eMESA USER'S GUIDE

eMESA is an opening range breakout system. It dynamically computes the offset from tomorrow’s opening price at which a buy (or sell) stop should be placed. The offset is computed using a variety of factors, such as the current market volatility, the predicted direction of the swing, the position within the cycle, etc. These factors are automatically calculated and need no input from you. While eMESA is specifically intended for trading the S&P e-mini futures contract, it is a generic kind of system and useful for trading a variety of market instruments. It can trade a wide range of indices, such as the DOW and NASDAQ; ETFs such as the SPY, DIA and QQQ and even individual stocks.

eMESA uses data from daily bars. End-of-day data is, therefore, required. Intraday data, such as 5-minute bars or 30-minute bars, is not appropriate for use with eMESA. The day session data is obtained by appending "=2" to the symbol name. For example, the correct symbol for the June 2003 e-mini contract is ES M3=2.

To apply the eMESA trading system to your bar chart, start by right mouse clicking on the chart. In the subsequent dropdown menus, select ADD-ON STUDIES…..MESA SOFTWARE…..MESA TRADING SYSTEM. The trading signal appears at the lower righthand corner of your bar chart. It will read something like “Buy @ Tomorrow’s Open + 1.67534”.

Each day, after the close for the day, you will find the correct signal directly on your bar chart near the lower righthand corner. It will be something like “Buy @ tomorrow’s open + 3.15”. This is your signal to buy long. Tomorrow, when you get the opening price, say 976.65, you add the signal offset to get a trade price of 976.65. You then place your stop order to buy at 976.65. Actually, you (or your broker) will need to round to the nearest tick level to place the stop order. The opening price may change within the first five minutes or so. The opening is initially the opening tick price. Later, the official opening price is posted as the average of the opening range. It is the official opening price of the day that you should use as the basis of your stop order.

eMESA is always in the market, both long and short. If you are already in a long position, you should ignore the buy signals and hold your position, waiting for the next sell signal. When reversing your position from long to short, you will need to place a sell stop order for two contracts to effect the reversal. One contract closes the existing long position and the second contract establishes the new short position. Similarly, you will need to place a buy stop order for two contracts to effect a reversal from a short position to a long position. eMESA will reverse its position about twice a week on the average.

eMESA does not use a money management stop because it is a reversing system. If the market behaves adversely to your current position, eMESA will quickly reverse the position for you at the next open. You are protected from severe adverse moves intraday because of the automatic stop trading rules for the entire market when the market moves 5%, 10% or even 15% from the previous closing price.

eMESA can be back tested in eSignal to see how it has performed historically. eMESA contains EFS code for back testing. Perpetual Futures Contracts are best used for back testing because they show the longest span of continuous trading. The correct symbol for the e-mini perpetual contract is ES #F=2. You should change the number of shares to 50 (because the futures value is $50 per point) to get the correct backtest results in dollars.

To invoke the back test feature, right mouse click on your bar chart. In the ensuing dropdown menus, select FORMULAS…..back testing…..eMESA1.EFS. The new subgraph will have alternate bars of green and red. The green background indicates the period when eMESA was holding a long position and the red background indicates the period when eMESA was holding a short position. Tomorrow’s trading signal will also appear in the back testing subgraph. In this case, back testing knows your current position and, so, signals for trades in the same direction as the current position is suppressed.

Back testing also gives you a powerful set of tools to assess the performance of eMESA. To reach these tools, right mouse click on the chart. In the dropdown menus, click on TOOLS…..BACK TESTING and then click on the TEST button in the upper righthand corner of the back testing window. Once you do this, you then have access to five different kinds of analyses. These are: 1) Strategy Analysis, 2) Trades, 3) Trade Analysis, 4) Time Analysis and 5) Periodical Analysis.

You also have access to three different kinds of graphics studies. These are: 1) Equity Graphs, 2) Trade Graphs and 3) RunUp/Drawdown graphs.

The back test analyses and tests allow you to independently evaluate the performance of eMESA on the futures contract, EFS or stock of your choice.

In summary, eMESA is designed to be an automatic trading system that is very easy to use. You simply note the offset trading signal given at the end of the trading day. When you get the opening price tomorrow, you add (or subtract) the offset from the opening price and use that value as your trading position reversal stop order.