automated-trading.ch

Stacked Imbalances Strategy

NinjaTrader 8 Strategy Published 21 Dec 2023 - Updated on 07 May 2024

PREMIUM

Summary

The Stacked Imbalances Strategy is a Premium mechanical strategy for the NinjaTrader 8 platform. It is a full-auto strategy that can be run on autopilot but in the same time it gives you the possibility to be extended with its built-in command buttons. The stacked imbalances strategy can be used to pass propfirms evaluation challenges

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Index

Prequisites Description Features Important Disclaimer Parameters Backtesting and Preferred Settings Download & Installation Instructions Frequently Asked Questions Release Notes User Comments & Feedback

Prequisites

To properly use this strategy you should have available the following prequisites

NinjaTrader 8. Click here to download
OrderFlow data enabled NinjaTrader account that can be obtained by either purchasing a lifetime NinjaTrader license or by using a license provided by one of our recommended trader funding programs:

We highly recommend

Description

The stacked imbalances strategy is both a trend-following and a reversal strategy. The strategy is based on the assumptions that stacked volume imbalances are a symptom of inherent inefficiencies in market micro-strucutre.

The strategy implements multiple imbalances based entry setups such as:

Trend Mode: Entering long when a ask-side stacked imbalance occurs, or entering short when a bid-side stacked imbalance occurs
Regression or Reversal Mode: Entering long when trapped sellers are detected on a long price reversal, or entering short when trapped buyers are detected on a short price reversal
Auto Mode: The auto mode will automatically switch between Trend and Reversal modes based on the analysis of prior day volume profile in relation to the current price action

The strategy aims to be profitable in the long term by generating a positive expected return determined by a win/loss ratio that is higher than 1.

The strategy can be used on a price based bar-type (Range or Ticks bars) or a time based bar-type. Refer to the preferred settings section to check out our suggested parameters on different instruments

So let's look at some entry examples:

Entering long on trend continutation mode

In this example, the strategy detected an ask-side stacked imbalance on the candle marked "1" which armed the strategy to go on a long trade. At this stage, the strategy will wait for a price action follow-through to execute the trade, which has happened on the "2" candle when the candle closed above the high of the previous candle. The trade was executed at the close of the "2" candle. The stop loss and take profit for this trade were set to 100$ with a quantity of 2 contracts on the MES Decembre 2023 contract

Entering trades on reversal mode

In this example the parameter Stacked Imbalances Entry Mode is set to the value Reversal which means when a buy side stacked imbalance occurs the strategy enters a short trade and when a sell side stacked imbalance occurs the strategy will enter a long trade.

On the above chart, we can see two examples of those reversal trades. The first one is a long trade that was entered following a bid-side stacked imbalance (candle marked with "1") followed by a red confirmation candle (marked "2"). This was a profitable trade since the imbalance were obviously high volume buy limit orders taking profits after a bearish trend, then price reversed up.

In the second trade few candles later we see the same scenario happening again but in the opposite direction/p>

Entering long on Trapped sellers signal

In this example we can see two long profitable trades, both are long trades that were entered after a trapped sellers signal was detected

In this example, only the Trapped Traders setup was enabled. This is why the other trend mode imbalances were not taken. On the first setup, on the candle "1" we can see a bid-side stacked imbalance on a green candle which means that there was either an agressive selling activity being trapped or a big volume of buy limit orders on those levels. The closing of this candle has armed the strategy to wait for a follow-through price action to go long.

The "2" candle has confirmed the entry setup signal and so the strategy entered a trade long making a profit with 2 contracts and 100$ 1:1 Take profit and Stop loss limits on the MCL 01-24 futures contract

On the second trade, the same scenario happened again, the only difference is that the "2" follow-through candle didn't occur directly after the setup signal but one candle later

"Dollar Cost Averaging" order management in action

When DCA is used as an order management strategy, the Imbalance strategy will increase the quantity of the open position at each closing candle in the winning direction in the hope of reaching the breakeven point and closing the position early in breakeven or slightly in profit

The above example illustrates this on three consecutive examples of short trades on a choppy trend.

