Category Archives: Must Know

Free Trend Following System with Indicator Tracker

Free Trend Following System

Here is a free Trend Following System that I read about on Andreas Clenow’s www.followthetrend.com website and from his book.  This is my interpretation of the rules as they were explained.  However the main impetus behind this post wasn’t to provide a free trading system, but to show how you can program a simple system with a complete input interface and program a tracking indicator.   You might be asking what is a “tracking indicator?”  We use a tracking indicator to help provide insight to what the strategy is doing and what it might do in the near future.  The indicator can let you know that a new signal is imminent and also what the risk is in a graphical form.  The indicator can also plot the indicators that are used in the strategy itself.

Step 1:  Program the Strategy

This system is very simple.  Trade on a 50 day Donchian in the direction of the trend and use a 3 X ATR trailing stop.  So the trend is defined as bullish when the 50-day exponential moving average is greater than the 100-day exponential moving average.  A bearish trend is defined when the 50-day is below the 100-day.  Long positions are initiated on the following day when a new 50 day high has been established and the trend is bullish.  Selling short occurs when the trend is bearish and a new 50 day low is establish.  The initial stop  is set to 3 X ATR below the high of the day of entry.  I tested using a 3 X ATR stop initially from the entryPrice for protection on the day of entry, but it made very little difference.  As the trade moves more into your favor, the trailing stop ratchets up and tracks the higher intra-trade extremes.  Eventually once the market reverses you get stopped out of a long position 3 X ATR from the highest high since you entered the long trade.  Hopefully, with a big winner.   The Clenow model also uses a position sizing equation that uses ATR to determine market risk and $2000 for the allocated amount to risk.  Size= 2000 / ATR – this equation will normalize size across a portfolio of markets.

Here is the code.

//Based on Andreas Clenow's description from www.followingthetrend.com
//This is my interpretation and may or may not be what Andreas intended
//Check his books out at amazon.com
//
inputs: xAvgShortLen(50),xAvgLongLen(100),hhllLen(50),buyTrigPrice(h),shortTrigPrice(l),risk$Alloc(2000);
inputs: atrLen(30),trailATRMult(3);
vars: avg1(0),avg2(0),lXit(0),sXit(0),posSize(0),atr(0);

avg1  = xaverage(c,xAvgShortLen);
avg2  = xaverage(c,xAvgLongLen);

atr = avgTrueRange(atrLen);
posSize = maxList(1,intPortion(risk$Alloc/(atr*bigPointValue)));

If marketPosition <> 1 and avg1 > avg2 and buyTrigPrice = highest(buyTrigPrice,hhllLen) then buy posSize contracts next bar at open;
If marketPosition <> -1 and avg1 < avg2 and shortTrigPrice = lowest(shortTrigPrice,hhllLen) then sellshort posSize contracts next bar at open;

If marketPosition = 0 then
Begin
	lXit = o - trailATRMult * atr ;
	sXit = o + trailATRMult * atr; 
//	if c < lXit then Sell currentcontracts contracts next bar at open;
//	If c > sXit then buyToCover currentcontracts contracts next bar at open;
end;

If marketPosition = 1 then 
begin
	lXit = maxList(lXit,h - trailATRMult * atr);
	If c < lXit then sell currentContracts contracts next bar at open;
end;

If marketPosition = -1 then 
begin
	sXit = minList(sXit,l + trailATRMult * atr);
	If c > sXit then buyToCover currentContracts contracts next bar at open;
end;
Cleanow Simple Trend Following System

What I like about this code is how you can use it as a template for any trend following approach.  All the variables that could be optimized are included as inputs.  Many may not know that you can actually change the data series that you want to use as your signal generator right in the input.  Here I have provided two inputs : buyTrigPrice(H), shortTrigPrice(L).  If you want to use the closing price, then all you need to do is change the H and L to C.  The next lines of code performs the calculations needed to calculate the trend.  PosSize is then calculated next.  Here I am dividing the variable risk$Alloc by atr*bigPointValue.  Basically I am taking $2000 and dividing the average true range over the past 30 days multiplied by the point value of the market being tested.  Always remember when doing calculations with $s you have to convert whatever else you are using into dollars as well.  The ATR is expressed in the form of a price difference.  You can’t divide dollars by a price component, hence the multiplication by bigPointValue.  So now we have the trend calcuation and the position sizing taken care of and all we need now is the trend direction and the entry levels.  If avg1 > avg2 then the market is in a bullish posture, and if today’s High = highest(High,50) days back then initiate a long position with posSize contracts at the next bar’s openNotice how I used the keyword contracts after posSize.  This let’s TS know that I want to trade more than one contract.  If the current position is flat I set the lXit and sXit price levels to the open -/+ 3 X ATR.  Once a position (long or short) is initiated then I start ratcheting the trailing stop up or down.  Assuming a long position, I compare the current lXit and the current bar’s HIGH- 3 X ATR and take the larger of the two valuesSo lXit always moves up and never down.  Notice if the close is less than lXit I used the keyword currentContracts and contracts in the directive to exit a long trade.  CurrentContracts contains the current number of contracts currently long and contracts informs TS that more than one contract is being liquidated.  Getting out of a short position is exactly the same but in a different direction.

