Bullish Hanging Man Bearish 4 3 5 1 Color and Style Defaults Plot name Description Color Type Hammer Bullish Hammer Yellow Cross on low HangingMan Bearish Hanging Man Yellow Cross on high 28 4 3 6 The Kase Harami Line and Stars KaseHarami_v981 A Harami line and star is a two bar pattern It consists of a Harami line followed by a star where
28. d be roughly equal to the Target Range you choose to input 3 You can always just choose a range that seems appropriate to you Visually the bars should look about the same size If there is a large variation it usually means that the target range you have set is too small 4 Check the KaseBar Average TrueRange by plotting it on your KaseBar chart Adjust your target up or down as necessary to result in the specific range you want For more information about KaseBars view the TradeStation Help files and search for KaseBars or contact us at 505 237 1600 2 6 Adding Indicators to your Charts Now that your charts are set up add the indicators to them 1 Choose Insert from the menu bar 2 Choose Indicator 3 The indicator library is listed alphabetically All of the Kase indicators start with K or K Below is a list of indicators that should be included with your package 2 6 1 Core Indicators KDevStops_v981T KDevStops_v981K KEES_v981 KasePO_v981 KaseCD_v981 2 6 2 Background Indicators KPermSto_v981 KPermFunction_v98 1 KaseSwing_v981 KRevAmounts_v981T KRevAmounts_v981K 2 6 3 Candlestick Indicators KaseEngulfing_v981 KaseEveMrnStar_v981 KaseHamHang_v981 KaseHarami_v98 1 KasePiercing_v981 The T or K after the indicator name means that the defaults are set for Time or Tick or Kase bars Hold down the Ctrl key and click each indicator you wish to add We suggest that yo
29. dicator dialog box for custom programmed displays Through the Style selection you may also make the indicators bolder or redesign the style altogether See Chapter 2 7 5 My Indicators Take a Very Long Time to Initiate Data Stream Too Long For your normal monitor chart you should most likely not need any more than about 50 days and for your timing chart 20 If you have a long data stream for example 100 days of 5 minute bars the computer needs to perform calculations for all 100 days Too Many Workspaces Try opening fewer workspaces at once KaseBars using Ticks versus Minute If you are using KaseBars with ticks try selecting minute bars to build them 55 All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise without the prior written permission of Kase and Company Inc CFTC Compliance Notice HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS SOME OF WHICH ARE DESCRIBED BELOW NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN IN FACT THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARE
30. e KaseCD is a second derivative momentum indicator that is used to measure the rate of change of the KasePO The KaseCD is generally a faster and more sensitive momentum indicator than the KasePO Its signals are traditionally used to identify potential stalling and turning points Kase uses the KaseCD divergence and KCDpeak or PeakOut signals as a warning or exit signal for profit taking opportunities Function Name __ Return Type Return Range Description KaseCD divergence signal 2 normal bearish 1 weak bearish 0 no signal 1 weak bullish 2 normal bullish KaseCD PeakOut signal 2 normal bearish 1 weak bearish 0 no signal 1 weak bullish 2 normal bullish KaseCD_value double N A momentum value of KaseCD histogram KaseCD_poval double N A value of KaseCD overbought oversold threshold KaseCD_divergence int 2 1 0 1 2 KaseCD_peak int 2 1 0 1 2 6 2 2 1 KaseCD_divergence Bullish and bearish divergences are the strongest signals generated by the KaseCD Bearish divergences take place when prices rise to new price swing highs are within numBars of one another and line up within tolerance of momentum peaks that are declining both momentum peaks must be positive Bullish divergences take place when prices fall to new price swing lows are within numBars of one another and line up within tolerance of momentum peaks that are rising both momentum peaks must be negative 46
31. e are three ways Kase recommends to determine bar lengths 2 3 Time Based Charts The first type of bar chart uses time bars In these charts one bar forms for each time period that elapses regardless of market activity When using time bars first determine the approximate number of minutes you wish to use and then determine the closest time bar length that divides evenly into the trading day When using a longer number of minutes such as 90 it s ok to have shorter bar on the day s close So for example in a five and one half hour trading day one could set the bars to five 60 minute and one 30 minute bar or use six 55 minute or five 66 minute bars Using a slightly shorter bar at the end of the day emphasizes the late day activity going into the close 2 4 Tick Volume Charts The second way to set up bar charts is using tick volume charts Each tick a reported traded price A tick volume bar of 200 for example would contain the price activity over 200 price changes or trades There are two ways to set up a tick volume chart The first is to determine how many bars per day session are generated by the time bar you have been comfortable with and set up a tick bar chart that generates a similar number of bars per day The second is to use the Average True Range indicator to determine the average true range of the time bar you are comfortable with and then use a tick bar length that generates a similar value For tick volume