The idea behind this is that if the price did pull back and went in the losing direction right after entering the trade, the strategy will try to exit as soon as possible by increasing the quantity and hope for a rapid breakeven. Off course this will not always work and sometimes this method will make the strategy exit early in loss because the stop loss was hit earlier than the take profit price due to increasing quantity

One should do many backtests on different market regimes, instruments and timeframes and have a sense of what is the impact of this method on the overall performance of the strategy on the long term

Strong imbalance signal but no follow-through

This example illustrates the importance of follow-through price action after the imbalance signals. In the image we see a strong sell side stacked imbalance which armed the strategy to enter a short trade.

we can see that there were no price action to confirm the imbalance signal. The price continued its movement upward and canceled the short signal

This example doesn't show actual trades. It is for explaining the idea behind follow-through price action

Features

The stacked imbalances strategy has a set of unique features:

Performant and In-house developed imbalances detection engine
No pending orders are placed: only market orders
Full-auto strategy that can be scaled into multiple instances
Can be run as a Semi-auto strategy using the automated trading interface on the Chart panel
Precise backtesting capabilities following NinjaTrader official best practices to obtain precise entry/exit backtesting on tick level
Robust In-house Order management library. Resistant to connection loss and works seamlessly on Rithmic accounts or NinjaTader brokerage accounts

Important Disclaimer

We strongly recommend that you never run your algorithmic trading systems on your hard-earned real money. You should always minimize your risk and run your strategies on trader funding programs so that the maximum amount your risk to lose is the monthly subscription fee you pay those programs.

Here are the trader funding programs that we recommend using, and that we use to run the Stacked Imbalance Strategy on:

Parameters

We try to keep the parameters to minimum. We only left the most important parameters to be set