Step 2: Program the System Tracking Indicator

Now you cant take the exact code and eliminate all the order directives and use it to create a tracking indicator.  Take a look at this code:

//Based on Andreas Clenow's description from www.followingthetrend.com
//This is my interpretation and may or may not be what Andreas intended
//Check his books out at amazon.com
//
inputs: xAvgShortLen(50),xAvgLongLen(100),hhllLen(50),buyTrigPrice(h),shortTrigPrice(l);
inputs: atrLen(30),trailATRMult(3);
vars: avg1(0),avg2(0),lXit(0),sXit(0),posSize(0),atr(0),mp(0);

avg1  = xaverage(c,xAvgShortLen);
avg2  = xaverage(c,xAvgLongLen);

atr = avgTrueRange(atrLen);

plot1(avg1,"stXavg");
plot2(avg2,"ltXavg");

If avg1[1] > avg2[1] and buyTrigPrice[1] = highest(buyTrigPrice[1],hhllLen) then mp = 1;
If avg1[1] < avg2[1] and shortTrigPrice[1] = lowest(shortTrigPrice[1],hhllLen) then mp = -1;

If mp = 0 then
Begin
	lXit = o - trailATRMult * atr ;
	sXit = o + trailATRMult * atr;
end;

If mp = 1 then 
begin
	lXit = maxList(lXit,h - trailATRMult * atr);
	plot3(lXit,"LongTrail");
	If c < lXit then mp = 0;
end;

If mp = -1 then 
begin
	sXit = minList(sXit,l + trailATRMult * atr);
	plot4(sXit,"ShortTrail");
	If c > sXit then mp = 0;
end;

However, you do need to keep track if the underlying strategy is long or short and you can do this by pretending you are the computer and using the mp variable.  You know if yesterdays avg1 > avg2 and HIGH[1] = highestHigh(HIGH[1],50), then a long position should have been initiated.  If this happens just set mp to 1You set mp to -1 by checking the trend and lowestLow(LOW[1],50).  Once you know the mp or implied market position then you can calculate the lXit and sXit.  You will always plot the moving averages to help determine trend direction, but you only plot the lXit and sXit when a position is on.  So plot3 and plot4 should only be plotted when a position is long or short.

Here is a screenshot of the strategy and tracking indicator.

Notice how the Yellow and Cyan plots follow the correct market position.  You will need to tell TS not to connect these plot lines when they are not designed to be plotted.

Turn-Off Auto Plot Line Connection

Do this for Plot3 and Plot4 and you will be good to go.

I hope you found this post useful.  Also don’t forget to check out my new book at Amazon.com.  If you really want to learn programming that will help across different platforms I think it would be a great learning experience.

 

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A Christmas Project for TradeStation Day-Traders

Here is a neat little day trader system that takes advantage of what some technicians call a “CLEAR OUT” trade.  Basically traders push the market through yesterday’s high and then when everybody jumps on board they pull the rug out from beneath you.  This strategy tries to take advantage of this.  As is its OK, but it could be made into a complete system with some filtering.  Its a neat base to start your day-trading schemes from.

But first have you ever encountered this one when you only want to go long once during the day.

I have logic that examines marketPosition, and if it changes from a non 1 value to 1 then I increment buysToday.  Since there isn’t an intervening bar to establish a change in marketPosition, then buysToday does not get incremented and another buy order is issued.  I don’t want this.  Remember to plot on the @ES.D.

Here’s how I fixed it and also the source of the CLEAR-OUT day-trade in its entirety.  I have a $500 stop and a $350 take profit, but it simply trades way too often.  Have fun with this one – let me now if you come up with something.

inputs: clearOutAmtPer(0.1),prot$Stop(325),prof$Obj(500),lastTradeTime(1530);

vars: coBuy(false),coSell(false),buysToday(0),sellsToday(0),mp(0),totNumTrades(0);

If d <> d[1] then
Begin
	coBuy = false;
	coSell = false;
	buysToday = 0;
	sellsToday = 0;
	totNumTrades = totalTrades;
end;

 
mp = marketPosition;
If mp[1] <> mp and mp = 1 then buysToday = buysToday + 1;
If mp[1] <> mp and mp = -1 then sellsToday = sellsToday + 1;

If h > highD(1) + clearOutAmtPer * (highD(1) - lowD(1)) then coSell = true;
If l < lowD(1) - clearOutAmtPer * (highD(1) - lowD(1)) then coBuy = true;

If totNumTrades <> totalTrades and mp = 0 and mp[1] = 0 and positionProfit(1) < 0 and entryPrice(1) > exitPrice(1) then buysToday = buysToday + 1;
If totNumTrades <> totalTrades and mp = 0 and mp[1] = 0 and positionProfit(1) < 0 and entryPrice(1) < exitPrice(1) then sellsToday =sellsToday + 1;

totNumTrades = totalTrades;

If buysToday = 0 and t < lastTradeTime and coBuy = true then buy ("COBuy") next bar at lowD(1) + minMove/priceScale stop;
If sellsToday = 0 and t < lastTradeTime and coSell = true then sellShort ("COSell") next bar at highD(1) - minMove/priceScale stop;

setStopLoss(prot$stop);
Setprofittarget(prof$Obj);
setExitOnClose;
Look at lines 22 and 23 - the entry/exit same bar fix

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Testing Keith Fitschen’s Bar Scoring with Pattern Smasher

Keith’s Book

Thanks to MJ for planting the seed for this post.  If you were one of the lucky ones to get Keith’s “Building Reliable Trading SystemsTradable Strategies that Perform as They Backtest and Meet Your Risk-Reward Goals”  book by John Wiley 2013 at the list price of $75 count yourself lucky.  The book sells for a multiple of that on Amazon.com.  Is there anything earth shattering in the book you might ask?  I wouldn’t necessarily say that, but there are some very well thought out and researched topics that most traders would find of interest.

Bar Scoring

In his book Keith discusses the concept of bar-scoring.  In Keith’s words, “Bar-scoring is an objective way to classify an instrument’s movement potential every bar.  The two parts of the bar-scoring are the criterion and the resultant profit X days hence.”  Keith provides several bar scoring techniques, but I highlight just one.

