Category Archives: EasyLanguage

Updated Pattern Smasher in EasyLanguage

Update To Original Pattern Smasher

What will you learn : string manipulation, for-loops, optimization

Before proceeding I would suggest reading my original post on this subject.    If you believe the relationship of the last few bars of data can help determine future market direction, then this post will be in you wheel house.  Another added benefit is that you will also learn some cool EasyLanguage.

Original post was limited to four day patterns!

This version is limitless (well not really, but pretty close).  Let’s stick with the original string pattern nomenclature (+ + – – : two up closes followed by two down closes.)  Let’s also stick with our binary pattern representation:

Pattern # 2^3 2^2 2^1 1
3 0 0 1 1
4 0 1 0 0
5 0 1 0 1
6 0 1 1 1

Remember a 0 represents a down close and a 1 represents an up close.  We will deviate from the original post by doing away with the array and stick with only strings (which are really just arrays of characters.)  This way we won’t have to worry about array manipulation.

How to create a dynamic length string pattern

This was the difficult part of the programming.  I wanted to be able to optimize 3, 4 and 5 day patterns and I wanted to control this with using just inputs.  I discovered that pattern three is different in a three day pattern than it is in a four day pattern: in a three day pattern it is 011 or – + + and in a four day pattern it is 0011 or – – + +.  Since I am counting 0’s as down closes, pattern #3 depends on the ultimate size of the pattern string.  No worries I will have eventually have another version where I utilize a different value for down closes and we can then have holes in our string patterns.  But I digress – so to differentiate the patterns based on the pattern length I included a maxPatternLen input.  So if maxPatternLen is three and we are trying to match pattern #3 then we will be looking for 011 and not 0011.  That was an easy fix.  But then I wanted to build a string pattern based on this input and the pattern number dynamically.  Here is some psuedo code on how I figured it out.


{Psuedo code to translate pattern number into binary number}
patternNumber = 3
maxPatternLen = 3

numBits = 0 // stick with binary representation
testValue = 0 // temporary test value
numBits = maxPatternLen-1 // how many bits will it take to get to the
// center of - or numBits to represent max
// number of patterns or 2^numBits
currentBit =numBits // start wit current bit as total numBits

value1 = patternOptTest // value1 represents current pattern number
testString = "" // build test string from ground up


for icnt = numBits downto 0 //building string from left to right
begin // notice keyword downto
if power(2,currentBit) > value1 then // must use power function in EL
begin // if the very far left bit value >
testString = testString + "-" // patten number then plug in a "-"
end
else
begin // else plug in a "+" and deccrement by
testString = testString + "+" // that bits value - if its the 3rd bit
value1 = value1 - power(2,currentBit)// then decrement by 8
end;
currentBit = currentBit - 1 // move onto the next bit to the right
end;
Pseudocode for Binary Representation of Pattern #

Now if you want to optimize then you must make sure your pattern number search space or range can be contained within maxPatternLen.  For example, if you want to test all the different combinations of a four day pattern, then your maxPatternLen would naturally be four and you would optimize the pattern number from 0 to 15.  Don’t use 1-16 as I use zero as the base.  A five day pattern would include the search space from 0 – 31.  The rest of the code was basically hacked from my original post.   Here is the rest of the code to do optimizations on different length pattern strings.  Notice how I use strings, for-loops and comparisons.

input: buyPattern("+++-"),sellPattern("---+"),patternOptimize(True),patternOptTest(7),maxPatternLen(3),patternOptBuySell(1),
stopLoss$(2000),profitTarg$(2000),holdDays(5);
vars: buyPatternString(""),sellPatternString(""),buyPatternMatch(""),sellPatternMatch(""),numBits(0),testValue(0),currentBit(0),
remainder(0),value(0),icnt(0),testString(""),numCharsInBuyPattern(0),numCharsInSellPattern(0);
vars:okToBuy(false),okToSell(false);

buyPatternMatch = buyPattern;
sellPatternMatch = sellPattern;
numCharsInBuyPattern = strLen(buyPatternMatch);
numCharsInSellPattern = strLen(sellPatternMatch);

If patternOptimize then
begin
numBits = 0;
testValue = 0;
value = maxPatternLen;
numBits = maxPatternLen-1;
currentBit =numBits;
remainder = patternOptTest;
testString = "";
for icnt = numBits downto 0
begin
if power(2,currentBit) > remainder then {note this originally had value1 instead of remainder}
begin
testString = testString + "-";
end
else
begin
testString = testString + "+";
remainder = remainder - power(2,currentBit);
end;
currentBit = currentBit - 1;
end;
numCharsInBuyPattern = maxPatternLen;
numCharsInSellPattern = maxPatternLen;
if patternOptBuySell = 1 then
Begin
buyPatternMatch = testString;
sellPatternMatch = "0";
end;
If patternOptBuySell = 2 then
Begin
buyPatternMatch = "0";
sellPatternMatch = testString;
end;
end;


buyPatternString = "";
sellPatternString = "";

