When using the ChaosHunter Trader, it is helpful to understand how trading signals are calculated. We will start with definitions of three different position types used in the program:
Virtual position refers to the model’s position.
Chart position refers to the position that is displayed in the Position status box on the ChaosHunter Trader.
IB position refers to the position in the Trader Workstation, which may include positions you entered directly in the Trader Workstation.
ChaosHunter Trader considers several factors when calculating trading signals that are then transmitted to IB Trader Workstation.
1. At the end of each bar, the formula output of each model is evaluated. The formula output is compared against a model's trading buy and sell thresholds. The comparison accounts for the current model's position (we call it a "virtual position") and the model's trading strategy type (reversal or non-reversal). For example, if a current virtual position is BUY (a.k.a. "Long" position), then only SELL virtual signals are considered. If a current virtual position is SELL (a.k.a. "Short" position), then only BUY virtual signals are considered. If a current virtual position is NEUTRAL (no position), then both BUY and SELL virtual signals are considered.
ChaosHunter Trader displays virtual signals and virtual positions for each model on either the "Untraded models" tab when automated trading is off, or on the "Order/Trade Log" tab when automated trading is on. The chart’s current position is displayed in the Position status box in the ChaosHunter Trader.
2. If there is more than one model on the chart (panel of experts), then virtual signals from all models are evaluated against the Majority Rule criteria. For example, if there are 5 models on the chart, and 3 or more models issue a BUY virtual signal, then the overall virtual trading signal is BUY. Otherwise, there is no overall virtual trading signal.
3. At the final stage, before being sent to Trader Workstation, the virtual signal is checked against the chart’s current position. ChaosHunter Trader cancels any virtual signal that will increase the chart’s current position. For example, if the chart’s current position is BUY, then a BUY virtual signal is reset to no signal. This prevents the chart’s current position from being doubled. The same is true if both actual position and virtual signal are SELL.
4. If a virtual signal passes all the above checks, ChaosHunter Trader composes and sends out a market BUY or SELL order. The size of the order is defined by the value found on the Trading Setup dialog, the "Order Size" box. In the case of a true reversal model(s), the order size is doubled to alternate between BUY and SELL states.