Strip the First Trade
Here the concept of stripping, i.e. deleting, the first trade is introduced.
We explain why the stripping of the first trade functionality is sometimes needed and how to activate it.
Also, the rules that it applies are listed.
Examples complete the description.
The Functionality
Why Is Needed
It can happen that boundary conditions to be different on the very first trade, resulting in unexpected behavior for the very first trade. If you identify such an eventuality, you might want to strip, or delete, the very first trade.How to Activate It
In order to activate this option, select the checkbox
Strip first trade
An Example of where It Is Needed
Suppose you are implementing a simple trading system where you want to go long as soon as the price goes above its EMA
and go short as soon as the price goes below its EMA. So you can select the elementary algorithms:
Long tab : Close greater than MA of EMA Short tab : Close less than MA of EMAThe intent is clear, but at the very first trade what happens is not what we want. This is because of two reasons. The first is that if we select a lookback period of
n bars for the EMA, for the first n-1 bars the EMA is unknown.
The second reason is that the elementary algorithms are true throughout the period in which the close is greater or less than the EMA,
not just when the price-EMA crossing occurs.
So the very first trade happens too late; anyway not according to our intentions.
To avoid this you can active the strip the first trade option to solve the problem.
Step
As a side note, this is just what theStep option is for.
In this particular case you could activate the Step option instead of the stripping of the first trade.
Rules
Congruency - What Is Reset
Trading Conceiver makes sure that the stripping of the first trade brings to congruent results.Liquidate Signal
If after the first long or short trade there is a liquidate, that liquidate is deleted as well. If not, the sequence of trading would start with a liquidate, which would be meaningless.Stop Loss and Take Profit
Stop loss and take profit exist only when a position is open. When the first trade is deleted, the correspondent stop loss and take profit, if any, are deleted as well.Different Signals and Different Thresholds Flags
Both these flags are reset, too, consistently with the fact that no trade occurs.Signals at Intervals
The column of the table, showing the signals for each sub-interval, is reset in correspondence of the stripped signals.Not Everything Is Reset
The strip occurs only on trading signals, whilst the combined Tabs signals are unmodified. This way, they can still be analyzed and still give the trading signal, which by the way has been stripped off.Profit and Loss
The important fact here is not what is reset and what is not. The fundamental concept is that the first trade is not factored into the profit and loss computation.Order of Application
This functionality is applied before of the following, if any- Only at close (shift to close)
- Only at (next) open
When to trade
Example
Trade signals before and after the strip of the first trade:
Stop loss before and after:
In charts, trade signals and stop loss:
