September 2010

TRADESTATION: THE CLEAR METHOD

In his article in this issue, “Getting Clear With Short-Term Swings,” author Ron Black provides a straightforward indicator based on price clearing the lowest high after a downtrend, or price clearing a highest low after an uptrend. We have adapted the article’s code to display the clear signal (SwingTrendLines) and have provided a PaintBar study and simple strategy.

To download the EasyLanguage code for this study, go to the TradeStation and EasyLanguage Support Forum (https://www.tradestation.com/Discussions/forum.aspx?Forum_ID=213). Search for the file “SwingLine.eld.” The original code (“Swing-Line”) by Black is included in the .eld file.

Figure 1: TRADESTATION, CLEAR METHOD. Here is an example of the SwingTrendLines indicator, SwingLineBar paint-bar study, and SwingLine Trader strategy applied to a daily chart of General Electric (GE) from October 22, 2008 to December 22, 2008. Note that the trades occur on the day after a daily low is established clear of the swing line. Since the daily low is not known with certainty until after the market closes, the entry is made on the second bar after clearing the swing line.

This article is for informational purposes. No type of trading or investment recommendation, advice, or strategy is being made, given, or in any manner provided by TradeStation Securities or its affiliates.

Indicator:  SwingTrendLines

variables: 
	HighestHigh( High ), 
	LowestLow( Low ), 
	LowestHigh( High ), 
	HighestLow( Low ), 
	upsw( 0 ) ;

{Find Swing Direction}
if upsw = 1 then 
	begin
	if High > HighestHigh then 
		HighestHigh = High ; 
		{update HighestHigh, HighestLow}
	if Low > HighestLow then 
		HighestLow = Low ;
	if High < HighestLow then 
		begin {swing changes to down}
		upsw = 0 ;
		LowestLow = Low ;
		LowestHigh = High ;
		end ;
	end ;

if upsw = 0 then 
	begin
	if Low < LowestLow then 
		LowestLow = Low ; 
		{update LowestLow, LowestHigh}
	if High < LowestHigh then 
		LowestHigh = High ;
	if Low > LowestHigh then 
		begin {swing changes to up}
		upsw = 1 ;
		HighestHigh = High ;
		HighestLow = Low ;
		end ;
	end ;

if upsw[1] = 1 and upsw = 0 then
	Begin
	Value1 = TL_New( Date[1], Time[1], 
		HighestLow[1], Date, Time, HighestLow[1] ) ;
	TL_SetColor( Value1, Cyan ) ;
	end
else if upsw[1] = 0 and upsw = 1 then
	begin
	Value1 = TL_New( Date[1], Time[1], LowestHigh[1], 
		Date, Time, LowestHigh[1] ) ;
	TL_SetColor( Value1, Magenta ) ;
	end 
else if upsw = 1 then 
	begin
	Value1 = TL_New( Date[1], Time[1], HighestLow[1], 
		Date, Time, HighestLow ) ;
	TL_SetColor( Value1, Cyan ) ;
	end
else if upsw = 0 then 
	begin
	Value1 = TL_New( Date[1], Time[1], LowestHigh[1], 
		Date, Time, LowestHigh ) ;
	TL_SetColor( Value1, Magenta ) ;
	end ;

PaintBar: SwingLineBar
variables: 
	HighestHigh( High ), 
	LowestLow( Low ), 
	LowestHigh( High ), 
	HighestLow( Low ), 
	upsw( 0 ) ;

{Find Swing Direction}
if upsw = 1 then 
	begin
	if High > HighestHigh then 
		HighestHigh = High ; 
		{update HighestHigh, HighestLow}
	if Low > HighestLow then 
		HighestLow = Low ;
	if High < HighestLow then 
		begin {swing changes to down}
		upsw = 0 ;
		LowestLow = Low ;
		LowestHigh = High ;
		end ;
	end ;

if upsw = 0 then 
	begin
	if Low < LowestLow then 
		LowestLow = Low ; 
		{update LowestLow, LowestHigh}
	if High < LowestHigh then 
		LowestHigh = High ;
	if Low > LowestHigh then 
		begin {swing changes to up}
		upsw = 1 ;
		HighestHigh = High ;
		HighestLow = Low ;
		end ;
	end ;

if upsw = 1 then 
	Begin
	PlotPaintBar( High, Low, Open, 
		Close, "SwLine", Cyan ) ;
	end
else if upsw = 0 then 
	begin
	PlotPaintBar( High, Low, Open, 
		Close, "SwLine", Magenta ) ;
	end ;