32. e opposite for bearish divergence In this illustration the SL1 Swing Low 1 and SL2 Swing Low 2 are price swings that are being compared for divergence by Kase s divergence algorithm momentum is not shown but is assumed to be rising for a bullish divergence like this The bridging filter checks the number of swings or peaks between SLI and HH highest high between SLI and SL2 If the number of bridging peaks is equal to or greater than the value set for BridgeFilter then the divergence is considered to be bridging and is nullified The idea here is that SL1 was a swing that took place during an uptrend and SL2 took place during a downtrend Therefore the two swing lows should not be compared for a valid divergence signal Setting BridgeFilter to zero 0 will nullify all divergences The higher these variables are set the more swings the algorithm will allow between SL1 and HH 19 PeakFilter This is the minimum histogram value that the momentum must overcome to be used as a measuring peak for momentum divergence and overbought oversold signals like PeakOuts and KCDpeaks 4 1 3 2 KasePO Color and Style Defaults Plot name Description Color Type KPOPeak Histogram Peak Po Histogram PO Histogram No Peak Dark Green Histogram PeakOut Line Overbought or oversold conditions Blue Line 4 1 3 3 KaseCD Color and Style Defaults Plot name Description Color Type KCDPeak Histogram Pe
33. eSwing_v981 KaseSwing is built into many of the Kase algorithms including KEES the KaseCD and the KasePO to identify swings and highs and lows needed for determining valid entries and divergences The indicator itself may be used by Kase to define both swing lines and waves KaseSwing identifies each bar as either a falling or rising bar A falling bar is defined as a bar that has a lower low than the previous bar or a rising bar which has a higher high than the last bar Note that outside bars those that make a higher high and lower low than the last bar are counted as both rising and falling bars Inside bars those that do not make a higher high or lower low that the last bar are ignored There are specific rules and settings for handling both outside and inside bars A running count of rising and falling bars is kept and updated for each new bar This count is used to find the detail or resolution of the swings and is controlled by an input called MinSize that controls the sensitivity of the swings drawn This means that after a swing has formed MinSize numbers of bars are needed to draw the next swing 22 As shown in the chart below after a high swing formed there was one falling bar and then one rising bar Because MinSize 1 a swing can be drawn at the low of the falling bar and the high of the rising bar Drawing MinSize 1 If the MinSize 2 there must be two falling bars and two rising bars in order for a swin
34. ent with your contractual arrangements with us See Chapter 4 to change your password Please be aware of the expiration date of your software If any indicator is coming up zero while others are not see Indicator May Not Have Enough Bars below 7 3 Indicator has been added but is Not Plotting Indicator May be Off Your indicator may be turned to off To check under the Format menu click on Analysis Techniques and make sure that the indicator is turned On by checking the Status column If the Status is Off highlight the indicator and click the Status button on the right hand side of the box to turn it on Indicator May Not Have Enough Bars Under the Format menu click on Analysis Techniques click Format and then click on the Properties tab Make sure the Auto detect box is checked if not check it If this still does not work there may not be enough data on the screen to initialize the indicators Under Format Price Data Settings increase the number of days weeks or months shown in the chart 54 7 4 Unable to See the Indicators Well Our indicators are designed for use with a white background and black bars Either change your background to white and bars to black or change the indicators to colors suitable for whatever background you are using This is done through the Style selection in the Format Indicator dialog box for the indicators themselves and through the Inputs selection in the Format In
35. ff 24 LineOn turns lines on or off LineSytle controls style of lines that are drawn between swings 4 2 3 3 KaseSwing Color and Style Defaults All colors and styles for KaseSwing are controlled by the inputs described above 4 2 4 The Kase Reversal Amounts KRev_v981 T and K KRev plots the absolute value of the stop amounts the amount in dollars and or cents of a reversal that must take place to hit the warning Dev1 Dev2 and Dev3 lines The standard deviation settings are the same as the respective K and T versions of the DevStops 4 2 4 1 Kase Reversal Amounts Inputs The inputs for KRev are the same as for the Kase DevStops expect that it does not include BarsInFMA or BarsInSMA NumBars Dev1 Dev2 and Dev3 are all as described above for the Kase DevStops Indicator 4 2 4 2 Kase Reversal Amounts Color and Style Defaults Plot name Description Color Type Warn Warning Line Reversal Dark Red Solid line Revl First Level Reversal Dark Blue Solid line Rev2 Second Level Reversal Dark Blue Solid line Rev3 Third Level Reversal Dark Blue Solid line 22 4 3 Candlestick Indicators Kase color codes five important candlestick patterns for easy identification Candlestick patterns can be used to identify danger of possible turns to confirm turns determine support and resistance points to accelerate exits Given that meaningful reversals generally take place at the top or bottom of e