Keith broke these patterns down into the relationship of the close to the open, and close in the upper half of the range; close greater than the open and close in the lower half of the range.  He extended the total number of types to 8 by adding the relationship of the close of the bar to yesterdays bar.

The PatternSmasher code can run through a binary representation

for each pattern and test holding the position for an optimizable number of days.  It can also check for long and short positions.  The original Pattern Smasher code used a for-loop to create patterns that were then compared to the real life facsimile.  In this code it was easier to just manually define the patterns and assign them the binary string.

if c[0]> c[1] and c[0] > o[0] and c[0] > (h[0] + l[0])/2  then patternString = "----";
if c[0]> c[1] and c[0] > o[0] and c[0] < (h[0] + l[0])/2  then patternString = "---+";
if c[0]> c[1] and c[0] < o[0] and c[0] > (h[0] + l[0])/2  then patternString = "--+-";
if c[0]> c[1] and c[0] < o[0] and c[0] < (h[0] + l[0])/2  then patternString = "--++";
if c[0]< c[1] and c[0] > o[0] and c[0] > (h[0] + l[0])/2  then patternString = "-+--";
if c[0]< c[1] and c[0] > o[0] and c[0] < (h[0] + l[0])/2  then patternString = "-+-+";
if c[0]< c[1] and c[0] < o[0] and c[0] > (h[0] + l[0])/2  then patternString = "-++-";
if c[0]< c[1] and c[0] < o[0] and c[0] < (h[0] + l[0])/2  then patternString = "-+++";
Manual Pattern Designations

Please check my code for any errors.  Here I go through the 8 different relationships and assign them to a Patter String.  “-+++”  represents pattern number (7 ) or type (7 + 1 = 8 – my strings start out at 0).  You can then optimize the test pattern and if the test pattern matches the actual pattern, then the Pattern Smasher takes the trade  on the opening of the next bar and holds it for the number of days you specify.  You an also designate long and short positions in the code.  Here I optimized the 8 patterns going long and short and holding from 1-4 days.

Here is the equity curve!  Remember these are Hypothetical Results with $0 commission/slippage and historic performance is not necessarily indicative of future results.  Educational purposes only!  This is tested on ES.D

Play around with the code and let me know if you find any errors or any improvements.

input: patternTests(8),orbAmount(0.20),LorS(1),holdDays(0),atrAvgLen(10),enterNextBarAtOpen(true);
  
var: patternTest(""),patternString(""),tempString("");
var: iCnt(0),jCnt(0);
array: patternBitChanger[4](0);
   
{written by George Pruitt -- copyright 2019 by George Pruitt
 This will test a 4 day pattern based on the open to close
 relationship.  A plus represents a close greater than its
 open, whereas a minus represents a close less than its open.
 The default pattern is set to pattern 14 +++- (1110 binary).
 You can optimize the different patterns by optimizing the
 patternTests input from 1 to 16 and the orbAmount from .01 to
 whatever you like.  Same goes for the hold days, but in this
 case you optimize start at zero.  The LorS input can be
 optimized from 1 to 2 with 1 being buy and 2 being sellshort.}
  
patternString = "";
patternTest = "";
 
patternBitChanger[0] = 0;
patternBitChanger[1] = 0;
patternBitChanger[2] = 0;
patternBitChanger[3] = 0;
 
value1 = patternTests - 1;
 
 
//example patternTests = 0 -- > 0000
//example patternTests = 1 -- > 0001
//example patternTests = 2 -- > 0010
//example patternTests = 3 -- > 0011
//example patternTests = 4 -- > 0100
//example patternTests = 5 -- > 0101
//example patternTests = 6 -- > 0110
//example patternTests = 7 -- > 0111

if(value1 >= 0) then
begin
 
    if(mod(value1,2) = 1) or value1 = 1 then patternBitChanger[0] = 1;
    value2 = value1 - patternBitChanger[0] * 1;
  
    if(value2 >= 7) then begin
        patternBitChanger[3] = 1;
        value2 = value2 - 8;
    end;
 
    if(value2 >= 4) then begin
        patternBitChanger[2] = 1;
        value2 = value2 - 4;
    end;
    if(value2 = 2) then patternBitChanger[1] = 1;
end;

for iCnt = 3 downto 0  begin
    if(patternBitChanger[iCnt] = 1) then
    begin
        patternTest = patternTest + "+";
    end
    else
    begin
        patternTest = patternTest + "-";    
    end;
end;
 
 patternString = "";
  
if c[0]> c[1] and c[0] > o[0] and c[0] > (h[0] + l[0])/2  then patternString = "----";
if c[0]> c[1] and c[0] > o[0] and c[0] < (h[0] + l[0])/2  then patternString = "---+";
if c[0]> c[1] and c[0] < o[0] and c[0] > (h[0] + l[0])/2  then patternString = "--+-";
if c[0]> c[1] and c[0] < o[0] and c[0] < (h[0] + l[0])/2  then patternString = "--++";
if c[0]< c[1] and c[0] > o[0] and c[0] > (h[0] + l[0])/2  then patternString = "-+--";
if c[0]< c[1] and c[0] > o[0] and c[0] < (h[0] + l[0])/2  then patternString = "-+-+";
if c[0]< c[1] and c[0] < o[0] and c[0] > (h[0] + l[0])/2  then patternString = "-++-";
if c[0]< c[1] and c[0] < o[0] and c[0] < (h[0] + l[0])/2  then patternString = "-+++";

 
if(barNumber = 1) then print(elDateToString(date)," pattern ",patternTest," ",patternTests-1);
if(patternString = patternTest) then
 begin
 
