Hawkeye 3.8 includes even more information than the previous version. It also includes the EWS and BOF, though not in the same way as in the Gryphon Learning EWS/BOF Trading System. Faster methods have been used to perform some of the original calculations.

Hawkeye 3.8 includes rules for determining whether long or short positions should be taken. This supersedes the shadows used in previous versions.

How do I get access to Hawkeye 3.8?

You will need to download the latest version of PhoenixAI and the latest version of the Gryphon Environment.

If you are already a subscriber to one or more of the Hawkeye Trading Systems, the new Hawkeye version will automatically download the next time you log on with the Gryphon Agent. A few minutes later you will see the new System in the “Highlights” tab of the PhoenixAI “Add Studies” tool.

If you are not already a subscriber, or you wish to upgrade your Hawkeye subscription, please call us on 1300 730 945 and one of our salespeople will be happy to arrange it for you.

How do I apply the Hawkeye 3.8 Highlights?

Hawkeye 3.8 Parameters

What does “Scope” mean?

“Scope” has the values “All Bars” or “Recent Bars.” It allows you to apply the Hawkeye to the entire chart, or save time by applying it to only the most recent data. We recommend that for normal use, you use the “Recent bars” setting.

What is the “Aggression”?

This parameter allows you to switch between Hawkeye systems based on the aggressiveness of your stock. Increasing aggressiveness gives increased potential profits at the expense of an increase in risk. The higher the aggressiveness, the more, earlier entry and exit points are identified. However, quite a few of these may prove to be false signals. The Hawkeye identifies and responds quickly to false signals; however your tolerance for false signals depends on the brokerage you pay.

What is “Speed”?

On Hawkeye Scalper, the Speed parameter allows you to fine tune the Aggressiveness of the system. Fast speed is more sensitive to volatility. Speed has no effect in Hawkeye Active Trader or Standard.

What is “Trading Style”?

This parameter is designed to be used with Scope = All Bars, to help you “back-test” Hawkeye.

Some people check the charts as soon as the market opens, (before they call their brokers or execute their trades,) then check them again after work. These people may have entered the market at a better price. Using Trading Style =”Open and Pre Close” will give some idea of the performance of Hawkeye under these circumstances.

WARNINGS

The “Trading Style” options affect the speed with which Hawkeye is calculated. “After Close” is quickest. “Open and Close” is fairly quick, but the others slow the calculations significantly. We recommend you only use them for “back-testing” and disconnect from Phoenix before using them.

The “Trading Style” parameter allows various estimations of entry and exit prices to be calculated using closing prices, not the actual tick data. The estimated entry and exit prices may differ from the actual prices at which you could realistically have entered and exited the market. It cannot, for example, completely account for the slippage between the price at which the signal occurred and the price you got when the transaction was made (maybe only a few seconds later.)

What is the difference between Standard, Active Trader and Scalper?

The difference between these Hawkeye Systems lies in the time frames to which they apply, and the degree of aggression they allow. Aggressive stocks are more volatile, generating more trades over shorter time-frames in reaction to small market fluctuations.

You can tune the Hawkeye Trading Systems to suit a stock’s level of aggression by altering the timeframe and adjusting the Aggression and Speed parameters.

hawkeye2 copy.jpg

In practice, the three aggression settings differ in the weighting given to volatility, support and resistance and trend.

· Low is weighted more to volatility.

· Medium is weighted more towards trend.

· High gives a more balanced approach.

Hawkeye Standard is available on Monthly, Weekly and Daily Data.

Hawkeye Active Trader is available on Monthly, Weekly, Daily, and 60-, 90-, 120- and 180-minute Intraday Data.

Scalper includes Hawkeye 3.8 Standard and Active Trader (90-,120- and 180-minute intraday), but also a more aggressive system for use with 5-, 10-, 15-, 20-, 30- and 60-minute Intraday data. The Speed parameter has no effect when used on Monthly, Weekly, Daily or Intraday data greater than 60 minutes.

Why have we included Standard with Active Trader and both with Scalper? So you can change between time frames without changing to a different Hawkeye Tool.

Using Hawkeye 3.8

What do the arrows mean?

The arrows mark entry and exit points identified by the Hawkeye 3.8 Trading System. If you are trading long, an entry is indicated by an arrow pointing up, and an exit by an arrow pointing down. If you are trading short, an entry is indicated by a rightward pointing arrow and an exit by a leftward pointing arrow.