For icnt = numCharsInBuyPattern-1 downto 0
Begin
If close[icnt] >= close[icnt+1] then buyPatternString = buyPatternString + "+";
If close[icnt] < close[icnt+1] then buyPatternString = buyPatternString + "-";
end;
For icnt = numCharsInSellPattern-1 downto 0
Begin
If close[icnt] >= close[icnt+1] then sellPatternString = sellPatternString + "+";
If close[icnt] < close[icnt+1] then sellPatternString = sellPatternString + "-";
end;


okToBuy = false;
okToSell = false;

if buyPatternMatch <> "" then
If buyPatternString = buyPatternMatch then okToBuy = true;
If buyPatternMatch = "" then
okToBuy = true;
If sellPattern <> "" then
If sellPatternString = sellPatternMatch then okToSell = true;
If sellPatternMatch = "" then
okToSell = true;

If okToBuy then buy next bar at open;
If okToSell then sellshort next bar at open;

If marketPosition = 1 and barsSinceEntry > holdDays then sell next bar at open;
If marketPosition = -1 and barsSinceEntry > holdDays then buytocover next bar at open;

setStopLoss(stopLoss$);
setProfitTarget(profitTarg$);

If lastBarOnChart then print(d," ",buyPatternMatch);
Final Version of New Pattern Smasher

Also see how I incorporate a profit target and protective stop.  I use the built in BarsSinceEntry function to count the number of days I am in a trade so I can utilize a time based exit.  Here is an interesting equity curve I developed using a two day pattern ( – –) to go long.

Register on the website and I will email you an ELD of the improved Pattern Smasher.  Or just shoot me an email.

 

 

Making Trading Decisions on Current Month’s Profit/Loss

Keeping track of intra-month profit or loss

In real time trading I have noticed that once you reach a certain loss for the month its best, sometimes, to circle the wagons and quit trading until the beginning of the next month.  This concept works best for very short term or day trade algorithms, as its very easy to get started back up.  You can do this with Trend Following, but you must build a logical and replicable process for re-entering existing positions.  Let’s assume a trading algorithm whose averaging losing month is $1500 and you are currently down $2000 – what are the chances that you will revert to the mean or draw down further?  Probably 50/50.  Who knows you might turn around and actually make money by month’s end.  If you review a track record of a hedge fund manager, trader, or algorithm and they show a bar chart of monthly returns and there sticking out like a sore thumb is a big down bar, that kind of makes you think that could happen again.  If you can control the monthly downside without sacrificing the existing Profit:DrawDown ratio, then why not do it.

Sample Code To Monitor IntraMonth $P/L

if month(date) <> month(date[1]) then
Begin
begMonthProf = netProfit;
print(d," ",t," ",begMonthProf);
canTrade = true;
end;
Capture Beginning Of Month Net Profit

Here I am comparing the month of the current bar against the month of the prior bar.  If they are not equal, then we have a new month.  Store the netProfit in the variable begMonthProf.  All you have to do is compare the current bar’s netProfit to begMonthProf and make a decision.  Here is some code:

Making a Trading Decision Based on Monthly $P/L

		If dayOfMonth(date) > 15 and begMonthProf - netProfit >= intraMonthMaxLoss then canTrade = false;
If Down MaxLoss for Month and Past Mid-Month - Quit Trading

If the day of the month is greater than 15 (month half over) and the difference between the current netProfit and begMonthProfit is greater than a negative intraMonthMaxLoss then quit trading for the month.  Only turn it back on the first bar of the next month.  See how this works for your algos.

How to Keep Track of BuysToday and SellsToday

The Useful MP

We all know how to use the reserved word/function MarketPosition – right?  Brief summary if not – use MarketPosition to see what your current position is: -1 for short, +1 for long and 0 for flat.  MarketPosition acts like a function because you can index it to see what you position was prior to the current position – all you need to do is pass a parameter for the number of positions ago.  If you pass it a one (MarketPosition(1)) then it will return the your prior position.  If you define a variable such as MP you can store each bars MarketPosition and this can come in handy.

mp = marketPosition;

If mp[1] <> 1 and mp = 1 then buysToday = buysToday + 1;
If mp[1] <> -1 and mp = -1 then sellsToday = sellsToday + 1;
Keeping Track of Buy and Sell Entries on Daily Basis

The code compares prior bar’s MP value with the current bar’s.   If there is a change in the value, then the current market position has changed.   Going from not 1 to 1 indicates a new long position.  Going from not -1 to -1 implies a new short.  If the criteria is met, then the buysToday or sellsToday counters are incremented.  If you want to keep the number of buys or sells to a certain level, let’s say once or twice,  you can incorporate this into your code.