Strategy: SwingLine Trader
variables: 
	HighestHigh( High ), 
	LowestLow( Low ), 
	LowestHigh( High ), 
	HighestLow( Low ), 
	upsw( 0 ) ;

{Find Swing Direction}
if upsw = 1 then 
	begin
	if High > HighestHigh then 
		HighestHigh = High ; 
		{update HighestHigh, HighestLow}
	if Low > HighestLow then 
		HighestLow = Low ;
	if High < HighestLow then 
		begin {swing changes to down}
		upsw = 0 ;
		LowestLow = Low ;
		LowestHigh = High ;
		end ;
	end ;

if upsw = 0 then 
	begin
	if Low < LowestLow then 
		LowestLow = Low ; 
		{update LowestLow, LowestHigh}
	if High < LowestHigh then 
		LowestHigh = High ;
	if Low > LowestHigh then 
		begin {swing changes to up}
		upsw = 1 ;
		HighestHigh = High ;
		HighestLow = Low ;
		end ;
	end ;

if upsw = 1 then 
	Buy next bar at market  
else if upsw = 0 then 
	SellShort next bar at market ;

—Mark Mills
TradeStation Securities, Inc.
A subsidiary of TradeStation Group, Inc.
www.TradeStation.com

BACK TO LIST

eSIGNAL: THE CLEAR METHOD

For this month’s Traders’ Tip, we’ve provided the formula “ClearSwingLine.efs” based on the code from Ron Black’s article in this issue, “Getting Clear With Short-Term Swings.”

The study is configured to compute on close only and does not contain any formula parameters. A sample chart is shown in Figure 2.

Figure 2: eSIGNAL, CLEAR METHOD

To discuss this study or download complete copies of the formula code, please visit the Efs Library Discussion Board forum under the Forums link from the support menu at www.esignal.com or visit our Efs KnowledgeBase at https://www.esignal.com/support/kb/efs/. The eSignal formula scripts (Efs) are also available for copying and pasting from the Stocks & Commodities website at Traders.com.

Clear swing line.efs

/*********************************
Provided By:  
    eSignal (Copyright c eSignal), a division of Interactive Data 
    Corporation. 2010. All rights reserved. This sample eSignal 
    Formula Script (EFS) is for educational purposes only and may be 
    modified and saved under a new file name. eSignal is not responsible
    for the functionality once modified.  eSignal reserves the right 
    to modify and overwrite this EFS file with each new release.

Description:        
    Getting Clear With Short-Term Swings
Version:            1.00  07/13/2010

Formula Parameters:                     Default:
    Line or Color Bars                  Line

Notes:
   The related article is copyrighted material. If you are not a subscriber
    of Stocks & Commodities, please visit www.traders.com.

**********************************/
var bInit = false;
var bVersion = null;

function preMain() {
    setPriceStudy(true);
    setShowTitleParameters(false);
    setStudyTitle("Getting Clear With Short-Term Swings");
    setShowCursorLabel(true, 0);
    setCursorLabelName("SwLine", 0);
    setDefaultBarFgColor(Color.cyan, 0);
    setPlotType(PLOTTYPE_INSTANTCOLORLINE, 0);
    setDefaultBarThickness(2, 0);
 }

var upsw = 0;
var xHigh = null;
var xLow = null;
var nHHigh = 0;
var nHLow = 0;
var nLHigh = 0;
var nLLow = 0;