The point of the arrow is positioned at the best estimate of the price at which the arrow appeared. (See more about this in the discussion of the Trading Style parameter.

How much data is needed for Hawkeye 3.8?

If you don’t have enough data, nothing will appear. Before actually using the Hawkeye Signals, be sure all data has finished downloading.

The amount of data needed depends on the security/ instrument you are trading and the time-frame and Hawkeye parameters you use. The table below is a general guide to the amount of data required.

Does the Hawkeye 3.8 work on Low Cap or infrequently traded stocks?

The Hawkeye Trading System is not particularly useful for low liquidity stocks. Before using the Hawkeye on a stock, check that it trades every day and is not closely held. A closely held stock has only a few shareholders, and hence the price can be significantly affected by the whims of a single shareholder. If for example, a major shareholder in a closely held stock decides to sell stock to buy a yacht, for example, the price can drastically decline. The Hawkeye cannot predict whether such an action will occur.

Should I use the EWS and BOF with Hawkeye?

In the Two-day Trader’s Workshop, you learned a Trading System based on the EWS and BOF. You also learned how to use this system to decide whether to trade long or short based on Hawkeye signals. However, if you incorrectly combine this with the Hawkeye to decide the timing or entry and exit points, you may well get lower returns than with either trading system used alone. Ideally, you would learn to use each system correctly, then compare them to see which best suits your risk profile and trading style.

What secondary indicators can I use with Hawkeye?

If you wait for secondary indicators to confirm Hawkeye signals, you may well enter and exit later, with reduced profits. This is because Hawkeye uses so much information, it has probably already taken into account the information provided by your secondary indicator.

However, it is obviously very sensible to use fundamentals to select the stocks on which you will apply Hawkeye.

Where Hawkeye simultaneously identifies several prospective trades, it is worth using the Gryphon Price Targeting Tool to choose between them. To be sure you are using the Price Targeting Tool correctly, we recommend you complete the New Chart Pattern Recognition course supplied as part of the Trader’s workshop. Only the chart patterns covered in this course are suitable for use with the Gryphon Price Targeting Tool. The course shows exactly where to click for each type of pattern. If you cannot identify wedges and horns we strongly recommend you repeat the Chart Pattern Recognition Course.

More about Hawkeye 3.8

How is the Hawkeye calculated?

The Hawkeye combines a great deal of information used by experienced, professional market traders/analysts. This includes (in short and medium time frames) a number of indicators, support and resistance levels, market strength, volatility, chart patterns, candlestick patterns, trends and velocity. This information is combined using rules designed to replicate (as far as possible) expert decision-making.

The Hawkeye does not take account of volume, fundamentals or long-term trends.

Why does the Hawkeye 3.8 take so long to calculate?

The Hawkeye has a great deal to calculate. First it must calculate the indicators and identify the patterns, trends and levels. Then it has to check whether they satisfy one of thousands of criteria. The computer can crunch numbers and check criteria faster than a human, but is slower at making judgement decisions such as whether a bar is long or short.

To use Hawkeye for trading, you should connect to Phoenix and run Hawkeye with Scope = Recent bars.

To check how Hawkeye has performed in the past, you should disconnect from Phoenix and run Hawkeye with Scope = All Bars.

Why disconnect from Phoenix when running with All Bars? Every time the chart is updated, the whole Hawkeye calculation must be repeated. Some highly liquid securities/instruments (especially Forex) are updated so often that if All bars is used the Hawkeye calculation cannot be completed before the chart next updates.

Where has the line gone?

In the earlier version of the Hawkeye, we used a level drawn across the last bar to estimate critical levels where Hawkeye signals might appear. This feature used a lot of calculating power, slowing Hawkeye unacceptably on highly liquid stocks/instruments such as Forex. It was also a “best estimate” of where arrows might have appeared. Being an estimate, it was sometimes wrong. In response to user feedback that it was confusing and not worth the slow-down in processing, we decided to dispense with the feature.

However, we have replaced it with the “Trading Style” Parameter (see below.)

Can I scan for Hawkeye signals?

No, not at present.

How do I start the System simulator and back tester?

How accurate is the Hawkeye 3.8?

See for yourself! Use the PhoenixAI simulator feature to Back-test the system.

1. Be sure you use a sufficiently long time frame to include sideways, bullish and bearish markets.

2. Use a wide range of securities, including Forex, Commodities, Australian stocks and indices and global markets indices and stocks.