36. g decisions However this does not mean that StatWare should not be used as a trading system or to enhance a trading system The Kase StatWare functions have been coded for use with custom indicators strategies and screeners This document describes the variables and functions that are available 6 2 Momentum Indicators KasePO and KaseCD Kase s momentums studies the acclaimed KasePO and KaseCD catch market turns 60 more accurately than optimized traditional indicators The studies are based on Kase s serial dependency index which statistically measures the degree of non random behavior and self optimizes both cycle length and volatility Kase s momentum divergence algorithm embedded in both studies automatically displays completed and confirmed divergences and pinpoints discrete overbought and oversold signals 6 2 1 KasePO The KasePO is a first derivative momentum indicator that is used to measure the rate of change of price Its signals are traditionally used to identify potential stalling and turning points Kase uses the KasePO divergence and PeakOut signals as a warning or exit signal for profit taking opportunities 43 Function Name Return Type Return Range Description KasePO_divergence int 2 1 0 1 2 KasePO divergence signal 2 normal bearish 1 weak bearish 0 no signal 1 weak bullish 2 normal bullish KasePO_peak int 2 1 0 1 2 KasePO PeakOut signal
37. g to be drawn as shown in the right sketch Otherwise as shown on the left if there is only one falling bar and then another rising bar no swing is drawn Drawing MinSize 2 For MinSize 3 the same rules as above apply but in this case there must be at least three rising or falling bars before a swing can be drawn 23 Drawing MinSize 3 By default a Size of 2 is normally used but 1 and 3 are commonly used as well The lower the number the more detail the indicator shows 4 2 3 1 KaseSwing Inputs MinSize changes the tolerance for the number of bars that must take place between high and low swings The most sensitive setting is 1 Settings of 2 which is the default and 3 are also allowable A setting of 3 is the least sensitive ConsiderInsides uses special inside bar rules when drawing swings TextColor changes the color of text on the screen that labels the swings DecimalFormat There are some commodities that don t trade in the normal decimal convention Setting DecimalFormat to 1 will automatically display the text labels in the correct units and precision A setting of O displays the text labels in decimals regardless of the units displayed on the chart and automatically finds the correct precision A setting greater than 0 will display that many decimals regardless of the precision or units of the chart TLColor changes the trend line color TextOn turns swing labels on or o
38. he trade 5 2 Setting Up Charts Initially charts should be setup according to the guidelines in Chapter 2 Sections 2 1 through 2 5 Once comfortable with the default chart setups make sure the risk associated with the charts is consistent with your risk tolerance For instance when trading the e mini S amp P 500 if you only want to risk 10 points per trade then you should set up your charts so that Dev3 from KDevStops_v981 T and K on the chart you are using for exits usually the normal monitor is no larger than about 10 points This can easily be assessed by using KRev_v981 T and K to monitor the value of Rev3 the amount of risk carried by Dev3 From this point you may refer back to Chapter 2 to setup your fast monitor and timing charts accordingly If Dev3 on the normal monitor carries more than 10 points of risk then a shorter bar length is required Once the normal monitor fast monitor and timing chart have been chosen it is time to add indicators as outlined in Chapter 2 Sections 2 6 through 2 9 5 3 Entering a Trade The KEES indicator shows entry signals As described earlier in Section 4 1 2 small points are used on bars that do not have the proper structure to allow an entry for example a first class buy bar with a down close or a lower high or low Large points are used on bars that do have the proper structure to allow an entry such as a first class buy bar that had a higher high higher low 31 and closed up Fur
39. ifically and accurately without making the procedure for doing so too complex Through the application of statistics and mathematics a whole new generation of indicators has been made possible It is our hope that using our piece of the future will be enjoyable and profitable for you Before Getting Started Load TradeStation and go through its manual to become familiar with the basics In this manual it is not our aim to explain TradeStation except where it is directly an issue regarding the use or the functionality of the Kase Indicators For help with the functionality of TradeStation please call their technical support as appropriate Kase StatWare Version 9 8 1 Table of Contents Introduction sarn a TE acy easements i Kase s Trading Philosophy siiisiccsceascenectssicandedecbided veacsedensepancdsnacardesncedend svpsodessaetecd eanescailande i Before Getting Statted 4c csanscedevarendancecaodcseacesdd daundaad sxccansetaaneacdsasesodd asausedesyannedepouviedassawaoneeesee i CHAPTER 1 Getting Started 1 1 Manual Conventions cceccccsseecccccccscecencceccccancscccesncccccausecccaucsececaasceceaneceeeeaes 1 2 Activation and Deactivation of Indicators ccc cc ccecssessecccccccceessssesceccessssusaeuseeeees CHAPTER 2 Setting Up Charts 2 1 Preliminary Sete es oitacceceecssboendbecsceccuntageed en uiecee vat eddie iia nisasie ioiii tai 22 Setting Bar Length on 0 eat Sabai ca catsero seed rrea E aee RE ER
40. into Dev1 for the remaining 20 A new S is generated while Dev3 holds and the previous swing high holds Upon this sell signal the position is re entered fully 32 Re Entry Signal ee CLG1O C Kase Bar 0 25 1 min S Held Previous Swing High ae E TEE Dev3 Held Da jija ecg pe EL me ot fso Divergence 73 40 Exit 80 5 la E i 0 00 EE TT 43 62 p 60 00 4 a 11 08 13 00 Created with TradeStation 5 3 3 Reversal Signals Similar to the re entry signal after a partial exit has been taken as described in Section 5 6 should there be second entry signal generated on the timing chart in the opposite direction of the original trade before stops are hit then a reversal can be taken The chart below shows an 80 exit after a divergence see Section 5 6 2 and then a second sell signal before Dev1 is hit At this point the remainder of the long trade is exited and a short trade is established Reversal Signal ES D 15 min Divergence Exit 80 First Sell Second Sell 1 S __f1 100 00 1 096 00 1 094 00 1 092 00 5 4 Placing and Managing Stops After entering a trade an emergency stop should always be placed at Dev3 The other stop levels as well as stops based on candlesticks may then be used to manage the risk if exit setups 33 and exit signals are triggered These danger and exits signals and the suggested stop levels should danger
