When you subscribe to OLTO Trading Ideas, you will receive ideas in real-time as soon as they are generated. OLTO will send you ideas by email.
1. Data-driven forecasts with scientific pipeline (overfitting free):
The main problem with statistical analysis is that too often it turns into overfitting and beautiful backtests rarely work in reality. At OLTO, we apply a completely different mechanism to identify trading suggestions, which has proven to be successful for many professional algorithmic traders.
2. Transparent approach (MAE/FAE etc) & minimising the gap between historical and real-time results:
Our pipeline employs out-of-sample testing, MAE/FAE tests and other statistical methods which minimise the chance of overfitting and maximise the validity of generated forecasts.
See the image below:
On the left-hand graph, you can see the AAPL chart for the last 3 months. The green dashed horizontal line is the optimal take profit for the Idea and the red dashed line is the optimal stop loss for the Idea. We call it Window of Opportunity (WOO) for traders.
On the right-hand graph, you can see the AAPL chart for the last 3 days, on the basis of which the Idea was formed. The name of the trading idea on the chart (e.g. ContractionCandlesRangeSignal) - is one of 13 candlestick patterns that we track. You can read more about the 13 candlestick patterns that we analysed in our Trade Wiki IV. 13 CANDLESTICK PATTERNS
It is a time interval at the beginning of which market conditions are formed in such a way that the price during this interval has an increased probability (greater than 50%) of rising or falling. If the Idea type is specified as Long, this means that the price has a probability of increasing during the days specified under Valid for. If the Idea type is set to Short, then the price will decrease with a 68.21% probability in this case (see Probability) during the days specified under Valid for.
We automate the identification of such windows in real time by analysing the trading instrument's price data for a 20-year trading history (or the maximum possible if the instrument's price history is less than 20 years). Each new trading WOO (see chart above) is generated as it is detected in the markets by our algorithms. The methods we use for analysis can be found here.
The start of the WOO (see chart above) trading window time period is determined by the trade idea generation time (Idea generation time). The end of the time frame is determined by the Valid for parameter.
We generate WOO for different trading instruments:
- stocks (e.g. Apple, Amazon, Netflix, Procter&Gamble, Visa, etc.),
- cryptocurrencies (e.g. BTCUSD, ETHUSD, etc.)
- commodity futures (e.g. Brent oil, gold, etc.),
- ETFs (e.g. SPY, etc.)
- currencies (e.g. EURUSD, USDJPY, etc.)
- world indices (e.g. S&P 500, NASDAQ, etc.).
The name of the trading instrument and its ticker are indicated in the Instrument field.
There are two types of trades - long and short. A position is called Long if the trader buys an asset to sell it at a higher price for profit. A position is called Short if the trader sells an asset to buy it at a lower price to make a profit.
The probability of an idea’s outcome is calculated as the number of positive idea outcomes divided by the total number of ideas generated over the historical period (in our analysis we use the 20-year history of an asset's price).
You can find a detailed description of how we obtained the probability in paragraph 3.2 of "Detailed Idea Analysis".
The name of the trading idea (e.g. "Exit from a narrowing range up") is one of 13 candlestick patterns we monitor in real-time for trading instruments, analyse over a 20-year historical period for those assets and publish if they meet the selection criteria (positive mathematical expectation and other criteria).
You can find a detailed description of statistical odds for the "Exit from a narrowing range" idea in paragraph 3 of "Detailed Idea Analysis". The link is at the bottom of the idea.
You can read more about the 13 candlestick patterns in Trade Wiki IV. 13 CANDLESTICK PATTERNS
The instrument is the name of the asset for which the idea is generated.
A time frame (e.g. 1D) - or trading period - is the interval of time used to group quotations when constructing price chart elements (bar, Japanese candlestick, line chart point). We use the daily dealing period (1D) for the instrument prices.
Idea generation time is the current date and time in the time zone of the exchange where the instrument is traded. For example, Apple shares are traded on the NASDAQ exchange, which is located in New York City. The state of New York uses the Eastern Time Zone (UTC-05:00) with daylight saving time (UTC-04:00).
The current price of an instrument is the price of the last transaction in the instrument executed by participants on the exchange on which the instrument is traded.
Optimal maximum holding period - the number of time periods (e.g. 3 days, meaning working days of the exchange) from the opening of a long or short position until it is liquidated completely (buy or sell). For the generated ideas, we calculate the optimal position holding time using the MFE/MAE test, using a 20-year history of the asset price.
You can find a detailed description of how we determined the Optimal maximum holding period in paragraph 3.1 of "Detailed Idea Analysis". The link is at the bottom of the idea.
You can read more about the MFE/MAE test in block VI. QUANTITATIVE ANALYSIS. “How to find a good entry point? MFE/MAE analysis. PART 1”
We describe not only how the idea is generated, but also what methodologies we use in our analysis and explain each concept in detail and in simple terms.
Trading is a game of chance and probability. We cannot predict with 100% accuracy whether the price will rise or fall in future, but we can analyse the history of the price of a trading instrument and determine how it has behaved since the appearance of a particular pattern:
- in how many cases did the price go up after the pattern appeared and in how many did it go down?
- what percentage did the price of the trading instrument go up or down after the pattern appeared?
- How much could I earn by systematically using this pattern and what would the curve of profitability of my trading account look like?
If the probability of positive pattern outcomes at historical prices is above 50%, we can talk about a so-called probability shift, which can be used to improve our trading.
In our case, you can use the trading windows in one of two ways:
1. Buy or sell the instrument at the moment of trade idea generation (Idea generation time) at a price close to the Idea generation price and close the position after the number of days specified in the field Valid for. Since there is no risk management in this system, we recommend doing it with a small volume of position, and using different trading instruments to diversify your trade.
2. Independently search for entry points in the direction in which the window of opportunity points (Long or Short). You may also independently place protective stop orders and manage your position within the window of opportunity. Such trading inside the WOO will improve your strategy as the windows themselves provide a positive bias of probability for trading.
Remember that OLTO Trading Ideas are not a call to action, rather trading ideas with some positive opportunities and expectations tested over a 20-year history of data analysis.
OLTO Trading Ideas are generated on daily charts (time frame D1), making it possible to execute these ideas at a different time than when they are generated. In the text of OLTO’s Trading Idea, there is a field "Current price" - the price of the trading instrument at the time of generation of the trading idea. In general, it is desirable to execute a trading idea at a price close to the parameter "Current price".
If the trader receives an idea to buy (long) but does not execute this trading idea immediately and the price falls below the parameter "Current price", then there is nothing wrong - the trader can buy the instrument at a lower price than the parameter "Current price".
If the trader receives an idea to sell (short) but at the same time does not execute this trading idea immediately and the price rises above the parameter "Current price", then there is nothing wrong - the trader can sell the instrument at a higher price than the parameter "Current price".