June 2001
TRADERS' TIPS

Here is this month's selection of Traders' Tips, contributed by various developers of technical analysis software to help readers more easily implement some of the strategies presented in this issue.

You can copy these formulas and programs for easy use in your spreadsheet or analysis software. Simply "select" the desired text by highlighting as you would in any word processing program, then use your standard key command for copy or choose "copy" from the browser menu. The copied text can then be "pasted" into any open spreadsheet or other software by selecting an insertion point and executing a paste command. By toggling back and forth between an application window and the open Web page, data can be transferred with ease.
 

This month's tips include formulas and programs for:
 
 
TRADESTATION EASYLANGUAGE
METASTOCK FOR WINDOWS
METASTOCK FOR WINDOWS
NEUROSHELL TRADER
NEUROSHELL TRADER
AIQ TRADINGEXPERT
TRADINGSOLUTIONS
TRADINGSOLUTIONS
INVESTOR/RT
INVESTOR/RT
WEALTH-LAB.COM
WEALTH-LAB.COM
TECHNIFILTER PLUS
TECHNIFILTER PLUS
WAVE WI$E MARKET SPREADSHEET
WAVE WI$E MARKET SPREADSHEET

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TradeStation EasyLanguage

Christian Fries's elastic volume-weighted moving average (eVwma), described in the article "Elastic Moving Averages" elsewhere this issue, can be implemented as an indicator in TradeStation's EasyLanguage as follows:
  
inputs:
 Price( Close ),
 VolumeDivisor( 1 ),
 N( 100000 ) ;
variables:
 eVWMA( 0 ),
 ScaledVol( 0 ),
 VolDiff( 0 ),
 Violation( false ) ;
if CurrentBar = 1 then
 eVWMA = Price
else
 begin
 ScaledVol = Volume / VolumeDivisor ;
 VolDiff = N - ScaledVol ;
 if VolDiff < 0 and Violation = false then
  Violation = true ;
 if Violation = true then
  eVWMA = eVWMA[1]
 else
  eVWMA = ( VolDiff * eVWMA[1] + ScaledVol * Price ) / N ;
 end ;
Plot1( eVWMA ) ;
The default value for the price input is set to the close value. This can be edited at the time the indicator is applied to a chart. The user may want to experiment with other values for price, such as MedianPrice. MedianPrice is a built-in function in EasyLanguage that returns (High + Low) / 2.

If the volume figures on the chart are too large, this can result in overflow errors at runtime. In such a case, the user should scale down the volume by increasing the VolumeDivisor input (the default setting of "1" results in no scaledown).

Finally, the default value for the total volume, N, is set to 100,000. If this turns out to be less than the scaled volume at any bar on the chart, the indicator is designed to plot a flat line from there onward. In such a case, N needs to be increased.

This code will be available for download at TradeStation Technologies' website. Look for the file "ElasticVwma.Els."

--Ramesh Dhingra, Product Manager, EasyLanguage
TradeStation Technologies, Inc. (formerly Omega Research, Inc.)
A wholly owned subsidiary of TradeStation Group, Inc.
https://www.TradeStation.com
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MetaStock For Windows

In his article "Elastic Moving Average" in this issue, Christian Fries introduces the eVWMA indicator. To recreate this indicator in MetaStock, select the Indicator Builder from the Tools menu. Then click New and enter the following formula: 
eVWMA
n := Input("Enter the number of shares: ",1,1000000,1);
eVWMA := ((n-V)*PREV+(V*C))/n;
eVWMA
--Cheryl C. Abram, Equis International, Inc.
https://www.equis.com
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MetaStock For Windows