//   print(date," ",patternString," ",patternTest); //uncomment this and you can print out the pattern
	if (enterNextBarAtOpen) then
	begin
		if(LorS = 2) then SellShort("PatternSell") next bar on open;
		if(LorS = 1) then buy("PatternBuy") next bar at open;
	end
	else
	begin
		if(LorS = 2) then SellShort("PatternSellBO") next bar at open of tomorrow - avgTrueRange(atrAvgLen) * orbAmount stop;
    	if(LorS = 1) then buy("PatternBuyBO") next bar at open of tomorrow + avgTrueRange(atrAvgLen) * orbAmount stop;
    end;
	

end;
 
if(holdDays = 0 ) then setExitonClose;
if(holdDays > 0) then
begin
    if(barsSinceEntry = holdDays and LorS = 2) then BuyToCover("xbarLExit") next bar at open;
    if(barsSinceEntry = holdDays and LorS = 1) then Sell("xbarSExit") next bar at open;
end;
Bar Scoring Testing Template
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How To Program A Ratcheting Stop in EasyLanguage

30 Minute Break Out utilizing a Ratchet Stop [7 point profit with 6 point retention]
I have always been a big fan of trailing stops.  They serve two purposes – lock in some profit and give the market room to vacillate.  A pure trailing stop will move up as the market makes new highs, but a ratcheting stop (my version) only moves up when a certain increment or multiple of profit has been achieved.  Here is a chart of a simple 30 minute break out on the ES day session.  I plot the buy and short levels and the stop level based on whichever level is hit first.

When you program something like this you never know what is the best profit trigger or the best profit retention value.  So, you should program this as a function of these two values.  Here is the code.

inputs: ratchetAmt(6),trailAmt(6);
vars:longMult(0),shortMult(0),myBarCount(0);
vars:stb(0),sts(0),buysToday(0),shortsToday(0),mp(0);
vars:lep(0),sep(0);

If d <> d[1] then
Begin
	longMult = 0;
	shortMult = 0;
	myBarCount = 0;
	mp = 0;
	lep = 0;
	sep = 0;
	buysToday = 0;
	shortsToday = 0;
end;

myBarCount = myBarCount + 1;

If myBarCount = 6 then  // six 5 min bars = 30 minutes
Begin
	stb = highD(0);  //get the high of the day
	sts = lowD(0);   //get low of the day
end;

If myBarCount >= 6 and buysToday + shortsToday = 0 and high >= stb then 
begin
	mp = 1;  //got long - illustrative purposes only
	lep = stb;

end;
If myBarCount >=6 and buysToday + shortsToday = 0 and low <= sts then begin
	mp = -1; //got short
	sep = sts;
end;

If myBarCount >=6 then 
Begin
	plot3(stb,"buyLevel");
	plot4(sts,"shortLevel");
end;
If mp = 1 then buysToday = 1;
If mp =-1 then shortsToday = 1;


// Okay initially you want a X point stop and then pull the stop up
// or down once price exceeds a multiple of Y points
// longMult keeps track of the number of Y point multipes of profit
// always key off of lep(LONG ENTRY POINT)
// notice how I used + 1 to determine profit
// and -  1 to determine stop level
If mp = 1 then 
Begin
	If h >= lep + (longMult + 1) * ratchetAmt then	longMult = longMult + 1;
	plot1(lep + (longMult - 1) *  trailAmt,"LE-Ratchet");
end;

If mp = -1 then 
Begin
	If l <= sep - (shortMult + 1) * ratchetAmt then	shortMult = shortMult + 1;
	plot2(sep - (shortMult - 1) *  trailAmt,"SE-Ratchet");
end;
Ratcheting Stop Code

So, basically I set my multiples to zero on the first bar of the trading session.  If the multiple = 0 and you get into a long position, then your initial stop will be entryPrice + (0 – 1) * trailAmt.  In other words your stop will be trailAmt (6 in this case) below entryPrce.  Once price exceeds or meets 7 points above entry price, you increment the multiple (now 1.)  So, you stop becomes entryPrice + (1-1) * trailAmt – which equals a break even stop.  This logic will always move the first stop to break even.  Assume the market moves 2 multiples into profit (14 points), what would your stop be then?

stop = entryPrice + (2 – 1) * 6 or entryPrice + 6 points.

See how it ratchets.  Now you can optimized the profit trigger and profit retention values.  Since I am keying of entryPrice your first trailing stop move will be a break-even stop.

This isn’t a strategy but it could very easily be turned into one.

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MULTI-TIME FRAME – KEEPING TRACK OF DISCRETE TIME FRAMES

Just a quick post here.  I was asked how to keep track of the opening price for each time frame from our original Multi-Time Frame indicator and I was answering the question when I thought about modifying the indicator.  This version keeps track of each discrete time frame.  The original simply looked back a multiple of the base chart to gather the highest highs and lowest lows and then would do a simple calculation to determine the trend.  So let’s say its 1430 on a five-minute bar and you are looking back at time frame 2.  All I did was get the highest high and lowest low two bars back and stored that information as the high and low of time frame 2.  Time frame 3 simply looked back three bars to gather that information.  However if you tried to compare these values to a 10-minute or 15-minute chart they would not match.

In this version, I use the modulus function to determine the demarcation of each time frame.  If I hit the border of the time frame I reset the open, high, low and carry that value over until I hit the next demarcation.  All the while collecting the highest highs and lowest lows.  In this model, I am working my way from left to right instead of right to left.  And in doing so each time frame is discrete.

Let me know which version you like best.