General
Backtest Mode	This parameter is very important and should be used carefully. This parameter should be set to true (checked) whenever the strategy is run in Historical, Backtest, or Optimization modes. When running the strategy in Live Real-Time mode this parameter should be set to false (unchecked).
Daily Stop Trading Strategy	This parameter lets you chose which strategy to use to decide when to stop trade for the current trading session Net Winning Count:This option will stop trading when the net total count of winning trades during the current trading session is equal to the value of the parameter Stop @ Winning Count Net Losing Count:This option will stop trading when the net total count of losing trades during the current trading session is equal to the value of the parameter Stop @ Losing Count Profit Amount Reached:This option will stop trading when the net realized PnL of the current session in dollars is equal of greater than the value of the parameter Daily TakeProfit Target Trade Count Reached:This option will stop trading if the total trade count during the current trading session is equal to the value of the parameter Max Daily Trade Count, regardless whether those trades where profitable or not
Daily TakeProfit	The strategy will stop when the daily TakeProfit amount is reached after a position is closed. When set to 0, this parameter is ignored
Daily StopLoss	The strategy will stop when the daily StopLoss amount is reached after a position is closed. The value of this parameter is positive. For example if the value is set to 300, the strategy will stop when the Realized PnL is lower or equal to -300$. When set to 0, this parameter is ignored
Max Daily Trade Count	This parameter is used only if the selected Daily Stop Trading Strategy is Trade Count Reached
Stop @ Winning Count	This parameter is used only if the selected Daily Stop Trading Strategy is Net Winning Count. This method will stop trading if the net number of winning trades is equal to the value of this parameter
Stop @ Losing Count	This parameter is used only if the selected Daily Stop Trading Strategy is Net Losing Count. This method will stop trading if the net number of losing trades is equal to the value of this parameter
Swings Period	Swings are higher lows,higher highs, lower highs and lower lows. After each price bar close, a swing can be detected. But just after that, the next bar can cancel the swing at the previous bar by creating a new swing of the same type. Or this can happen on the second bar, or the third, etc... The swing period sets how many bars is enough to seperate two swings of the same type. The more you increase this parameter, the more you decrease the number of swings overall. The more you decrease this parameter, the more you increase the number of overall swings. I prefer to use the value of 3 or 4 for this parameter.
Draw Price Swings	This parameter will enable/disable the drawing of swings on the chart. Swings will always be analyzed and processed regardless of this parameter which only affect visibility and render.
Buy Imbalances Color	Color of Bullish stacked imbalance zones to draw on the chart
Sell Imbalances Color	Color of Bearish stacked imbalance zones to draw on the chart
Entry Setup
Trade Time	This parameter is very important and can be delicate in some cases. This parameter is used to determine the time intervals in which the strategy is allowed to place trades. The time zone that should be used while setting this parameter value should be the Time Zone of the machine on which NinjaTrader is executed. Here are some examples for more clarifications: Machine in New York Time Zone and trade time set to RTH (regular trading hours): 09:30-16:00 Machine in Switzerland Time Zone and trade time set to RTH: 15:30-22:00 Machine in New York Time Zone and trade time set to both RTH and ETH (extended trading hours) with gaps to avoid volatile periods: 00:01-08:00,09:55-15:55,18:01-23:59 In this example, there are two things to notice: The time intervals should be set in increasing order even though the last interval 18:01-23:59 is the first interval that occurs for a new day session. The time interval were cut at midnight to avoid issues when stepping into a new day Machine in Switzerland Time Zone and trade time set to both RTH and ETH (extended trading hours) with a gap to avoid volatile period: 00:01-14:00,15:55-21:55
Quantity Strategy	This parameter sets how the quantity should be set for a Trade Fixed Quantity: This will set a fixed quantity. Before the trade is open, the risk is evaluated and if the risk calculated is higher than the value of the parameter Max Risk Currency, the trade is skipped and will not be open Risk Adjusted: this option will make the contract size for each trade dynamic and calculated based on the StopLoss price and the Max Risk Currency value
Max Qty	This parameter sets the maximum allowed quantity when the Risk Adjusted method is selected. This option is very useful since some propfirms has order quantity limits that can cause the account to be invalidated
Trade Entry Mode	This parameter sets the entry mode following an entry setup, it can have 2 possible values: Immediate: The strategy opens a position immediately after the bar close when an entry setup occurs. Wait For Confirmation: When this method is selected, the strategy will wait for a candle to close higher than the setup candle for a long setup, and lower than the previous candle for a short setup. This mode can be useful to avoid cases where the price reverses against the entry setup
Order Qty	This parameter sets the quantity of each trade when the Fixed Quantity method is selected. In the case of increasing orders quantity executed by the order management mechansim, this parameter is also used for each increase in quantity.
Enable Trapped Traders Entry	This parameter enables/disables entering on trapped traders signals when a stacked imbalance occurs on a reversal candle followed by a follow-through price action. The follow-through price action is when the price breaks above/below the high/low of the imbalance candle
Enable Stacked Imbalances Entry	This parameter enables/disables trend following entry signal when a stacked imbalance occurs followed by a follow-through price action. The follow-through price action is when the price breaks above/below the high/low of the imbalance candle