The formulas discussed by Gordon Gustafson in his article in this issue, "Which Volatility Measure?" can be recreated in MetaStock 6.52 or higher. To recreate these indicators in MetaStock, select the Indicator Builder from the Tools menu. Then click New and enter the following formulas:
Standard Deviation Bands 
stdh := Mov(C,20,E)+2*(Stdev(C,20));
stdl := Mov(C,20,E)-2*(Stdev(C,20));
stdh;
stdl
Average True Range Bands 
stdha := Mov(C,20,E)+2*(ATR(20));
stdla := Mov(C,20,E)-2*(ATR(20));
stdha;
stdla
--Cheryl C. Abram, Equis International, Inc.
https://www.equis.com
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  NeuroShell Trader

Christian Fries's elastic moving average (eVWMA), described in his article in this issue, can be easily implemented in NeuroShell Trader by using the NeuroShell Trader's ability to call external Dynamic Linked Libraries. Dynamic Linked Libraries can be written in C, C++, Power Basic (also Visual Basic using one of our add-on packages), and Delphi (Figure 1).

FIGURE 1: NEUROSHELL TRADER. Here's the Power Basic source code for the elastic volume-weighted moving average to create the DDL for the NeuroShell Trader.


We've recreated the elastic volume-weighted moving average (eVWMA) for NeuroShell Trader and posted it for Standard Deviation Bands download at the NeuroShell Trader free technical support website. We also provide the code at the website so that if you want to make any modifications to it you will be able to do so.

After downloading the custom indicator, you can easily insert it (Figure 2) or combine it with any of our more than 800 built-in indicators into a chart, prediction, or trading strategy.

FIGURE 2: NEUROSHELL TRADER. A NeuroShell Trader chart displays the elastic volume-weighted moving average.

Users of NeuroShell Trader can go to the STOCKS & COMMODITIES section of the NeuroShell Trader free technical support website to download a copy of these or past Traders' Tips for NeuroShell Trader.

For more information on NeuroShell Trader, visit www.NeuroShell.com.

--Marge Sherald, Ward Systems Group, Inc.
301 662-7950, sales@wardsystems.com
https://www.neuroshell.com


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NeuroShell Trader

In "Which Volatility Measure?" in this issue, Gordon Gustafson compares standard deviation and true range bands as measures of volatility. To create each band in NeuroShell Trader (Figure 3), select "New Indicator ..." from the Insert menu and create each of the following indicators using the Indicator Wizard: 
Standard Deviation Bands:
STDH:  Add2(ExpAvg(Close,20), Mult(StndDev(Close,20),2))
STDL:  Sub(ExpAvg(Close,20), Mult(StndDev(Close,20),2))
Average True Range Bands:
STDHA:  Add2(ExpAvg(Close,20), Mult(AverageTrueRange(Close),20),2))
STDLA:  Sub(ExpAvg(Close,20), Mult(AverageTrueRange(Close),20),2))
Note that the true range indicator is included in the NeuroShell Trader Advanced Indicator Set add-on and is also available for free download from the Ward Systems Group free technical support website.

To test the standard deviation and average true range indicators in NeuroShell Trader as Gustafson does in the last half of his article, you can create the three trading strategies shown below. Since NeuroShell Trader is not limited to only one trading strategy per chart, you can create and display all three trading strategies on a single chart. To create a trading strategy, select "New Trading Strategy ..." from the Insert menu and enter the entry and exit conditions in the appropriate locations of the Trading Strategy Wizard: 

Standard Deviation Band Trading Strategy:
Generate a buy long MARKET order if ALL of the following are true:
 A<B(Close, STDL)
Generate a sell long MARKET CLOSE if ALL the following are true:
 BarsSinceActivated(TradingStrategy,5)
Average True Range Trading Strategy:
Generate a buy long MARKET order if ALL of the following are true:
 A<B(Close, STDLA )
Generate a sell long MARKET CLOSE if ALL the following are true:
 BarsSinceActivated(TradingStrategy,5)
Exclusive Average True Range Trading Strategy:
Generate a buy long MARKET order if ALL of the following are true:
 A<B(Close, STDLA)
 A>B(Close, STDL)
Generate a sell long MARKET CLOSE if ALL the following are true:
 BarsSinceActivated(TradingStrategy,5)


If you own NeuroShell Trader Professional, you can also choose whether or not the system parameters should be optimized. To set up the trading strategy to trade a fixed $510,000 of S&P contracts, simply press the "Modify Trading Strategy Parameters ..." button, choose the "Buy a fixed dollar amount of contracts" option, set the desired dollar amount to $510,000, and then set the point value for futures contracts to 250. After backtesting each trading strategy, use the "Detailed Analysis ..." button to view the backtest and trade-by-trade statistics for the system.