 

Inputs:tf1Mult(2),tf2Mult(3),tf3Mult(4),tf4Mult(5);



vars: mtf1h(0),mtf1l(0),mtf1o(0),mtf1c(0),mtf1pvt(0),diff1(0),
      mtf2h(0),mtf2l(0),mtf2o(0),mtf2c(0),mtf2pvt(0),diff2(0),
      mtf3h(0),mtf3l(0),mtf3o(0),mtf3c(0),mtf3pvt(0),diff3(0),
      mtf4h(0),mtf4l(0),mtf4o(0),mtf4c(0),mtf4pvt(0),diff4(0),
      mtf0pvt(0),diff0(0);

If barNumber = 1 then
Begin
	mtf1o = o;
	mtf2o = o;
	mtf3o = o;
	mtf4o = o;
end;


If barNumber > 1 then
Begin

	Condition1 =  mod((barNumber+1),tf1Mult) = 0;
	Condition2 =  mod((barNumber+1),tf2Mult) = 0;
	Condition3 =  mod((barNumber+1),tf3Mult) = 0;
	Condition4 =  mod((barNumber+1),tf4Mult) = 0;
	
	mtf1h = iff(not(condition1[1]),maxList(high,mtf1h[1]),high);
	mtf1l = iff(not(condition1[1]),minList(low,mtf1l[1]),low);
	mtf1o = iff(condition1[1],open,mtf1o[1]);
	mtf1c = close;

	
	mtf0pvt = (close + high + low) / 3;
	diff0 = close - mtf0pvt;
	
	mtf2h = iff(not(condition2[1]),maxList(high,mtf2h[1]),high);
	mtf2l = iff(not(condition2[1]),minList(low,mtf2l[1]),low);
	mtf2o = iff(condition2[1],open,mtf2o[1]);
	mtf2c = close;
	
	
	mtf1pvt = (mtf1h+mtf1l+mtf1c) / 3;
	diff1 = mtf1c - mtf1pvt;
		
	mtf2pvt = (mtf2h+mtf2l+mtf2c) / 3;
	diff2 = mtf2c - mtf2pvt;
		
	mtf3h = iff(not(condition3[1]),maxList(high,mtf3h[1]),high);
	mtf3l = iff(not(condition3[1]),minList(low,mtf3l[1]),low);
	mtf3o = iff(condition3[1],open,mtf3o[1]);
	mtf3c = close;
	
	mtf3pvt = (mtf3h+mtf3l+mtf3c) / 3;
	diff3 = mtf3c - mtf3pvt;
	
	mtf4h = iff(not(condition4[1]),maxList(high,mtf4h[1]),high);
	mtf4l = iff(not(condition4[1]),minList(low,mtf4l[1]),low);
	mtf4o = iff(condition4[1],open,mtf4o[1]);
	mtf4c = close;

	mtf4pvt = (mtf4h+mtf4l+mtf4c) / 3;
	diff4 = mtf4c - mtf4pvt;
	
	
	Condition10 = diff0 > 0;
	Condition11 = diff1 > 0;
	Condition12 = diff2 > 0;
	Condition13 = diff3 > 0;
	Condition14 = diff4 > 0;
	 
	If condition10 then setPlotColor(1,Green) else SetPlotColor(1,Red);
	If condition11 then setPlotColor(2,Green) else SetPlotColor(2,Red);
	If condition12 then setPlotColor(3,Green) else SetPlotColor(3,Red);
	If condition13 then setPlotColor(4,Green) else SetPlotColor(4,Red);
	If condition14 then setPlotColor(5,Green) else SetPlotColor(5,Red);
	
	condition6 = condition10 and condition11 and condition12 and condition13 and condition14;
	Condition7 = not(condition10) and not(condition11) and not(condition12) and not(condition13) and not(condition14);

	If condition6 then setPlotColor(7,Green);
	If condition7 then setPlotColor(7,Red);
	
	If condition6 or condition7 then plot7(7,"trend");

	Plot6(5,"line");	
	Plot1(4,"t1");
	Plot2(3,"t2");
	Plot3(2,"t3");
	Plot4(1,"t4");
	Plot5(0,"t5"); 

end;
Multi-Time Frame with Discrete Time Frames
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Programming a Multi-Time Frame Indicator in EasyLanguage

Take a look at this indictor.

MTF indicator EasyLanguage

This indicator plots five different time frames as a stacked chart. The circles or dots at the bottom represent the difference between the closing price of each time frame and its associated pivot price  [(high + low + close)/3].  The value plotted at 4, in this case, represents the 5 minute time frame.  The 10-minute time frame is represented by the plot at 3 and so on.  The value plotted at 7 represents the composite of all the time frames.  It is only turned on if all times are either red or green.  If there is a disagreement then nothing is plotted.

This indicator is relatively simple even though the plot looks complicated.  You have to make sure the indicator is plotted in a separate pane.  The y – axis has 0 and 8 as its boundaries.  All you have to do is keep track of the highest highs/lowest lows for each time frame.  I use a multiplier of the base time frame to create different time frames.  TimeFrame1Mult = 2 represents 10 minutes and TimeFrame2Mult = 3 and that represents 15 minutes.  The indicator shows how strong the current swing is across five different time frames.  When you start getting a mix of green and red dots this could indicate a short term trend change.  You can use the EasyLanguage to plug in any indicator over the different time frames.  Here’s the code.  Just email me with questions or if you see a mistake in the coding.