41. it less sensitive increase the Stochastic Length by changing it from 9 to a higher value such as 13 To speed up the indicator do the opposite 4 2 1 2 Kase Permission Stochastic Color and Style Defaults Plot name Definition Color Type PermK Equivalent of Slow K Dark magenta Broken line PermD Equivalent of Slow D Black Solid line 4 2 2 The Kase Permission Screen KPermFunction_v981 The Permission Screen interprets the Permission Stochastic by simply displaying one color when the filter is in a status where long trades may be taken Permission Long and another for Permission Short using some simple rules that relate to the level of the K and D lines and their relationship The user should note that this indicator is embedded in the entry indicators and is not necessary or even recommended to use in normal timer or position charts If the Permission Screen histogram is green long trades on the normal bar length chart may be taken If the 21 Permission Screen histogram is dashed dark magenta then short trades on the normal bar length chart may be taken 4 2 2 1 Kase Permission Screen Inputs The inputs are the same as for the Permission Stochastic 4 2 2 2 Kase Permission Screen Color and Style Defaults Plot name Definition Color Type PermLong Equivalent of PermK Dark green Histogram PermShort Equivalent of PermD Dark magenta Broken histogram 4 2 3 KaseSwing Kas
42. nal will trigger before the second buy signal on the smaller bar length This is shown in the chart on the right above In this case once the second buy has been triggered on the timing chart and a trade entered long it can be immediately scaled to the longer bar length 35 5 6 Exiting a Trade For exits use of three Kase indicators is recommended These indicators are the KasePO the KaseCD and the DevStops The KasePO and KaseCD are used to identify potential turns through divergences PeakOuts and KCDpeaks The DevStops are used to identify exit points As discussed earlier anytime a trade is entered a stop is placed at Dev3 by default Tighter stops are used to manage risk when there are danger or exit signals present There are five exit strategies that are normally used These signals are listed below in order of importance highest to lowest and a higher strategy overrides a lower For example a dual divergence with a KCDpeak calls for a 100 exit even though a KCDpeak alone only calls for 50 If there is a KCDpeak and an early PeakOut then 50 is exited right away even though the PeakOut only calls for one third at Dev1 The Recommended Action column shows how much of a trade should be exited and what stop s should be used after the signal takes place Signal Description Recommended Action Dual Divergence on KasePO AND KaseCD 100 Divergence on KasePO OR KaseCD OR PeakOut 80 Devl late in the direction of the dominant
43. ne would anticipate that the market was going to close above the completion point red and accelerate the exit by changing Dev to the price at that point Then if Dev1 was above the confirmation point blue the confirmation point would become Dev2 otherwise Dev1 would take the place of Dev etc Bullish Piercing Pattern Accelerated Stops 10 800 10 700 10 600 710 500 10 400 10 300 T 30 31 11 08 Created with TradeStation 5 7 2 The Kase Evening amp Morning Star KaseEveMrnStr_v981 After the formation of the first two candles the Harami line followed by the star above or below the body of the Harami line use accelerated stops Both the completion and confirmation points can be used as shown in the chart below The completion point replaces Dev1 and if Dev is above the confirmation point the confirmation point replaced Dev2 otherwise Dev1 becomes Dev2 and so forth 41 Evening Star Accelerated Stops CL C Daily 63 50 63 00 62 50 ESS ees eee aay TIERE PREIEI 61 50 EN cen nec EED Ses eave caren E EEEE IO EESE 61 00 60 50 r 20 23 24 25 Created with TradeStation 5 7 3 The Kase Harami Line and Star KaseHarami_v981 In the case of the Harami Line and Stars if the star s close is not at or beyond the midpoint of the Harami line use the completion point for an exit on the next bar
44. ng the KCDpeak Dev1 is hit 52 of the time Exit Signal 3 KCDpeak CL C Kase Bar 0 35 1 min 80 00 10 03 1040 10 49 11 18 1245 Created with TradeStation 38 5 6 5 Exit Signal 4 PeakOut Early In the Direction of Trend Whenever there is a PeakOut early in the direction of the trend often following a sharp correction stops are set to exit one third of the position at each of the three DevStops In Kase s study Dev1 was hit only 37 of the time following this signal so taking an exit will many times result in a reentry just a few bars later By pulling in stops and scaling out at Dev1 2 and 3 exits are consistent with the observed probability of turns Exit Signal 4 PeakOut early in trend ES D Kase Bar 1 min 1 090 00 i 1 085 00 l _ 1 080 00 du plete j L au a i E pleti TTI gt 1 040 00 106 96 100 00 80 00 j 108 10 11 1013 10 14 10 5 Created with TradeStation 5 6 6 Exit Signal 5 No Signal Though rare there are times when the market will reverse direction without warning i e a PeakOut KCDpeak or divergence When this happens a full exit is take at Dev3 5 6 7 Inactivity Exit Guidelines At times the market will stagnate at which point an exit can be considered If there is no profit in the trade after five to eight bars an exit may be taken due to inactivity 5 6 8 Position
