Robert Cocchiola, the author of the InterChart Tools indicator sets for NeuroShell Trader is scheduled to have an article in an upcoming issue of Technical Analysis of Stocks and Commodities magazine.  One of the discussion points in the article is that your trading algorithm (rules) and bar types need to be coordinated in order to maximize your equity curve.   He recently introduced the concept of optimizable Renko Bars that can vary the amount of dollars that change hands in up moves versus down moves before a new virtual Renko Bar is created.  In his new version of InterChart Tools 2, he extends that concept to consolidated bars in order to only trade meaningful price movement.  (Consolidated Bars indicators compute the price of a virtual bar which is formed from the combination of the most recent number of  bars identified in the "Bar Count" parameter.)

We created a simple Trading Strategy using Exponential Moving Average crossovers that shows the power of the Adaptive Consolidated Bars.  Adaptive Consolidated Bars indicators also combine the information from the most recent bars on a chart, but unlike the regular Consolidated Bars the Adaptive Consolidated Bars treat rising bars and falling bars independently.  The Adaptive Consolidated Bars offer the option of consolidating a different number of bars for rising prices as contrasted to the number of bars for falling prices. Since the function of a consolidated bar is to absorb noise and rising price jitter is often different from falling price jitter, the Adaptive Consolidated Bars permit an asymmetrical definition to accommodate this. 

In the Trading Strategy at the top of the chart we used an Exponential Moving Average crossover of the original Consolidated Bars.

Buy Long Conditions:

Cross Above (ExpAvg (Consolidated Bar Low), ExpAvg (Consolidated Bar Close))

Sell Short Conditions:

Cross Below (ExpAvg (Consolidated Bar High), ExpAvg (Consolidated Bar Close))

We set up the system to trade 75% of the account balance, which started out as $60,000, and used a margin of $8,500 and a Point Value of $100.

The out-of-sample Return on Trades was 30.4% compared to a percent change in price of -0.7 for buy and hold during the same period.

Trading Strategy #2 used the same account settings and substituted Adaptive Consolidated Bars in the Exponential Moving Averages.

The out-of-sample Return on Trades showed was 82.8% compared to the percent change in price of -0.7 for buy and hold.  Trading Strategy #2 used the same date ranges as the first Trading Strategy. 

See below to save on the upgrade or InterChart Tools 21!