Use common sense when interpreting the results. OXR for example, increased in price from 13 cents to $4.30. Here’s an extract from some back-testing:

It shows incredible compounding – but would you really put $433,111 on a single trade? Consider whether that size of trade would affect the share price. Putting $433,111 into a $3.50 share would probably have little effect on the price – the same could not be said if you tried putting the same amount into a 3 cent share.

The “Current statistics” and “Compare” tabs include statistics which can give you a good idea of the theoretical accuracy.

Remember too, that the results you get will depend on your particular trading style.

· Do you trade short and long? – Or just long?

· How much of the profits do you reinvest?

· How much are you prepared to short?

· Do you use leverage? How much?

· How often do you look at the charts?

What assumptions have been made for back-testing?

· You can only buy a whole number of shares. This means you will often have cash left over after opening a trade. This cash is available for use next time. If you use a low deposit with high-priced shares, the statistics will not accurately reflect the power of the Hawkeye. To test indices such as the XJO or Dow Jones, we recommend using a deposit in the hundred of thousands.

· For each long trade you invest all your available cash. This gives an idea of the compounding power of Hawkeye. However, where Hawkeye is back-tested over a number of years, the transactions amounts end up huge – far more than most people would use for a single stock.

· For each short trade, you short to the value of your available cash. Once again, this gives a good idea of the power of shorting, but is not necessarily a strategy that most people would employ in real life.

· You actually get the price at which the arrow appeared. Once again, this is an idealised situation. We cannot simulate, for example, a situation where an on-line broker’s systems crash for an hour or so.

· Purchases do not affect the share price and you can purchase all the shares you want, at the price calculated in the simulation. Clearly, this is not true for every instrument. Be careful back-testing illiquid, closely held stocks.

How do I use the PhoenixAI System Simulator?

How do I compare the results of applying the system to a number of securities?

1) Set up a simulation by

a) Click the simulator button to open the simulator.

b) Enter a stock symbol (e.g. XJO.)

c) Choose the time frame (Daily, weekly etc.)

d) Select the date range.

e) Click the Tick button.

f) Select the system.

g) Select the sim and enter the amount of your initial deposit (bank).

h) Go to the Compare Tab

2) Open a watch list containing the stocks you wish to compare.

3) Click the Sync Play button.

4) The simulator will calculate statistics for all stocks in the watch list and display the results in the Compare Tab.

5) When the calculations are done, click the Sync Play button again.

Warnings

1) This is very computation-intensive. To avoid having it lock up your machine:

a) Choose a limited date range (e.g. 7 years for daily data.)

b) Disconnect from PhoenixAI first.

2) It may take several hours, depending on the size of your watch list.

Can I print the simulator results?

You can print the results on the following tabs

· GL - Current Statistics

· GL – Position Details

· GL – Positions Summary

In these tabs, Internet Explorer is used to display the results. By Right-clicking the mouse you can access a range of Internet Explorer functions, including Print.

To print the results in the Compare Tab, you need to export them to a spreadsheet first.

To do this

1) Select the Compare Tab.

2) On the Edit Menu, select Copy.

3) Go to the spreadsheet and Paste.

Can I export the simulator results to a spreadsheet?

To export the data in the Compare Tab:

1) Select the Compare Tab.

2) On the Edit Menu, select Copy.

3) Go to the spreadsheet and Paste.

There are two ways to export the data in the GL - Current Statistics, GL – Position Details or GL – Positions Summary tabs

Method 1

1) Go to the required tab

2) Right-click the mouse in the data area

3) Select Export to Microsoft Excel

Method 2

1) Go to the required tab

2) Right-click the mouse in the data area

3) Select Select All

4) Right-Click the mouse again

5) Select Copy

6) Go to the spreadsheet and Paste

What do the Tabs show?

What is the difference between a “Sys” and a “Sim”?

In brief, the “Sys” or “System” produces the signals and the “Sim” or “Simulator” applies the signals and calculates the statistics. You can apply the Hawkeye3.8 systems to a chart, where they will produce the same signals as the Hawkeye3.8 highlights. Sims can only be used with the system simulator.

For example, suppose you choose the Hawkeye 3.8 Standard system. Depending on whether you want to actually trade Long, Short or Both, you would use a different Sim

What does the System Tab show?

The System Tab shows the signals generated by the system and the dates and prices at which these signals occurred.

In the above example, the system is the “GL – Hawkeye 3.8 Active Trader Long Short Sys” with High Aggression and “Open and Pre-Close” Trading Style. It is applied to BHP, using data from 7-Feb – 2006.