45. nsidered bridging See Bridging Illustration PeakFilter 0 0 to 25 Minimum value that momentum must overcome to be considered a potential peak id 1 0 32700 Identification number for DLL reference 44 6 2 1 2 KasePO_peak A PeakOut is a pinpointed overbought or oversold signal that is generated when the momentum value of the KasePO rises above the overbought oversold threshold The overbought oversold threshold is the lesser of the peakFixed or the peakStdDev When momentum peaks above this threshold and there is a price peak within tolerance a PeakOut will be triggered Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range Standard deviations of momentum used to measure lpeakStdDev 2 25 1 to4 potential overbought oversold conditions for PeakOut signals Fixed overbought oversold line The overbought oversold lpeakFixed 200 100 to 300 line for PeakOuts is the lesser of the peakFixed or the lppeakStdDev The percentage 0 01 1 that a potential momentum slopeFilter 0 01 0 to 0 05 peak s value has to be versus surrounding bars to be considered a momentum peak Distance between price swing and momentum peak for tolerates ve divergences and PeakOuts ae valid J PeakFilter 0 0 to 25 Minimum value that momentum must overcome to be considered a potential peak id 1 0 32700 Identific
46. of 90 minute bars or longer are being used Note that the hanging man and hammer patterns cannot be used by themselves for exits and so are not included in the discussion below The concept with the candlesticks is that if a candlestick pattern is forming the initial stops either the warning line or Dev1 can be shifted to either the completion point the midpoint of the initial Harami line or the confirmation point the open of the initial Harami line When accelerating exits for example if the midpoint of the initial Harami line is being used instead of Dev1 then Dev would be used instead of Dev2 etc Candlestick patterns should be taken into consideration especially if the pattern is coincident with a KCDpeak or PeakOut and or divergence or setup s 40 5 7 1 The Kase Engulfing Candlestick Lines KaseEngulfing_v981 or The Kase Piercing and Dark Cloud Cover Candlesticks KasePierDkC_v981 There is no way before the close of either pattern to see if the bar will close beyond the initial bar s open or only at or beyond the midpoint When trading intra day with the exception of the last bar of the day wait for the bar to complete to determine if the close satisfies candlestick pattern requirements For the last bar of the day and for daily and longer bars an assumption about the close a few minutes early in anticipation of the close may be made to accelerate exits The example below shows a bullish piercing pattern O
47. onger bar length filter which is set by Multiplier These signals are akin to the L or S that is shown when KEES is plotted on a chart Variable Default Reasonable Range Description lookback for underlying synthetic longer bar length Length 9 3to21 momentum filter Multiplier 3 number of bars used to create synthetic longer bar length id 1 0 32700 Identification number for DLL reference 6 3 2 KEES status KEES examines a series of momentum indicators bar lengths and bar formations to color code each bar and then decide which bars are permissioned for long or short entries Every bar on the chart is color coded but not all bars are permissioned for a potential entry Bars are either permissioned as first or second class and as entry or non entry Frist class bars are permissioned in the direction of the trend on both the bar length being used and the synthetic longer bar length filter which is set by Multiplier These signals are akin to the color and dot size that is displayed on each bar when StatWare is plotted on a chart Variable Default Reasonable Range Description lookback for underlying synthetic longer bar length Length 9 3 to 21 momentum filter Multiplier number of bars used to create synthetic longer bar length id 1 0 32700 Identification number for DLL reference 6 3 3 KPermSto_permk and KPermSto_permd KEES uses a synthetic bar length that i
48. r long short stop flip When FastMA gt Slow MA IBarsInFMA 10 5 to 21 long stop is returned vice versa for short stop Slow moving average lookback crossover for long short stop flip When FastMA gt Slow MA IBarsInSMA 21 13 to 55 long stop is returned vice versa for short stop id 1 0 32700 Identification number for DLL reference 6 4 2 KRevAmounts_value The reversal value used for Kase DevStops is simply the number of standard deviations of the average true range over NumBars This value is then added to lows for short stops or subtracted from highs for long stops This value can be used to calculate stops in either direction at any time like a training stop Variable Default Reasonable Range Description INumBars 30 5 to 50 number of bars for double true range calculation number of standard deviations of double true StandardDeviations 0 0 to 10 range id 1 0 32700 Identification number for DLL reference 53 CHAPTER 7 Troubleshooting 7 1 General Problems For problems not directly related to using Kase s indicators please check your TradeStation user s manual or call TradeStation technical support 7 2 Indicators Coming Up Zero Nothing Is Plotting If all of your indicators are coming up zero then your PASSWORD has most likely expired Phone the Kase Call Center at 505 237 1600 or email kase kaseco com and we will arrange for an update of your PASSWORD consist