{EasyLanguage MultiTime Frame Indicator)
 written by George Pruitt - copyright 2019 by George Pruitt
 }


Inputs:tf1Mult(2),tf2Mult(3),tf3Mult(4),tf4Mult(5);

vars: mtf1h(0),mtf1l(0),mtf1o(0),mtf1c(0),mtf1pvt(0),diff1(0),
      mtf2h(0),mtf2l(0),mtf2o(0),mtf2c(0),mtf2pvt(0),diff2(0),
      mtf3h(0),mtf3l(0),mtf3o(0),mtf3c(0),mtf3pvt(0),diff3(0),
      mtf4h(0),mtf4l(0),mtf4o(0),mtf4c(0),mtf4pvt(0),diff4(0),
      mtf0pvt(0),diff0(0);


If barNumber > 1 then
Begin
	
	mtf0pvt = (close + high + low) / 3;
	diff0 = close - mtf0pvt;
	
	mtf1h = highest(h,tf1Mult);
	mtf1l = lowest(l,tf1Mult);
	mtf1c = close;
	
	mtf1pvt = (mtf1h+mtf1l+mtf1c) / 3;
	diff1 = mtf1c - mtf1pvt;
	
	mtf2h = highest(h,tf2Mult);
	mtf2l = lowest(l,tf2Mult);
	mtf2c = close;
	
	mtf2pvt = (mtf2h+mtf2l+mtf2c) / 3;
	diff2 = mtf2c - mtf2pvt;
		
	mtf3h = highest(h,tf3Mult);
	mtf3l = lowest(l,tf3Mult);
	mtf3c = close;
	
	mtf3pvt = (mtf3h+mtf3l+mtf3c) / 3;
	diff3 = mtf3c - mtf3pvt;
	
	mtf4h = highest(h,tf4Mult);
	mtf4l = lowest(l,tf4Mult);
	mtf4c = close;

	mtf4pvt = (mtf4h+mtf4l+mtf4c) / 3;
	diff4 = mtf4c - mtf4pvt;
	
	Condition10 = diff0 > 0;
	Condition11 = diff1 > 0;
	Condition12 = diff2 > 0;
	Condition13 = diff3 > 0;
	Condition14 = diff4 > 0;
	 
	If condition10 then setPlotColor(1,Green) else SetPlotColor(1,Red);
	If condition11 then setPlotColor(2,Green) else SetPlotColor(2,Red);
	If condition12 then setPlotColor(3,Green) else SetPlotColor(3,Red);
	If condition13 then setPlotColor(4,Green) else SetPlotColor(4,Red);
	If condition14 then setPlotColor(5,Green) else SetPlotColor(5,Red);
	
	condition6 = condition10 and condition11 and condition12 and condition13 and condition14;
	Condition7 = not(condition10) and not(condition11) and not(condition12) and not(condition13) and not(condition14);

	If condition6 then setPlotColor(7,Green);
	If condition7 then setPlotColor(7,Red);
	
	If condition6 or condition7 then plot7(7,"trend");

	Plot6(5,"line");	
	Plot1(4,"t1");
	Plot2(3,"t2");
	Plot3(2,"t3");
	Plot4(1,"t4");
	Plot5(0,"t5"); 

end;
MTF in EasyLanguage

 

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Working Around 0:00 Time in EasyLanguage

Let’s say you want to carve out a special session of data from the 24-hour data session – maybe keep track of the highest high and lowest low from 9:00 p.m. to 4:00 p.m. the next day.  How would you do it?

To start with you would need to reset the highest high and lowest low values each day.  So you could say if the current bars time > StartTime and the prior bars time <= StartTime then you know the first bar of your specialized session has started.  So far so good.  If the time falls outside the boundaries of your special session then you want to ignore that data -right?  What about this:

If t >StartTime and t <= EndTime then…

{Remember EasyLanguage uses the end time stamp for its intraday bars}

Sounds good.  But what happens when time equals 2300 or 11:00 p.m.?  You want to include this time in your session but the if-then construct doesn’t work.    2300 is greater than 2100 but it’s not less than 1600 so it doesn’t pass the test.  The problems arise when the EndTime < StartTime.  It really isn’t since the EndTime is for the next day, but the computer doesn’t know that.  What to do?  Here is a quick little trick to help you solve this problem:  use a special offset if the time falls in a certain range.

EndTimeOffset = 0 ;

If t >=StartTime and t <= 2359 then EndTimeOffset= 2400 – EndTime;

Going back to our example of the current time of 2300 and applying this little bit of code our EndTimeOffset would be equal to 2400 – 1600 or 800.  So if t = 2300, you subtract 800 and get 1500 and that works.

2300 – 800 = 1500 which is less than 1600 –> works

What if t = 300 or 3:00 a.m.  Then EndTimeOffset = 0; 300 – 0 is definitely less than 1600.

That solves the problem with the EndTime.  Or does it?  What if EndTime is like 1503?  So you have 2400 – 1503 which is something like 897.  What if time is 2354 and you subtract 897 you get 1457 and that still works since its less than 1503.  Ok, what about if EndTime = 1859 then you get 2400 – 1859 which equals 541.  If time  = 2354 and you subtract 541 you get 1843 and that still works.

Is there a similar problem with the StartTime?  If t = 3:00 a.m. then it is not greater than our StartTime of 2100, but we want it in our window.  We need another offset.  This time we want to make a StartTime offset equal to 2400 when we cross the 0:00 timeline.  And then reset it to zero when we cross the StartTime timeline.  Let’s see if it works:

t = 2200 : is t > StartTime?  Yes

t=0002 : is t > StartTime?  No, but should be.  We crossed the 0000 timeline so we need to add 2400 to t and then compare to StartTime:

t + 2400 = 2402 and it is greater than StartTime.  Make sense?