Users of NeuroShell Trader can go to the STOCKS & COMMODITIES section of the NeuroShell Trader free technical support website to download a sample StndDev and Atr bands chart containing the average true range indicator.

For more information on NeuroShell Trader, visit www.NeuroShell.com.
 

--Marge Sherald, Ward Systems Group, Inc.
301 662-7950, sales@wardsystems.com
https://www.neuroshell.com
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AIQ Tradingexpert

In "Which Volatility Measure?" in this issue, Gordon Gustafson compares standard deviation to average true range as a measure of volatility. Here is the AIQ TradingExpert Pro code for plotting both kinds of bands. 
! Aiq Eds code for Average True Range and Standard Deviation Bands
! These can be plotted on price graph or used as entry/exit criteria for
trades.
Define AvgPd 20.
!StDev Bands
StdDev is Sqrt(Variance([close],AvgPd)).
Stdh is ExpAvg([close],AvgPd) + 2 * StdDev.
Stdl is ExpAvg([close],AvgPd) - 2 * StdDev.
TrueRange is
max([high]-[low],max([high]-val([close],1),val([close],1)-[low])).
AvgTrueRange is SimpleAvg(TrueRange,AvgPd).
!ATR Bands
Stdha is ExpAvg([close],AvgPd) + 2 * AvgTrueRange.
Stdla is ExpAvg([close],AvgPd) - 2 * AvgTrueRange.
--AIQ Technical Support
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TradingSolutions

The article "Which Volatility Measure?" by Gordon Gustafson in this issue presents a comparison of trading bands using the average true range function and the standard deviation function. These band functions can be entered into TradingSolutions as follows (Figure 4): 
StDev Band High
Short Name: stdh
Inputs: Data, Period, Width
Add (MA (Data, Period), Mult (StDev (Data, Period), Width))
StDev Band Low
Short Name: stdl
Inputs: Data, Period, Width
Sub (MA (Data, Period), Mult (StDev (Data, Period), Width))

ATR Band High
Short Name: stdha
Inputs: Close, High, Low, Period, Width
Add (MA (Close, Period), Mult (ATR (Close, High, Low, Period), Width))

ATR Band Low
Short Name: stdla
Inputs: Close, High, Low, Period, Width
Sub (MA (Close, Period), Mult (ATR (Close, High, Low, Period), Width))
Alternatively, you could use the existing Bollinger Bands functions as the standard deviation bands.
  
--Gary Geniesse, TradingSolutions Project Lead 
NeuroDimension, Inc., 800 634-3327, 352 377-5144
info@tradingsolutions.com, www.tradingsolutions.com
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TradingSolutions

The article in this issue "Elastic Moving Average" by Christian Fries presents a volume-weighted moving average based on the percentage of the number of floating shares being traded. The formula for this average in TradingSolutions would appear as follows:
  
Moving Average (Elastic Volume Weighted)
Short Name: eVWMA
Inputs: Price, Volume, Floating Shares
If (Prev (1), Div (Add (Mult (Sub (Floating Shares, Volume), Prev
(1)), Mult (Volume, Price)), Floating Shares), Price)
All of these functions are available in a function file that can be downloaded from our website in the Solution Library section. They can then be imported into TradingSolutions using "Import Functions..." from the File menu. To apply one of these imported functions to a stock or group of stocks, select "Add New Field..." from the context menu for the stock or group, select "Calculate a value...", then select the desired function from the "Traders Tips Functions" group.
 