49. riable is set to true Dots is used to turn the color coded dots on and off for each bar These dots help traders identify the underlying permission and class for each bar F Format Indicator KEES_v981 Multiplier General Inputs Alerts Style Color Scaling Advanced Name Value foutsdeRevenss OutsideSames true Dots true Length 9 3 Length is the value used for the momentum indicator lookback that is applied to the underlying synthetic longer bar length filter 14 Multiplier is the number of bars used to create the synthetic longer bar length For instance if KEES_v981 is applied to a 10 minute chart and Multiplier is set to 3 then the last three 10 minute bars are combined to create a synthetic 30 minute bar 4 1 2 2 KEES Color and Style Defaults Plot name Description Color Type L1 Entry Entry Long 1 Class Blue Large Point L2 Entry Entry Long 2 Class Dark Cyan Large Point Ll Filtered Long 1 Class No Entry Blue Point L2 Filtered Long 2 Class No Entry Dark Cyan Point S1 Entry Entry Short 1 Class Magenta Large Point S2 Entry Entry Short 2 Class Red Large Point S1 Filtered Short 1 Class No Entry Magenta Point S2 Filtered Short 2 Class No Entry Red Point 4 1 3 Kase Momentum Indicators KasePO_v981 and KaseCD_v981 The KasePO and KaseCD are momentum indicators de
50. rived from a mathematically sound statistically based evaluation of trends and is used similar to traditional momentum indicators Both momentum indicators automatically adapt for changes in dominant cycle length and volatility These indicators signal the following 15 Overbought or Oversold conditions The KasePO and KaseCD identify overbought and oversold conditions with PeakOut signals shown by a P for the KasePO PeakOuts and a K for the KaseCD PeakOuts A PeakOut is a positive histogram peak above an overbought line or a negative histogram peak below an oversold line The Signals are colored when they occur under normal conditions and gray when they are weak Weak signals indicate that the confirmation bar closed against the direction of the signal i e a bearish PeakOut when the confirmation bar closes up Momentum Divergence The indictors generate standard bullish and bearish divergence signals a Bearish divergence takes place when prices have made a higher or equal high and a momentum indicator has made a lower or equal positive peak b Bullish divergence takes place when prices have made a lower or equal low peak and a momentum indicator has made higher or equal i e less negative negative peaks c Normal signals are shown as a solid line green for KasePO and red for KaseCD d Weak signals are shown as a dotted line green for KasePO and red for KaseCD KaseCD _V981 alll je
51. rs that do not have the proper structure to allow an entry for example a first class buy bar with a down close and a lower high and lower low Large points are used for bars that do have the proper structure to allow an entry such as a first class buy bar that had a higher high higher low and closed up but do not follow a valid swing AAPL D Daily KEES_v981 102 00 100 00 7 1714 Traditionally Kase has taught traders to take second entry signals This means that the first signal in a new trend is treated as a warning signal and the second signal after a valid pullback is taken as the entry This is a more conservative strategy but does not have to be deployed by more aggressive traders KEES identifies the first signal and color codes it light blue for longs and orange for shorts 4 1 2 1 KEES Inputs OutsideReversals is used to control the entry rules used for outside bars An outside bar is a bar that has a higher high and lower than previous bar This variable only effects outside bars that reverse the direction of the close when compared to the previous bar The rule comes into play when the variable is set to true 13 OutsideSames is used to control the entry rules used for outside bars An outside bar is a bar that has a higher high and lower than previous bar This variable only effects outside bars that close in the same direction of the previous bar The rule comes into play when the va
52. s set by Multiplier to filter entries The filter is a momentum indicator called KPermissionStochastic KPermSto that is applied to this synthetic longer bar length The lookback length of KPermSto is set by Length The KPermSto calculates a PermK and PermD line that are similar to the stochastic K and D lines Variable Default Reasonable Range Description lookback for underlying synthetic longer bar length Length 9 3to21 momentum filter Multiplier number of bars used to create synthetic longer bar length id 1 0 32700 Identification number for DLL reference 51 6 3 4 KPermFunction The KPermFunction is a simplified version of the KPermSto that returns long or short permissions based upon the status of the PermK and PermD lines When PermK is greater than PermD the permission is long When PermK is less than PermD the permission is short Variable Default Reasonable Range Description lookback length for underlying synthetic longer Length 9 3 to 21 bar length momentum filter number of bars to use to create synthetic longer Multiplier 3 bar length for filter id 1 0 32700 Identification number for DLL reference 6 4 Rigorous Exit System The DevStops The ideal stop is one that best balances letting profits run while cutting losses Kase s DevStops evaluate not only average market range but distribution and variability of the range to set optimal stop exit points statis