Probably not but look at the code:

inputs: StartTime(numericSimple),EndTime(numericSimple),StartTimeOffSet(numericRef),EndTimeOffSet(numericRef);

If t >= StartTime and t[1] < StartTime then StartTimeOffSet = 0;
EndTimeOffSet = 0;
If t >= StartTime and t <= 2359 then EndTimeOffSet = 2400 - EndTime;
If t < t[1] then StartTimeOffSet = 2400;

TimeOffsets = 1; 
Function To Calculate Start and End Time Offsets

Here is an the indicator code that calls the function:

vars: startTimeWindow(2100),endTimeWindow(1600);
vars: startOffSet(0),endOffSet(0);
Value1 = timeOffSets(startTimeWindow,endTimeWindow,startOffSet,endOffSet);

If t+startOffset > startTimeWindow and t-endOffSet <=endTimeWindow then
Begin
	
end
Else
Begin
	print(d," ",t," outside time window ");
end;
Calling TimeOffsets Function

Hope this helps you out.  I am posting this for two reasons: 1) to help out and 2) prevent me from reinventing the wheel every time I have to use time constraints on a larger time frame of data.

StartTimeWindow = 2300

EndTimeWindow = 1400

Time = 2200, FALSE

Time = 2315, TRUE [2315 > 2300 and 2315 – (2400 -1400) <1400)]

This code should work with all times.  Shoot me an email if you find it doesn’t.

 

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Calculating Position Size with Optimal F

I had a reader of the blog ask how to use Optimal F.  That was really a great question.  A few posts back I provided the OptimalFGeo function but didn’t demonstrate on how to use it for allocation purposes.  In this post, I will do just that.

I Have Optimal F – Now What?

From Ralph Vince’s book, “Portfolio Management Formulas”, he states: “Once the highest f is found, it can readily be turned into a dollar amount by dividing the biggest loss by the negative optimal f.  For example, if our biggest loss is $100 and our optimal f is 0.25, then -$100/ 0.25 = $400.  In other words, we should bet 1 unit for every $400 we have in our stake.”

Convert Optimal F to dollars and then to number of shares

In my example strategy, I start out with an initial capital of $50,000 and allow reinvestment of profit or loss.  The protective stop is set as 3 X ATR(10).  A fixed $2000 profit objective is also utilized.  The conversion form Optimal F to position size is illustrated by the following lines of code:

//keep track of biggest loss
biggestLoss = minList(positionProfit(1),biggestLoss);
//calculate the Optimal F with last 10 trades.
OptF = OptimalFGeo(10);
//reinvest profit or loss
risk$ = initCapital$ + netProfit;
//convert Optimal F to $$$
if OptF <> 0 then numShares = risk$ / (biggestLoss / (-1*OptF));
Code snippet - Optimal F to Position Size
  1. Keep track of biggest loss
  2. Calculate optimal F with OptimalFGeo function – minimum 10 trades
  3. Calculate Risk$ by adding InitCapital to current NetProfit (Easylanguage keyword)
  4. Calculate position size by dividing Risk$  by the quotient of biggest loss and (-1) Optimal F

I applied the Optimal F position sizing to a simple mean reversion algorithm where you buy on a break out in the direction of the 50-day moving average after a lower low occurs.

Code listing:

vars: numShares(0),initCapital$(50000),biggestLoss(0),OptF(0),risk$(0);


//keep track of biggest loss
biggestLoss = minList(positionProfit(1),biggestLoss);
//calculate the Optimal F with last 10 trades.
OptF = OptimalFGeo(10);
//reinvest profit or loss
risk$ = initCapital$ + netProfit;
//convert Optimal F to $$$
if OptF <> 0 then numShares = risk$ / (biggestLoss / (-1*OptF));
numShares =  maxList(1,numShares);
//if Optf <> 0 then print(d," ",t," ",risk$ / (biggestLoss / (-1*OptF))," ",biggestLoss," ",optF);

if c > average(c,50) and low < low[1] then Buy numShares shares next bar at open + .25* range stop;

setStopPosition;
setProfitTarget(2000);

setStopLoss(3*avgTrueRange(10)*bigPointValue);
Strategy Using Optimal F

I have included the results below.  At one time during the testing the number of contracts jumped up to 23.  That is 23 mini Nasdaq futures ($20 * 7,300) * 23.  That’s a lot of leverage and risk.  Optimal doesn’t  always mean the best risk mitigation.  Please let me know if you find any errors in the code or in the logic.

 

Here is the ELD that incorporates the Strategy and the Function.USINGOPTIMALF

 

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A Bar Scoring System – inspired by Keith Fitschen

In Keith’s wonderful book, “Building Reliable Trading Sytems”, he reveals several algorithms that classify an instruments’ movement potential.  In the part of the book that is titled Scoring by a Bar Type Criterion, he describes eight different two-day patterns that involve 3 different criteriaEight different Bar-Types

He looks at the relationship between today’s open and today’s close, today’s close and yesterday’s close, and today’s close in terms of the day’s range.  Bar-Types 1 to 4 all have the close of today >= close of yesterday.  Bar-Types 5 to 8 have close of today < close of yesterday.

I wanted to program this into my TradeStation and do some research to see if the concept is valid.  In his book, Keith tested a lot of different stocks and commodities.  In this post, I just test the ES, US, and Beans.  This form of research can be used to enhance an existing entry technique.

Here is how I defined the eight different bar types:

array : barTypeArray[8](false); 

midRange = (h + l)/2;

barTypeArray[0] = c >= c[1] and c > o and c >= midRange;
barTypeArray[1] = c >= c[1] and c > o and c <  midRange;
barTypeArray[2] = c >= c[1] and c < o and c >= midRange;
barTypeArray[3] = c >= c[1] and c < o and c <  midRange;
barTypeArray[4] = c <  c[1] and c > o and c >= midRange;
barTypeArray[5] = c <  c[1] and c > o and c <  midRange;
barTypeArray[6] = c <  c[1] and c < o and c >= midRange;
barTypeArray[7] = c <  c[1] and c < o and c <= midRange;
Defining Eight Different Bar Types

I used a brute force approach by creating an 8-element array of boolean values.  Remember EasyLanguage uses a 0 index.  If the two -day pattern matches one of the eight criteria I assign the element a true value.  If it doesn’t match then a false value is assigned.  I use an input value to tell the computer which pattern I am looking for.  If I choose Bar-Type[0] and there is a true value in that array element then I take a trade.   By providing this input I can optimize over all the different Bar-Types.