--Gary Geniesse, TradingSolutions Project Lead
NeuroDimension, Inc., 800 634-3327, 352 377-5144
info@tradingsolutions.com, www.tradingsolutions.com
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  Investor/RT

The Investor/RT chart in Figure 5 shows the elastic volume-weighted moving average (eVWMA) drawn in white, overlaying both the candlesticks and volume bars of a daily chart of Microsoft.

FIGURE 5: Investor/RT. This Investor/RT chart shows the elastic volume-weighted moving average (eVWMA) drawn in white, overlaying both the candlesticks and volume bars of a daily chart of Microsoft.


To add this line to a chart in Investor/RT, click on the "Add Technical Indicator" button in the main toolbar and choose "Elastic Volume Weighted MA" from the list. The eVwma line in the chart above is created using the preferences shown in Figure 6.
 


FIGURE 6: Investor/RT. The eVWMA line in the chart in Figure 6 is created using the preferences shown here.


The second volume period option, "Use average volume," gives the user the ability to base his volume period on a multiple of the average volume of the symbol in the chart, thereby making the indicator both symbol-independent and time frame-independent. If either the time frame or the underlying symbol in this chart were changed, the eVWMA settings would still apply, basing the new volume period on the new ticker symbol-timeframe combination. This aspect is especially useful in scans, where the eVWMA token is "Evw."
 

--Chad Payne, Linn Software, Inc.
800 546-6842, sales@linnsoft.com
https://www.linnsoft.com
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Investor/RT

In "Which Volatility Measure?" in this issue, Gordon Gustafson compares standard deviation and true range bands as measures of volatility. He considers the question: Is average true range, which is an approximation, superior to standard deviation as a measure of volatility?

The Investor/RT chart in Figure 7 shows the average true range bands drawn in blue, along with the standard deviation bands drawn in red. The black line in the middle represents the 20-period moving average.
 


FIGURE 7: Investor/RT. This Investor/RT chart shows the average true range bands drawn in blue, along with the standard deviation bands drawn in red. The black line in the middle represents the 20-period moving average.

The standard deviation bands are applied by adding the moving average channel indicator to the chart with the preferences specified in Figure 8.
 


FIGURE 8: Investor/RT. The standard deviation bands are created on the Investor/RT chart in Figure 7 by adding the moving average channel indicator to the chart with the preferences specified here.

The average true range bands require creating two Investor/RT custom indicators and then adding each to the chart. From the menu, choose "Setup: Custom Indicators." Specify the following syntax for the first custom indicator: 

MA + 2 * TR


Then click the Save button. It will then ask you for your moving average and true range preferences. Both should be set up with a 20-period simple smoothing. Give the custom indicator the name "TR_HI_BAND." Next, repeat this process, this time using the syntax:
  

MA - 2 * TR
Save this custom indicator with the name "TR_LO_BAND." Now, go back to your chart, click the "Add Technical Indicator" button in the chart toolbar, and choose the custom indicator "TR_HI_BAND." Choose a color and click "Apply," then choose "TR_LO_BAND" and click OK. Your two TR bands may be in a separate window pane. Simply drag them into the same pane as your price bars. Double-click in the vertical scan and ensure that "Use Multiple Scales" is unchecked.
 
--Chad Payne, Linn Software, Inc.
800 546-6842, sales@linnsoft.com
https://www.linnsoft.com
 
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Wealth-Lab.com

You can use the Wealth-Lab.com website and the companion Wealth-Lab Desktop product to explore volatility bands based on standard deviation and average true range in more detail. Wealth-Lab offers a powerful scripting language, WealthScript, that gives you very fine control over trading system rules as well as cosmetic chart manipulation.

The following script draws both the standard deviation and average true range bands on the same chart (Figure 9). It also creates a new chart pane where we display the total number of times prices closed outside of both types of bands.