The first signal (an Open Long position) was generated on 10-Oct-2006, at a price of $25.8050.

On 24-Oct – 2006, an Open Short and a Close Long signal were generated at a price of $27.8

What does the Simulation Tab show?

The Simulation Tab shows the simulated transactions based on the signals shown on the System Tab.

In this example, the “GL – Long Short Trading Sim” has been applied. The Initial deposit is $10,000. This means the first trade can have a value of up to $10,000.

The first transaction occurred on 10-Oct-2006. A long position was opened: a purchase of 387 BHP shares at $25.805 each, for a total value of $9,986.54. The Trader was left with $13.46 cash-in-hand.

The next day, 24-Oct-2006, those 387 shares were sold for $27.80 each: a total amount of $10,758.60. Immediately, a Short position was opened, involving 387 shares at $27.80 each. The amount of the transaction (and the trader’s exposure) was $10,758.60.

What does the Graphs Tab show?

The Graphs Tab has two parts. In the top section is a line chart of the stock (BHP in this case) with the signals marked.

OL – Open Long, CL – Close Long, OS – Open Short, CS – Close Short

The lower section shows three lines. The Pink line, the “Risk_Free_Return” represents the returns gained from investing at a fixed interest rate. This might be a bank account or a Cash Management Trust, for example.

The green line – “Buy_And_Hold” represents the returns obtained from buying the stock at the first opportunity, and keeping it – whatever the market does. In this case, the stock was bought on the first day for which there was data – 7-Feb-2006.

The blue line “Assets_04” represent the returns obtained by using the system. Returns are only calculated while the money is in the market. The calculation does not take into account any interest earned by the money while it lies in the bank or cash management trust between trades.

What does the Positions Tab show?

The “Positions” Tab shows the results of the simulated trades.

The Column headings mean

· Type - the type of trade – Long or Short.

· Quantity - the number of shares involved in the trade.

· Open Date –the date of the opening transaction

· Open Price – The price at which the transaction occurred

· Open Amount - the value of the shares when the trade is opened.

· Close Date –the date of the Closing transaction

· Close Price – The price at which the transaction occurred

· Close Amount - the value of the shares when the trade is closed.

· Gain/Loss +/- shows the profit or loss for the trade.

· Gain/Loss % shows the profit or loss for the trade as a percentage of the Opening Amount.

In this case, the first trade involved opening a Long Position on 10-10-2006 and closing it on 24-10-2006. During this time, the share price rose from 25.805 to 27.80, and the value of the shares held rose from $9,986.54 to $10,758.60 for a profit of $772.06, or 7.73%

What does the GL- Current Statistics Tab show?

This Tab shows a number of statistics useful in evaluating the Hawkeye 3.8.

How are the statistics calculated, and what is their significance?

Probability of outcome

This is the number of trades with a particular outcome, divided by the total number of trades. For example, the probability of a win is the number of wins divided by the total number of trades expressed as a percentage. This gives you an idea of how accurately the system predicts winning trades.

Profit/Loss %

On the GL – Current statistics and GL – Positions Summary tabs, this is calculated as the final total profit divided by the value of the first trade, expressed as a percentage. On the Compare tab, it is the final total profit divided by the deposit. With a successful system, this figure will be significantly higher than the profit from buying-and-holding the stock, or putting the money in the bank at the risk-free interest rate.

Max Profit/Loss per trade %

Even if a system has a high probability of winning trades, it is possible that your first few trades could involve losses. Use the Maximum Percentage Profit/Loss per trade to assess the chances of this happening. If the Max percentage Loss per trade is only 2%, then you can probably survive 50 losing trades in a row. Look at the Maximum Losing Streak to see how many losing trades in a row you are actually likely to get.

Annualised Profit %

The Annualised Percentage Profit (or loss) is the percentage profit multiplied by 365 and divided by the time range from the first to last trade (with that outcome.) The Annualise Percentage Profit allows you to compare systems operating over different date-ranges.

Estimated compounding ROR

The estimated compounding rate of return is the Percentage Profit/Loss multiplied by the total number of trades, multiplied by 365 and divided by the days in market. This statistics gives you an idea of how hard your money is working while it is in the market. All else being equal, a stock with fewer days in the market will have a higher Estimated Compounding ROR. Where two stocks spend the same time in the market and produce the same profit, the one with the higher number of trades will have the higher Estimated Compounding ROR