Input : 
	BarTypeNumber(0), // which bar type
	buyOrSell(1),   //1 to buy 2 to sell
	numDaysToHold(2); //how many days to hold position




For cnt = 0 to 7 //remember to start at 0
Begin
	If barTypeArray[cnt] = true then whichBarType = cnt;
end;

If whichBarType = BarTypeNumber then 
begin
 	if buyOrSell = 1 then buy this bar on close;
	if buyOrSell = 2 then sellshort this bar on close;
end;
Loop Thru Array to find Bar Type

Here are some results of looping through all eight Bar-Types, Buy and Sell, and holding from 1 to 5 days.

ES – ten – year results – remember these are hypothetical results with no commission or slippage.

Here’s what the equity curve looks like.   Wild swings lately!!

Beans:

Bonds

Keith was right – look at the Bar Category that bubbled to the top every time – the most counter-trend pattern.  My Bar-Type Number 7  is the same as Keith’s 8.  Here is the code in its entirety.

{Bar Scoring by Keith Fitschen
 from his book "Building Reliable Trading Systems" 2013 Wiley}
 
Input : BarTypeNumber(0),
	 buyOrSell(1),
	 numDaysToHold(2);
	 
vars: midRange(0);
array : barTypeArray[8](false); 

midRange = (h + l)/2;

barTypeArray[0] = c >= c[1] and c > o and c >= midRange;
barTypeArray[1] = c >= c[1] and c > o and c <  midRange;
barTypeArray[2] = c >= c[1] and c < o and c >= midRange;
barTypeArray[3] = c >= c[1] and c < o and c <  midRange;
barTypeArray[4] = c <  c[1] and c > o and c >= midRange;
barTypeArray[5] = c <  c[1] and c > o and c <  midRange;
barTypeArray[6] = c <  c[1] and c < o and c >= midRange;
barTypeArray[7] = c <  c[1] and c < o and c <= midRange;

vars: whichBarType(0),cnt(0);

For cnt = 0 to 7
Begin
	If barTypeArray[cnt] = true then whichBarType = cnt;
end;

If whichBarType = BarTypeNumber then 
begin
 	if buyOrSell = 1 then buy this bar on close;
	if buyOrSell = 2 then sellshort this bar on close;
end;

If barsSinceEntry = numDaysToHold then
begin
	If marketPosition = 1 then sell this bar on close;
	If marketPosition =-1 then buytocover this bar on close;
end;
Bar Scoring Example

Keith’s book is very well researched and written.  Pick one up if you can find one under $500.  I am not kidding.  Check out Amazon.

 

 

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George’s EasyLanguage BarsSince Function – How Many Bars Since?

BarsSince Function in EasyLanguage

Have you ever wondered how many bars have transpired since a certain condition was met?  Some platforms provide this capability:

If ExitFlag and (c crosses above average within 3 bars) then

TradeStation provides the MRO (Most Recent Occurrence) function that provides a very similar capability.  The only problem with this function is that it returns a -1 if the criteria are not met within the user provided lookback window.  If you say:

myBarsSinceCond = MRO(c crosses average(c,200),20,1) < 3

And c hasn’t crossed the 200-day moving average within the past twenty days the condition is still set to true because the function returns a -1.

I have created a function named BarsSince and you can set the false value to any value you wish.  In the aforementioned example, you would want the function to return a large number so the function would provide the correct solution.  Here’s how I did it:

inputs: 
	Test( truefalseseries ), 
	Length( numericsimple ), 
	Instance( numericsimple ) , { 0 < Instance <= Length}
	FalseReturnValue(numericsimple); {Return value if not found in length window}
	 
value1 = RecentOcc( Test, Length, Instance, 1 ) ;
If value1 = -1 then 
	BarsSince = FalseReturnValue
Else
	BarsSince = value1;
BarsSince Function Source Code

And here’s a strategy that uses the function:

inputs: profTarg$(2000),protStop$(1000),
rsiOBVal(60),rsiOSVal(40),slowAvgLen(100),
fastAvgLen(9),rsiLen(14),barsSinceMax(3);

Value1 = BarsSince(rsi(c,rsiLen) crosses above rsiOSVal,rsiLen,1,999);
Value2 = BarsSince(rsi(c,rsiLen) crosses below rsiOBVal,rsiLen,1,999);

If c > average(c, slowAvgLen) and c < average(c,fastAvgLen) and Value1 <barsSinceMax then buy next bar at open;

If c < average(c, slowAvgLen) and c > average(c,fastAvgLen) and Value2 <barsSinceMax then sellshort next bar at open;

setStopLoss(protStop$);
setProfitTarget(profTarg$)
Strategy Utilizing BarsSince Function

The function requires four arguments:

  1. The condition that is being tested [e.g.  rsi > crosses above 30]
  2. The lookback window [rsiLen – 14 bars in this case]
  3. Which occurrence [1 – most recent; 2- next most recent; etc…]
  4. False return value [999 in this case; if condition is not met in time]

A Simple Mean Reversion Using the Function:

Here are the results of this simple system utilizing the function.

Optimization Results:

I came up with this curve through a Genetic Optimization:

The BarsSince function adds flexibility or fuzziness when you want to test a condition but want to allow it to have a day (bar) or two tolerance.  In a more in-depth analysis, the best results very rarely occurred on the day the RSI crossed a boundary.   Email me with questions of course.

 

 

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