Stacked Imbalances Entry Mode	This parameter is related the above parameter Enable Stacked Imbalances Entry and it sets the trade entry mode Trend Following: This mode will enter a trade in the direction of the stacked imbalance in the hope of price trend continuation Reversal: This mode will enter a trade in the opposite direction of the imbalance in the hope of profiting from a reversal in price Auto: This mode will define a trend bias based on the analysis of the position of the current price in regard of the prior day Volume Profile For each RTH trading session (9:30-16:15 EST) the volume profile is calculated and will be used for defining entry mode for the next day. Then in the current trading session, the strategy will determine the entry direction based on the following logic: If the current price is above the Value Area High (VaH) of the previous Volume Profile (VP), the entry mode is set to Long Only If the current price is below the Value Area Low (VaL) of the previous Volume Profile (VP), the entry mode is set to Short Only If the current price is between the VaL and VaH of the previous VP, the entry mode is set to Reversal If the previous volume profile is a double distribution and the price is between the two volume profile components, the entry mode is set to Trend: Long or Short
VWAP Filter	This parameter enables/disables the VWAP filter for entries. For Long entries, the price should be above the VWAP and for short entries the price should be below the VWAP
Swing Filter	This parameter enables/disables the swings trend filter for entries. This swing filter will analysis consecutive swing pivots and will apply the following filter for entries: Long entries are allowed if at least 2 consecutive low swings occur prior to the entry setup Short entries are allowed if at least 2 consecutive high swings occur prior to the entry setup
Imbalances
Min Imbalance Ratio	This parameter sets the minimum ratio between the diagonal bid/ask volumes to consider an imbalance
Min Imbalance Volume	This parameter sets the minimum volume value on the strong side (bid/ask) to consider an imbalance
Max Imbalance Gap (Ticks)	This parameter sets a gap tolerance between stacked imbalance levels. For example, multiple imbalances that are not perfectly stacked (having a number of tick gaps between them) will be considered a cluster of stacked imbalances if the this parameter is higher than one
Min Stacked Imbalance Count	This parameter sets the minimum number of imbalances in a cluster of stacked imbalances, generally this should be 3 or more
Order Management
Order Management Strategy	ATM Strategy: This method will trigger an ATM strategy and will entirely delegate the management of positions to this ATM strategy The ATM (Automated Trading Management) strategy is a mechanism provided by NinjaTrader that can be accessed from the Chart Panel When this method is selected, you should specifiy the template name of the ATM strategy to use and the positions opened will be managed by your custom ATM strategy Dollar Cost Averaging (Grid): This method will increase the order quantity each time a swing is formed in losing side of the trade, which creates a dollar cost averaging effect on the position average price. We also call this a Grid method Trail Stop on Swings: This method will trail the stop loss of the position each time a swing is formed in the winning direction of the trade None: This selection means the stop loss defined by the Stop Loss Currency parameter will be used
ATM Strategy Template Name	This parameter is available when the ATM Strategy order management method is selected. This parameter specifies which ATM strategy to use. All the available custom ATM templates will be automatically shown in the drop down box
On Opposite Signal	Breakeven: This parameter sets the behaviour of the strategy whenever an opposite signal occurs to breakeven Close Position: This parameter sets the behaviour of the strategy whenever an opposite signal occurs to immediately closing the position Do Nothing: This parameter sets the behaviour of the strategy whenever an opposite signal occurs to nothing
StopLoss Strategy	Bar High Low: When this value is set as the stop loss strategy, the StopLoss price is set to the Imbalance candle low/high levels. The overall StopLoss price will also be determined by the previous Stop Loss Currency parameter. Hence, the position will be closed when any of those StopLoss levels is first hit Last Swing: When this value is set as the stop loss strategy, the StopLoss price is set to the previous Price Swing high/low level. The overall StopLoss price will also be determined by the previous Stop Loss Currency parameter. Hence, the position will be closed when any of those StopLoss levels is first hit Fixed Currency Value: This selection means only the stop loss defined by the Max Stop Loss Currency parameter will be used
TakeProfit Strategy	Fixed Currency Value: This selection means the take profit price will be based on the fixed value of the parameter Take Profit Currency 1:1 Win Loss Ratio: The take profit price will be calculated based on the stop loss price with a 1:1 ratio 0.5:1 Win Loss Ratio: The take profit price will be calculated based on the stop loss price with a ratio 2:1 Win Loss Ratio: The take profit price will be calculated based on the stop loss price with a 2:1 ratio 3:1 Win Loss Ratio: The take profit price will be calculated based on the stop loss price with a 3:1 ratio 4:1 Win Loss Ratio: The take profit price will be calculated based on the stop loss price with a 4:1 ratio 5:1 Win Loss Ratio: The take profit price will be calculated based on the stop loss price with a 5:1 ratio 6:1 Win Loss Ratio: The take profit price will be calculated based on the stop loss price with a 6:1 ratio
Max Stop Loss Currency	This sets the max risk in dollars for the open position.
Take Profit Currency	This sets the take profit in dollars for the open position. If you use the Fixed Currency Value as a take profit strategy, the value of this parameter will be used. If not, make sure to set this parameter to a high value to not interfer with other ratio based strategies
DCA (Grid) Parameters
Breakeven Profit Shift	When the DCA method is selected as a position management mode, this parameter will modify the definition of a breakeven and adds a bit of profit to it. This is useful to cover the cost of commissions when closing the grid in breakeven
Grid Size to Breakeven	When the DCA method is selected as a position management mode, this parameter will set the number of order increases required to consider closing the position in breakeven
Command Buttons
The strategy allows to manually execute some commands in case you want to manually intervene. The commands buttons are added to the Chart Trader panel, make sure to show it on your active chart