If  time >= startTradeTime and t < endTradeTime and 
buysToday < 1 and
rsi(c,rsiLen) crosses above rsiBuyVal then buy this bar on close;
If time >= startTradeTime and t < endTradeTime and
sellsToday < 1 and
rsi(c,rsiLen) crosses below rsiShortVal then sellShort this bar on close;
Using MP to Keep Track of BuysToday and SellsToday

This logic will work most of the time, but it depends on the robustness of the builtin MarketPosition function Look how this logic fails in the following chart:

I didn't want entries in the same direction per day!
I only wanted 1 short entry per day!

MarketPosition Failure

Failure in the sense that the algorithm shorted twice in the same day.  Notice on the first trade how the profit objective was hit on the very next bar.  The problem with MarketPosition is that it only updates at the end of the bar one bar after the entry.  So MarketPosition stays 0 during the duration of this trade.  If MarketPosition doesn’t change then my counter won’t work.  TradeStation should update MarketPosition at the end of the entry bar.  Alas it doesn’t work this way.  I figured a way around it though.  I will push the code out and explain it later in more detail.

Input: rsiLen(14),rsiBuyVal(30),rsiShortVal(70),profitObj$(250),protStop$(300),startTradeTime(940),endTradeTime(1430);

Vars: mp(0),buysToday(0),sellsToday(0),startOfDayNetProfit(0);

If d <> d[1] then
Begin
buysToday = 0;
sellsToday = 0;
startOfDayNetProfit = netProfit;
end;

{mp = marketPosition;

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

If entriesToday(date) > buysToday + sellsToday then
Begin
If marketPosition = 1 then buysToday = buysToday + 1;
If marketPosition =-1 then sellsToday = sellsToday + 1;
If marketPosition = 0 then
Begin
if netProfit > startOfDayNetProfit then
begin
if exitPrice(1) > entryPrice(1) then buysToday = buysToday + 1;
If exitPrice(1) < entryPrice(1) then sellsToday = sellsToday + 1;
end;;
if netProfit < startOfDayNetProfit then
Begin
if exitPrice(1) < entryPrice(1) then buysToday = buysToday + 1;
If exitPrice(1) > entryPrice(1) then sellsToday = sellsToday + 1;
end;
end;
print(d," ",t," ",buysToday," ",sellsToday);
end;

If time >= startTradeTime and t < endTradeTime and
buysToday < 1 and
rsi(c,rsiLen) crosses above rsiBuyVal then buy this bar on close;
If time >= startTradeTime and t < endTradeTime and
sellsToday < 1 and
rsi(c,rsiLen) crosses below rsiShortVal then sellShort this bar on close;

SetProfittarget(profitObj$);
SetStopLoss(protStop$);

SetExitOnClose;
A Better Buy and Short Entries Counter

TradeStation does update EntriesToday at the end of the bar so you can use this keyword/function to help keep count of the different type of entries.  If MP is 0 and EntriesToday increments then you know an entry and an exit has occurred (takes care of the MarketPosition snafu) – all you need to do is determine if the entry was a buy or a sell.  NetProfit is also updated when a trade is closed.   I establish the StartOfDayNetProfit on the first bar of the day (line 9 in the code) and then examine EntriesToday and if NetProfit increased or decreased.  EntryPrice and ExitPrice are also updated at the end of the bar so I can also use them to extract the information I need.   Since MarketPosition is 0  I have to pass 1 to the EntryPrice and ExitPrice functions – prior position’s prices.  From there I can determine if a Long/Short entry occurred.  This seems like a lot of work for what you get out of it, but if you are controlling risk by limiting the number of trades (exposure) then an accurate count is so very important.

An alternative is to test on a higher resolution of data – say 1 minute bars.  In doing this you give a buffer to the MarketPosition function – more bars to catch up.

 

Pyramiding and then Scaling Out at Different Price Levels – EasyLanguage

TOTAL, TOTAL, TOTAL – an important keyword

I just learned something new!  I guess I never programmed a strategy that pyramided at different price levels and scaled out at different price levels.

Initially I thought no problem.  But I couldn’t get it to work – I tried everything and then I came across the keyword Total and then I remembered.  If you don’t specify Total in you exit directives then the entire position is liquidated.  Unless you are putting all your positions on at one time – like I did in my last post.   So remember if you are scaling out of a pyramid position use Total in your logic.

vars: maxPosSize(2);

If currentContracts < maxPosSize - 1 and c > average(c,50) and c = lowest(c,3) then buy("L3Close") 1 contract this bar on close;
If currentContracts < maxPosSize and c > average(c,50) and c = lowest(c,4) then buy("L4Close") 1 contract this bar on close;


If currentContracts = 2 and c = highest(c,5) then sell 1 contract total this bar on close;
If currentContracts = 1 and c = highest(c,10) then sell 1 contract total this bar on close;
Scaling Out Of Pyramid

Why you have to use the Total I don’t know.  You specify the number of contracts in the directive and that is sufficient if you aren’t pyramiding.  The pyramiding throws a “monkey wrench” in to the works.