53. sed to lpeakStdDev 2 1 to4 measure potential overbought oversold conditions for KCDpeak signals Fixed overbought oversold line The lpeakFixed 90 70 to 150 overbought oversold line for PeakOuts is the lesser of the peakFixed or the peakStdDev The percentage 0 01 1 that a potential slopeFilter 0 01 0 to 0 05 momentum peak s value has to be versus surrounding bars to be considered a momentum peak Distance between price swing and tolerance 2 0 to 4 momentum peak for divergences and KCDpeaks to be valid Minimum value that momentum must Perk Paie i ie a gt overcome to be considered a potential peak id 1 0 32700 Identification number for DLL reference 47 6 2 2 3 KaseCD_ value The value of the KaseCD indicates the strength of momentum The KaseCD yields either positive or negative momentum and has a zero line It is normally plotted as a histogram Unlike other momentum indicators it is not bound between 0 and 100 Variable Default Reasonable Range Description shortCycle 8 5 to 21 Minimum lookback for dynamic range longCycle 65 34 to 144 Maximum lookback for dynamic range id 1 0 32700 Identification number for DLL reference 6 2 2 4 KaseCD_poval The KaseCD_poval or KCDpeak value is the value of the overbought oversold threshold for the KaseCD When momentum is positive the KaseCD_poval is positive and an overbought threshold When momentum is negative the KaseCD_poval
54. set up as follows e The entry indicator KEES_v981 as well as the KDevStops_v981T or K indicator are placed in sub graph 1 along with and scaled to the price data e The KeesCD_v981 is placed in sub graph 2 scaled to screen e The KeesPO_v981 is placed in sub graph 3 also scaled to screen With all four core indicators on the screen your chart should appear as follows Typical Kase StatWare Chart Set Up AAPL D Daily KDevStops_v981T KEES_v981 et iussi hus r i ar Di shi Hear h ji A ja EETA ae o rial petals i 1 li jil lly ell pi ijin eer niini ae oes AE E E E S l i a 2 6 1 20 27 aig 10 17 4 1714 8 15 2 29 as 5 piv ll dda CHAPTER 3 Importing PassKey Updates 3 1 PassKey Updates Kase StatWareo is enabled with a password called a PassKey If you are on a trial of StatWareo when your trial password expires please contact the Kase Call Center for a new password or to sign up for a lease When you sign up for a lease or if your trial is extended you will be sent a new password which will need to be imported into TradeStation 3 2 Importing New PassKey Files 1 You password will be emailed to you in a file The file will have a name of the form PASSKEY90_20121031 ELD The numbers in the file name signify when the password file will expire In the example October 31 2012
55. t is checked and click Finish Click OK or Yes to any message boxes that come up including one asking whether you d like to replace the existing passKey_v981 function Your indicators will now continue to function until the date in the name of your password storage file CHAPTER 4 The Indicators 4 1 Core Indicators 4 1 1 The Kase DevStops KDevStops_v981 T and K The Kase DevStops are the closest ideal stops can be in the real world DevStops account for volatility which is directly proportional to risk for the variance of volatility how much volatility changes from bar to bar and for positive volatility skew the degree an asymmetrical right tail extends to more positive values than a normal distribution NGZO9 C Kase Bar 0 045 1 min Created with TradeStation DevStops allow profits to run and losses to be minimized Setting stops based on statistical probabilities of being stopped out allows profit to be taken or losses to be cut at levels where the probability of a particular trade remaining profitable is low Two versions of the Kase DevStops are included in the installation package for StatWare v_90 KDevStops_v981T and KDevStops_v981K This is because the default settings are slightly 10 different KDevStops_v981T uses standard deviations of 1 2 2 and 3 6 equivalent to the normal bell curve s 1 2 and 3 The KDevStops_v981K uses 2 1 5 5 and 8 9 equivalent to the time or tick volume interval
56. te Please note that keeping your old indicators will not prevent your new indicators from importing or from working properly CHAPTER 2 Setting Up Charts 2 1 Preliminary Settings Open View Chart Analysis Preferences click on the Symbol tab and un check both Show empty daily trading periods and Show empty intraday session periods as shown below Click OK Chart Analysis Preferences Chart Types Traditional Tick Volume Intra day Daily Weekly Interval Tl ick vl Range values to use for the interval selected above For Time Use 2 Days Back v For Bars use 500 Default range setting to use for the interval selected above O Time Bars 2 2 Setting Bar Length on Charts Kase s philosophy is to scale up from shorter term to longer term trades using three chart periods For active traders we recommend using charts roughly equivalent to 10 to 15 minutes 20 to 30 minutes and 45 to 90 minutes depending on the level of activity and degree of trendiness The more the market is trending the longer the time frames and the more choppy the market the shorter the time frames Also active traders may decide to scale up to longer time frames during well established trends We recommend less active traders hold trades for at least a few days to a number of weeks to look for long term entry and exit signals on one quarter to one third day charts half day charts and daily charts Ther
57. ther the indicator marks first and second buy and sell signals to make identifying entries easier A first signal is the initial instance of a long or short signal A second buy signal is one that occurs after a pullback wherein the previous swing low is held A second sell signal is one that occurs after a pullback wherein the previous swing high is held Both first and second signals are also marked with an L for buy signals and an S for sell signals Kase recommends waiting for second signals most of the time however valid entries can be used at any time when traders wish to exercise discretion 5 3 1 Initiating a Trade from a Flat Position Entries are normally taken on the fast monitor chart This is the shortest bar length chart and is the most active Look for an L followed by an L or an S followed by an S where the swing high or low holds the initial swing high or low The chart below shows a first buy signal followed by a pullback and then a second buy signal Second Buy Signal VIPS D Daily KEES_v981 f S 1 ey bh H 2nd Buy Ist Buy T 20 27 114 10 18 00 17 00 16 00 15 00 13 5 3 2 Re Entry System After an exit of any volume if Dev3 has not been broken and there is a new valid entry with an L or S consecutive to an earlier L or S get back in In the example below a bullish divergence prompts an exit of 80 see Section 5 6 2 and stops are pulled