FIGURE 9: WEALTH-LAB. This chart shows both the standard deviation and average true range bands on the same chart. It also creates a new chart pane showing the total number of times prices closed outside both types of bands.
{ Construct Std Dev Bands }
StdDevBand := MultiplySeriesValue( StdDev( #Close, 20 ), 2.0 );
StdH := AddSeries( WMA( #Close, 20 ), StdDevBand );
StdL := SubtractSeries( WMA( #Close, 20 ), StdDevBand );
{ Plot Std Dev Bands }
PlotSeries( StdH, 0, #Red, 2 );
PlotSeries( StdL, 0, #Red, 2 );
{ Construct ATR Bands }
AtrBand := MultiplySeriesValue( ATR( 20 ), 2.0 );
AtrH := AddSeries( WMA( #Close, 20 ), AtrBand );
AtrL := SubtractSeries( WMA( #Close, 20 ), AtrBand );
{ Plot ATR Bands }
PlotSeries( AtrH, 0, #Blue, 2 );
PlotSeries( AtrL, 0, #Blue, 2 );
{ Count the number of times prices close outside of each band type }
OutStdDev := 0;
OutAtr := 0;
for Bar := 20 to BarCount - 1 do
begin
 if ( PriceClose( Bar ) > GetSeriesValue( Bar, StdH ) ) or
  ( PriceClose( Bar ) < GetSeriesValue( Bar, StdL ) ) then
  Inc( OutStdDev );
 if ( PriceClose( Bar ) > GetSeriesValue( Bar, AtrH ) ) or
  ( PriceClose( Bar ) < GetSeriesValue( Bar, AtrL ) ) then
  Inc( OutATR );
end;
{ Create a new Pane to hold our counts }
NewPane := CreatePane( 30, true, false );
{ Output our counts }
DrawText( 'Prices Closed Outside of Std Dev Bands ' +
  IntToStr( OutStdDev ) + ' times (' + FormatFloat(
  '#,##0.00%', OutStdDev * 100 / BarCount ) + ')',
  NewPane, 4, 4, #Red, 10 );
DrawText( 'Prices Closed Outside of ATR Bands ' +
  IntToStr( OutAtr ) + ' times (' + FormatFloat(
  '#,##0.00%', OutATR * 100 / BarCount ) + ')',
  NewPane, 4, 20, #Blue, 10 );
Content-Type: image/bmp;
 name="AtrStdDev.bmp"
Content-Disposition: attachment;
 filename="AtrStdDev.bmp"
--Dion Kurczek, Wealth-Lab.com
773 883-9047, dionkk@ix.netcom.com
https://www.wealth-lab.com
 
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Wealth-Lab.com

Christian Fries's method of calculating an elastic volume-weighted moving average requires that you know the number of shares in the float for the security that you're charting. This information isn't available from many of the vendors of historical data, but you can get the current float of any US stock from the Yahoo!Finance website (https://finance.yahoo.com/). Just enter the stock symbol and click the 'Profile' link. Scroll down to the 'Share Related Items' to find the stock's current float.

Once you know the float, you can use it to compute Fries's eVWMA indicator. In the following script, we use the current float for the stock POWI. Replace this with the float of the stock that you're charting before running the script. 

Flt := 16000000.0; {For Symbol POWI, replace with the Float
 for the Stock that you are charting}
evwma := CreateSeries();
prev := PriceClose( 0 );
for Bar := 1 to BarCount - 1 do
begin
  x := ( ( Flt - Volume( Bar ) ) *
     prev + Volume( Bar ) * PriceClose( Bar ) ) / Flt;
  SetSeriesValue( Bar, evwmav, x );
  prev := x;
end;

PlotSeries( SMA( evwmav, 20 ), 0, #Green, 2 );
PlotSeries( SMA( #Close, 20 ), 0, #Blue, 2 );

--Dion Kurczek, Wealth-Lab.com
773 883-9047, dionkk@ix.netcom.com
https://www.wealth-lab.com
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TechniFilter Plus

Here is the TechniFilter Plus formula for the eVWMA formula discussed by Christian Fries in his article in this issue, "Elastic Moving Averages."
Formula for the Elastic Volume Weighted Moving Average 
NAME: eVWMA
SWITCHES: recursive
PARAMETERS: 565000
INITIAL VALUE: C
FORMULA: ( (&1-V) * T + (V*C) ) / &1


 Visit RTR's website to download this formula as well as program updates.

