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Precision Probability Index for Tradestation comes with two strategies

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Precision Probability Index - Computing the precise probability of one price being higher than another any number of bars into the future with 100% mathematical accuracy

This indicator for Tradestation gives you the trader the exact probability of your trade doing what you want it to do. No more guessing in a fully configurable format

Please visit the product guide above if you require this Tradestation product for a different trading platform.


Indroduction and concepts of Precision Probability Index for Tradestation

Precision Probability Index herein referred to as PPI was a very complex programming task for me and I was well rewarded for the time invested.

Its a unique piece of kit that is nothing like anything else out there.  You can use it on any time frame in ticks charts, minute charts, hourly, daily and most exotic bar types.


There are two strategies included in the package.


1. The Signal Line strategy which is shown in the video below.

This is NOT trading on the probabilities exactly but when the probability trend changes direction ( which is a unique approach )


2.
The Above Below strategy which trades on the crossing of zero using exact mathematical probabilities ( which you can edit to add a "dead spot" threshold to prevent over trading )



The PPI line crossing above the signal line generates a long trade (Buy) the crossing below the signal line generates a short entry OR a long exit. (You can choose which).







As with all my products performance will improve if you take the time to search through lots of markets and look for those with favourable price action. This also applies to timeframes.

The average trader will plot it on ES SP500 1 minute future chart and expect to win. Of course the type of person is not going to win in the long run as winning by definition requires work.

The forums are full of such persons. They get good followings as they post a lot of content but as traders, they would rather type unimformed opinions than put in the work to scan for suitable markets.

Those who talk do not know - Those who know do not talk.

People who just rely on other forum users to tell them if a product is good or not can never understand the recipe for success is a very simple one....


TRADING TO WIN OVER THE LONG RUN REQUIRES WORK  


Video clip below shows the Precision Probability Index above and below strategy for Tradestation

The zero line in this example is the trigger that generates buy signals. In this example as it is a generally trending up market, the signal is set to long only (Which is often better)

You can of course set it to take short trades by enabling short selling = true. This signal generates less trades than the signal line strategy if the same periods are entered.

This model is acting on pure probabilities and buying then the odds are > 50% of a move up occuring. Exit long when < 50% Very simple really.







 
Special features of Precision Probability Index

The exaggeration factor, which as you would expect exaggerates the truth, telling lies about reality.

You might wonder why one would want to do this and the best way to explain it is to view the screenshot below which has turned PPI into a digital signal processing unit or "DSP"

The plot now only has two places to visit, 0 and 100. The 0 means sell and the 100 means buy. A simple way for a beginner to understand how to operate a trend following system.

You can set the strategy and the indicator to function in this manner by typing larger and larger values into the exaggeration factor input, all the way up to 100 or 200 for example.

This product can bend and twist with you to suit whatever abstruse or bizzare trading style you wish to implement. Yes really, it is that versatile.



Precision Probability Index for Tradestation is very versatile


Other "accidental" discoveries of the PPI indicator

In the example below you can observe ( if you are observant ) that there is a support level that forms approximately around the 50 level of equilibrium that leads to the market price

bouncing up away from it each time it gets there.

You can translate this phenomenon into traders who are accumulating stock each time it becomes mildly oversold, they want to buy cheap but they also want to keep the uptrend going up

thus preserving a bullish sentiment for the market to see.


This price action is generally caused by long term players in for a few years or if you see it in intraday futures, you can still call them long term players in for a few hours!

You wont see this all the time, but you will often see it in choppy uptrends ( and choppy downtrends acting as resistance )


PPI indicator for Tradestation
 

The shot below shows such a choppy down trend with the 50 equilibrium level acting as resistance.

You can sometimes observe this effect in other indicators such as Demand Index
 

Threshold feature reduces whipsaw trades in the PPI indicator for Tradestation


View license prices for Precision Probability Index for Tradestation



So now for the literature about how this gadget works
 

This product computes the probability of one moving average being above another in x bars into the future.

The short period average would usually be about 2/3 of the slow moving average. But please feel free to experiment.

If you use lengths which are short such as short length 8 and slow length 15 you will see a lot of signals occuring around the 50 level as the battle between bulls and bears occurs.

In the shot below this irons out into longer lasting trades when a trend develops.

To reduce the number of tiny wins and tiny losses that occur at 50 fluctuations, I have build in a threshold which you can set to buy > 50.5 or 50.03 etc and sell < 49.8 or 49.99 etc.

This has the effect of reducing whipsaw trades by delaying the entries slightly.


Shot below shows faster settings 8 and 15

Notice how close the line gets to 50 very often then scroll down to the next image which uses the threshold feature...


Please compare these two charts below which use a different threshold setting.

The threshold iS ZERO in the first one which means it buys > 50 and shorts < 50.

The image under is using a threshold of 3, notice the difference?




Lots of trades generated at the mid point


Threshold changed below to allow a "dead spot"

In the shot below as the yellow text says the thresholds have been reset to buy above 53 and sellshort below 47.

This reduces whipsaw trades at the expense of some delay.



Threshold feature reduces whipsaw trades

The bars future feature.

This is the number of bars into the future that the plot will calculate the probability of the short average being above the slow average.

This is the least important feature for trading results but is nice to punch in the numbers and know the exact chance of X being above Y in 20 bars time.

Key points to remember:

Reducing the bars future values will increase the volatility of the PPI plot

Increasing it will reduce the volatility of the plot.

The plot will not change "shape" when altering the bars future value and the crossing of 50 will be the same.

It is suggested to use a small value between 2 and 5 etc.


A very important points below

If you are setting this up on a short term time frame such as 1 minute or 20 tick chart the amount of threshold you type must be MUCH SMALLER.

You will need to include multiple decimal places such as buy above 50.03 and sell below 49.95 etc to see the effect. In some cases three decimal places will be needed.

Typing in large numbers on short term time frames will result in zero trades occuring as the mathematical probabilities will shift to a microscopic degree.

Also you need to use smaller threshold values with slower lengths of PPI averages. In the shot below it is a fast setting of 8 and 15 which is posted on a daily chart with a threshold of 3

points used.

If this setting was applied to long term PPI averages like 20 and 28 the thresholds would need to be reduced to 1 or 2 or thereabouts.



Using the readings for a trade evaluation

In the image below you can see the exact probabilities based on the white moving average line (3 period) being above the yellow moving average line (50 period) in 4 bars time.

From left to right

1st  = 47.2%
2nd = 73.3%
3rd  = 81.5%
 

The actual probability of one moving average being above the other is calculated



For intra day use in day trading on minute and tick charts

Precision Probability Index uses volatility to assist in measuring the true percentage probability of a fast moving average being above a slower moving average.
 
When plotted on a short term intra day chart such as 20 ticks or 30 seconds or 5 minutes, there is naturally smaller volatility values being passed to the algorithm.

TThe resulting output of the PPI indicator will be much smaller in terms of the probability score. You will see numbers like 50.004 and 49.992 for example.

This will require you to input smaller values into the above below strategy to see trades. br>


This product is also available as a combo trading system.

Check out the combo page here


View license prices for Precision Probability Index for Tradestation
 
 

The help and advice of customers is valuable to me. Have a suggestion? Send it in!

The contact page here has my email address and you can search the site

 

 

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About

Precision Trading Systems was founded in 2006 providing high quality indicators and trading systems for a wide range of markets and levels of experience.

Supporting MultiCharts, Tradestation and NinjaTrader and soon TradingView.

 

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Admin notes

Page updated July 12th 2023   - New responsive page GA4 added canonical this. 5/5 html baloon  videos added