Arm/Disarm Buttons	The Arm Long/Disabled Long and Arm Short/Disabled Short buttons can manually activate or deactivate entering trades long or short. By default those two toggle buttons are enabled meaning the strategy is armed to enter both long and short trades. Toggling the button to the disable will restrain the strategy to enter a trade in the disabled direction. This can be useful if you have a directional bias or conviction about the direction of the market
Entry Mode Switch Button	The Entry Mode button allows to switch the entry mode of the strategy between Trend and Reversal
Close Position Button	The Close position button will immediately flatten the position on the active instrument on the active Chart. This can be useful if you want to exit a trade without having to affect the strategy or restart it. After closing the position, the strategy will continue to function normally and look for new trades to take
Increase Qty Button	The increase Qty button allows to increase the quantity of the current active position. The increase value is defined by the parameter Order Qty. This can be useful if you want to manually dollar cost average the position or to double the quantity of the position after a confirmation signal on the winning side of the trade

Backtesting and Preferred Settings

Here I will try to periodically list backtests with different risk appetit. But before that here are some remarks regarding backtesting

Commissions are included in the backtests to get as realistic results as possible. The commission schema used is NinjaTrade Lifetime license commissions schema
The Trade Time setting used in these backtests is adapted to UTC+1 Timezone which is 00:01-21:58. The EST equivalent will be 00:01-15:58,18:01-23:59
At automated-trading.ch we run very precise backtests due to the following 2 factors

We are following the NinjaTRader official guide on how to achieve precise intrabar granularity backtesting by using additional tick level DataSeries See here for more info
We are only using Market Orders instead of Pending Orders in both real-time and becktest modes.

To run this strategy in "Strategy Analyzer - Optimization" mode, make sure you select the Volumetric Data Series type, or otherwise no orders will be sent.

MES April 24

April 2024

Parameters

Summary

Analysis

Download & Installation Instructions

The strategy can be downloaded and run on Backtest, Playback, Optimization and live modes for free without the need for an active subscription. Nevertheless, a license number that you can get for free is required for running the strategy on Live Real-time mode.

To obtain the license simply Signup and then get your license on the billing page

To download and install the strategy follow the instructions below

Click on the below download button to download the Imbalances Strategy file
This file was downloaded 234 times. Last download was 1 day ago
Import the downloaded .zip file into NinjaTrader using the import NinjaScript menu item

Next, open a new chart window while making sure the Tick Replay tickbox is checked

If you don't see the Tick Replay check box, go to Tools->Options->Market Data and enable Show Tick Replay

After installing the strategy and opening a new Chart window you should add the strategy to the chart.

Click to enlarge
After adding the strategy to the chart, the strategy will be run on Historical data loaded in the chart.
When the Histocial data run is done, the strategy will switch to Real-Time mode and will add the license panel controls to the Chart Trader Panel
Make sure to display the Chart Trader panel on your active NinjaTrader Chart

Copy/Paste your license in the text box as shown in the image below. Your license can be found on the billing main page. Make sure to create an account or login first
Click on the Check License Button

At this step the strategy will check the License and activate/deactivate trading according to the license correctness
If the license is correctly submitted you will see the "Check License" button turned to green, and the next verification date next to your email. License check is only required once. Until the next verification date.

At this stage, the strategy is ready to be run in all modes of execution

Frequently Asked Questions

General

Do I need a VPS to run this strategy?

Using a VPS is good but not imperative. I run this strategy on a ~$6 VPS Windows instance on Hetzner. Check out our resources page to get a discount through our affiliate LINK

Can I run multiple instances of this strategy on the same account?

Yes! You can run multiple instances of this strategy on the same account but each instance should be run on a unique instrument

You can't run multiple instances on the same account on the same instrument because as you know NinjaTrader will aggregate orders in one position per instrument per account

Can I use a Trade Copier with this strategy?

