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 Systems – Tradable 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.

{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.}

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;

Backtesting with [Trade Station,Python,AmiBroker, Excel]. Intended for informational and educational purposes only!

Get All Four Books in the Easing Into EasyLanguage Series - The Day Trade Edition is now Available!

Announcement – A Day Trade Edition will be added to my Easing Into EasyLanguage Series this year! This edition will be the fourth installment and will utilize concepts discussed in the Hi-Res and Advanced Topics editions. I will show how to develop and program algorithms that will enter after the open of the day and get out before the market closes. Hence, no overnight exposure. Most examples will be carried out on the mini Dow, Nasdaq, S&P500 and Russel. The programming skills that you will learn can be carried to any market that provides enough bang for the buck to day trade. Look for this edition later this year. But get geared up for it by reading the first three editions in the series now. Get your favorite QUANT the books they need!

Hello to All! The Easing Into EasyLanguage Series is now complete with the publication of the Advanced Topics Edition. This series includes three educational editions. Start out with the Foundation Edition. It is designed for the new user of EasyLanguage or for those you would like to have a refresher course. There are 13 tutorials ranging from creating Strategies to PaintBars. Learn how to create your own functions or apply stops and profit objectives. Ever wanted to know how to find an inside day that is also a Narrow Range 7 (NR7?) Now you can, and the best part is you get over 4 HOURS OF VIDEO INSTRUCTION – one for each tutorial. All source code is available too, and if you have TradeStation, so are the workspaces. Plus you can always email George for any questions. george.p.pruitt@gmail.com.

This book is for those that have read the Foundation Edition or have some experience working with EasyLanguage and the various functions that help make a trading decision. This book’s audience will be those programmers that want to take an idea, that requires an observation of intraday market movements to make a trading decision, and program it accurately. If you have programmed daily bar systems, and you want to drill down and add some components that require additional market information (like what came first – the high or the low), then you have come to the right place. If you want to buy and sell short in the same day and use trade management principles such as profit targets and stop losses then The Hi-Res Edition is the book you need. There are two paradigms that EasyLanguage covers: daily and intraday bar programming. It’s the same language, but the move from daily to intraday programming can be quite difficult. Learn all the essentials and shortcuts with this edition. 5 HOURS OF VIDEO INSTRUCTION in this Hi-Res edition – one for each tutorial. All source code is available too, and if you have TradeStation, so are the workspaces. Plus you can always email George for any questions. george.p.pruitt@gmail.com.

Advanced Topics (AT) could cover a vast amount of ideas and concepts and be the length of “War and Peace” on steroids. Since this book is part of the series, I wanted to cover a handful of concepts that included the follow programming constructs. Arrays and their manipulation. Buffers (fixed length arrays) and the tools to maintain buffer elements with formulas for extraction and sorting. Finite State Machines using the switch-case construct and range based case values. Using original text graphic objects and retrieving and analyzing their properties to determine X and Y coordinate values of text location. Seasonality: The Ruggiero/Barna Universal Seasonal and the Sheldon Knight Seasonal methods. In AT, you will also find an introduction to EasyLanguage’s Project Concept and the steps to create one by adding/deleting component files. TradeStation now provides access to fundamental data such as Commitment of Traders – learn how to convert the Net Change indicator into a strategy utilizing the FundValue functionality. If you wanted to find out how to merge multiple time frames into a single indicator, you are in luck! Create a MTF indicator for yourself.

Day Trading (DT) – This is a surprise installment in my Easing into EasyLanguage Series, as I had only intended on three books. However, I think it will fit well with the other books. Daytrading is a very popular approach as overnight risk is eliminated. Don’t worry there is plenty of risk during the day too! However, it can be very difficult to accurately program a trading idea on higher resolution data such as five- or one-minute bars. Like my other books, there is no “Holy Grail” included. And if you are looking for a book that gets in and out of a trade in a few seconds, this is not the one for you. I discourage trading more than a handful of trades per day – this is best left up to the professionals. But, if you want to learn about volatility-based break outs, pyramiding, scaling out, zone-based trading, accurate trade accounting and having a peek at algorithms that once ruled the systematic daytrading industry, then this is the book for you. A beginner might have a little difficulty in following along with the tutorials. If you have read the first two books (Foundation and Hi-Res) in this series, you are good to go. Or if you have some experience working with EasyLanguage and minute data, you will be OK as well.

Pick up your copies today – e-Book or paperback format – at Amazon.com