--Clay Burch, Rtr Software
919 510-0608, rtrsoft@aol.com
https://www.rtrsoftware.com
 
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TechniFilter Plus

Here are TechniFilter Plus formulas for both average true range (ATR) bands and standard deviation bands discussed by Gordon Gustafson in his article in this issue, "Which Volatility Measure?" Both formulas were written using TechniFilter Plus chart directives to plot all three lines.
  
Formula for ATR Bands
NAME: ATRBands
SWITCHES: multiline
PARAMETERS: 20,2
FORMULA: [1]: ((H%CY1)-(L#CY1))X&1 {ATR}
 [2]: CX&1          {c}{Nmiddle} {rgb#255}
 [3]: [2]+([1]*&2)  {c}{Nupper}  {rgb#255}
 [4]: [2]-([1]*&2)  {c}{Nlower}  {rgb#255}
Formula for Standard Deviation Bands
NAME: SDBands
SWITCHES: multiline
PARAMETERS: 20,2
FORMULA: [1]: C|&1 {SD}
 [2]: CX&1         {c}{Nmiddle} {rgb#32768}
 [3]: [2]+([1]*&2) {c}{Nupper}  {rgb#32768}
 [4]: [2]-([1]*&2) {c}{Nlower}  {rgb#32768}


 Visit Rtr's website to download this formula as well as program updates.

 
--Clay Burch, Rtr Software
919 510-0608, rtrsoft@aol.com
https://www.rtrsoftware.com
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WaveWi$e Market Spreadsheet

The following WaveWi$e formulas demonstrate Gordon Gustafson's comparison of standard deviation and average true range as described in "Which Volatility Measure?" in this issue.

Although two standard deviations from the mean (or average) encompasses 95.45% of a normally distributed population, Gustafson's use of an exponential average as the base yields interesting results.
  

A: DATE @TC2000(C:\TC2000V3\Data,SP-500,Standard & Poors 500,DB)
B: HIGH
C: LOW 
D: CLOSE
E: OPEN 
F: VOL 
G: Eavg  @EAVG1(CLOSE,20)
H: STDH  EAVG + 2*@STD(CLOSE,20)
I: STDL  EAVG - 2*@STD(CLOSE,20)
J: Trange  @TR(HIGH,LOW,CLOSE,1)
K: STDHA  EAVG + 2*@MAVG(TRANGE,20)
L: STDLA  EAVG - 2*@MAVG(TRANGE,20)
M: '==========End Formulas


--Peter Di Girolamo, Jerome Technology
908 369-7503, jtiware@aol.com
https://members.aol.com/jtiware

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WaveWi$e Market Spreadsheet

The following WaveWi$e formulas demonstrate the elastic volume-weighted moving average (eVWMA) as described by Christian Fries in "Elastic Moving Averages." Note the formula Float (column H) requires the issue's "shares floating" as described in the article. 
A: DATE   @TC2000(C:\TC2000V3\Data,AOL,Aol Time Warner,DB)
B: HIGH
C: LOW 
D: CLOSE 
E: OPEN 
F: VOL
G: 
H: Float  'Enter Shares Floating here (Authors value=565000)
I: eVWMA  @INIT(1,CLOSE); ((FLOAT-VOL)*EVWMA[-1] + VOL*CLOSE)/FLOAT
J: Mavg   @MAVG(CLOSE,20)
K: '==========End Formulas
--Peter Di Girolamo, Jerome Technology
908 369-7503, jtiware@aol.com
https://members.aol.com/jtiware
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All rights reserved. © Copyright 2001, Technical Analysis, Inc.
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