Yes! you can use a copier, but a better solution would be to run multiple instances of the strategy. The purchased license allows you to run unlimited instances on multiple machines

Can I use this strategy to pass Apex or any other trader funding program?

Yes! The strategy is designed for that exact purpose. It will work seamlessly on Rithmic, NinjaTrader brokerage, Tradovate or any other provider connected to your NinjaTrader platform

Is this a hands-off, full-automatic strategy or does it need manual intervention and monitoring?

I designed this strategy to be full-automatic strategy. Yet, it can be used as a semi-auto strategy to enter trades and then let you manage those trades manually using its command buttons

Why should I consider full automated-trading instead of discretionary manual trading?

You should consider full auto-trading over manual trading for many reasons:

Trading 24/7: Automated trading strategies don't need to go to the bathroom nor it needs to take a break
Better execution, faster and more precise
Eliminate psychology and sentiments
Can be scaled to dozens if not hundreds of instances
Automated trading can generate truly "passive" income, manual trading is just another stressful job

Can I ask you to modify/add a new feature to this strategy?

Yes, If you have an idea that you believe can improve the performance of this strategy, I will be more then happy to hear from you. Please use the contact page to send me a message

Will I get the source code of the strategy when I download it?

No, the source code of the strategy is protected for copyright reasons

Billing

Can I cancel my subscription at any time?

Yes, you can cancel your subscription from the account page at any time to prevent future payments. We cannot refund the unused portion of your subscription, but you will be able to use your subscription even after cancelling for the remainder of the billing cycle.

Is there a free trial period?

No, we don't offer a trial subscription plan. But you can download and test the strategy in backtest and playback modes before subscribing

What is the refund policy?

We do not offer full or partial refunds, but you may cancel your subscription at any time to stop future payments.

Skeptics

What is your background? Aren't you just another fake trading guru trying to sell me garbage?

I have been a professional software developer since 2010. I have been developing automated trading strategies since 2012, for my self for fun and profit and also been developing strategies for clients all over the world

I have always been invlolved professionaly in the business of Finance and investing, I have worked for trading brokers and investment banking.

I'm not a marketer, and I don't hire someone else to develop my strategies.

If this strategy is profitable why are you selling it?

This strategy has been profitable for me on the long run with ups and downs, especially when it is run on multiple insturments. But the question remains pertinent, why I'm selling it?

The answer is I'm not selling it, I'm renting it to generate an additional income and diversify my different sources of income besides what this strategy can generate. Which you should also do. You should not rely on one source of income to reach financial independance, the key is diversification.

Why the strategy uses Market orders and no Pending orders?

Lets examine pros and cons of pending orders

Pros:

Best price execution when using limit orders
Protection against losses in case of connectivity issues

Cons:

Can get rejected on high price volatility
Delay between request to place the order and when it gets placed. Price volatility can cause the order to be rejected and the price to run away
Requires management: any opposite orders need to be canceled
Visible to the broker, placed orders can be manipulated

After years of developing strategies I reached the conclusion that market orders are better suited for the context of automated trading.

The main drawback of using pending orders is the fact that they can be rejected which is very hard to manage especially in a volatile environment

In all our strategies, we use market orders even for take profit and stop loss. Lets examine the pros and cons of market orders

Pros:

Guarantee of execution reagrdless of volatility conditions
Invisible to the broker before they get submited
No risk of being rejected which means better protection for stop loss
Faster execution than pending orders

Cons:

In the case of the connection being lost with the broker, the strategy will be unable to send market orders

Remark: MIT (market if touched) orders in NinjaTrader are a solid alternative to pending orders if you really want to use pending orders

It is known that backtesting on NinjaTrader is not accurate. How accurate are your backtests?

We are following the NinjaTrader official guide on how to achieve precise intrabar granularity backtesting by using additional tick level DataSeries See here for more info

Don't take my word for it. Test it yourself, at the end of each trading day, run a backtest of the strategy on that day and compare it with the live trades the strategy made during the day.