58. tical probabilities Thus DevStops are set at points at which there is an increasing probability of reversal against the trend being statistically significant Function Name Return Type Return Range Description Returns stop value added to low or subtracted IKDevStops_price double N A from high IKRevAmounts_value double N A Returns raw stop reversal value 6 4 1 KDevStops_price The KaseDevStops are plotted as either long stops below the market and subtracted from the most recent swing high or short stops above the market and added to the most recent swing low The long short crossover is controlled by a simple moving average crossover that is set using BarsInFMA fast moving average and BarsInSMA slow moving average When the value of BarsInFMA is greater than BarsInSMA long stops below the market are returned When the value of BarsInFMA is less than BarsInSMA short stops above the market are returned The StandardDeviations variable can be set to 0 for the warning line 1 1 for Dev1 2 2 for Dev2 and 3 6 for Dev3 Other values of StandardDeviations may also be used for wider and narrower stops as deemed appropriate by the user 52 Variable Default Reasonable Range Description INumBars 30 5 to 50 number of bars for double true range calculation number of standard deviations of double true StandardDeviations 0 0 to 10 range Fast moving average lookback crossover fo
59. trend Any KCDpeak 50 Devl PeakOut early in the trend Dev1 2 and 3 equally No Signal 100 at Dev3 36 5 6 1 Exit Signal 1 Divergence on KasePO AND KaseCD Whenever there is a dual divergence that is divergences on the KaseCD AND the KasePO exit 100 of the trade This is the strongest signal found in Kase s studies Dev1 is hit 95 of the time following this signal Exit Signal 1 KasePO AND KaseCD Divergence beggad UNa age mm 0 00 HT y OUG 80 00 i j 1109 j up J 18 00 9 35 8 Created with TradeStation 5 6 2 Exit Signal 2A Single Divergence on KasePO OR KaseCD Whenever there is a divergence on the KaseCD OR the KasePO but not both exit 80 of the trade and pull stops in to Dev1 for the remaining 20 Dev1 is hit 83 of the time following this type of signal Exit Signal 2A KasePO OR KaseCD Divergence 37 5 6 3 Exit Signal 2B PeakOut Late In the Direction of Trend Whenever there is a PeakOut late in the direction of the trend exit 80 of the trade and pull stops in to Dev1 Following this signal Dev has been hit 79 of the time Exit Signal 2B PeakOut late in trend CL C Kase Bar 0 35 1 min 76 00 60 00 T 13 50 12 18 6 40 710 Created with TradeStation 5 6 4 Exit Signal 3 KCDpeak Whenever there is a KCDpeak with no divergence exit 50 of the trade and pull stops in to Dev1 Followi
60. u load at least the four core indicators These four indicators comprise those used in the basic Kase approach to trading with StatWare The other indicators might be placed on the chart as hidden or used on a secondary chart for reference The Candlestick Indicators are normally only used on one quarter day charts and higher 2 7 Formatting the Indicators The indicators come preset with all the optimized defaults so adjustments to the their inputs is not required Nevertheless if you wish to change the indicator inputs select Format from the menu bar and click on Analysis Techniques etc By selecting the Inputs tab you may change the default settings for certain variables The default settings have been set to their optimal values so we recommend staying with the preset defaults except in a few special circumstances that will be described in the Chapter 5 The Indicators By selecting the Alerts tab you may select whether alerts generated by a given indicator are ignored and if not what action should be taken upon an alert being triggered By selecting the Color tab the colors used by a given indicator may be changed 2 8 Setting Up Indicators in Different Subgraphs 1 Goto Format Analysis Techniques 2 Select the indicator to Format and choose the Properties tab 3 Select Subgraph 2 9 Organizing Your Workspace Generally four core indicators either the T indicators or K indicator for one DevStop are
61. xtended moves or trends to filter out patterns occurring after less meaningful moves Kase s filters candlestick patterns with the Stochastic only identify the patterns meeting overbought bearish or oversold bullish conditions These patterns are especially significant when accompanied by divergences and or PeakOut signals 4 3 1 Candlestick Inputs Thold identifies the overbought and oversold thresholds used in the in the slow Stochastic filter A default of 75 means that bearish formations will only be identified when the Stochastic is above 75 and bullish formations below 25 A Thold value of 90 would identify candlestick patterns only if the Stochastic is above 90 or below 10 The lower the setting the fewer patterns will be filtered Setting Thold to 0 turns the filter off so that all patterns are identified 4 3 2 The Kase Engulfing Candlestick Lines KaseEngulfing_v981 Bullish and bearish engulfing lines entirely engulf the previous candlestick as shown below The Engulfing line opens beyond the previous bar s close and closes beyond the previous bar s open Bullish Engulfing Bearish Engulfing 26 4 3 3 1 Color and Style Defaults Plot name Description Color Type Bullish engulf Bullish Engulfing line Dark blue Cross below low Bearish engulf Bearish Engulfing line Dark blue Cross on high 4 3 4 The Kase Evening amp Morning Star KaseEveMrnStr_v981 This three

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