function main() {
var nBarState = getBarState();
var nHigh = 0;
var nLow = 0;
var nResult = 0;
    if (bVersion == null) bVersion = verify();
    if (bVersion == false) return;   
    if (!bInit) { 
        xHigh = high();
        xLow = low();
        nHHigh = xHigh.getValue(0);
        nHLow = xLow.getValue(0);
        nLHigh = xHigh.getValue(0);
        nLLow = xLow.getValue(0);
        bInit = true; 
    }
        nHigh = xHigh.getValue(-1);
        nLow = xLow.getValue(-1);
        if (upsw == 1) {
            if (nHigh > nHHigh) nHHigh = nHigh;
            if (nLow > nHLow) nHLow = nLow;
            if (nHigh < nHLow && nBarState == BARSTATE_NEWBAR) {
                upsw = 0;
                nLLow = nLow;
                nLHigh = nHigh;
            }
        } else {
            if (nLow < nLLow) nLLow = nLow;
            if (nHigh < nLHigh) nLHigh = nHigh;
            if (nLow > nLHigh && nBarState == BARSTATE_NEWBAR) {
                upsw = 1;
                nHHigh = nHigh;
                nHLow = nLow;
            }
        }
    if(upsw == 1) {
        nResult = nHLow;
        setBarFgColor(Color.cyan);
    }
    if(upsw == 0)  {
        nResult = nLHigh;
        setBarFgColor(Color.magenta);
    }
    if (nResult == 0) return;
    return nResult;
}

function verify() {
    var b = false;
    if (getBuildNumber() < 779) {
        drawTextAbsolute(5, 35, "This study requires version 8.0 or later.", 
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "error");
        drawTextAbsolute(5, 20, "Click HERE to upgrade.@URL=https://www.esignal.com/download/default.asp", 
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "upgrade");
        return b;
    } else {
        b = true;
    }
    return b;
}

—Jason Keck
eSignal, a division of Interactive Data Corp.
800 815-8256, www.esignalcentral.com

BACK TO LIST

WORDEN BROTHERS STOCKFINDER: THE CLEAR METHOD

In StockFinder, you can use RealCode to paint the upswings and downswings described in Ron Black’s article in this issue, “Getting Clear With Short-Term Swings.” RealCode is based on the Microsoft Visual Basic.Net framework and uses the Visual Basic (VB) language syntax. RealCode is compiled into a .Net assembly and run by the StockFinder application.

To paint the price plot using RealCode, click the Paint Scheme button, then click “New Paint Scheme,” then click the Edit link to open the editor. See Figure 4.

Figure 4: STOCKFINDER, CODE. Here is the paint scheme code in RealCode for Ron Black’s method of identifying upswings and downswings.

Once you’ve coded the paint scheme, save it, and it will become part of your paint scheme library.

The chart shown in Figure 5 is a three-day candlestick chart of US Bancorp, and the paint scheme is indicating the beginning of an upswing.

Figure 5: STOCKFINDER, CLEAR METHOD. Here is a three-day candlestick chart of US Bancorp (USB) with upswings painted green and downswings painted red.

To download the StockFinder software and get a free trial, go to www.StockFinder.com.

— Bruce Loebrich and Patrick Argo
Worden Brothers, Inc.
www.StockFinder.com

BACK TO LIST

NEUROSHELL TRADER: THE CLEAR METHOD

Ron Black’s swing line technique (described in his article in this issue, “Getting Clear With Short-Term Swings”) can be recreated in a standard programming language such as C, C++, Power Basic, or Delphi. First, convert the EasyLanguage programming code given in Black’s article to the standard programming language of your choice and then insert the compiled result into your NeuroShell Trader chart by doing the following:

1. Select “New Indicator…” from the Insert menu.
2. Choose the External Program & Library Calls category.
3. Select the appropriate External Dll Call indicator.
4. Set up the parameters to match your Dll.
5. Select the Finished button.

Users of NeuroShell Trader can go to the Stocks & Commodities section of the NeuroShell Trader free technical support website to download a copy of this or any past Traders’ Tips.

A sample chart is shown in Figure 7.

Figure 7: NEUROSHELL TRADER, CLEAR METHOD. This NeuroShell Trader chart shows the swing line and the upswing value.

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

BACK TO LIST

TRADERSSTUDIO: THE CLEAR METHOD

The TradersStudio code for Ron Black’s article in this issue, “Getting Clear With Short-Term Swings,” is given here.

The TradeStation EasyLanguage code provided in the article can be converted easily to TradersStudio code via the Migration Tool, which is located in the Tools menu. Once I converted the basic code using the Migration Tool, I created a function, “CLEAR_ST,” that returns a “1” if the market is in an upswing and a “0” if the market is in a downswing.

Using the function, I then created an indicator, “CLEAR_ST_IND,” that can be plotted on the chart to see the swing direction. Upswing bars are colored green and downswing bars are colored red. In addition, as shown in Figure 10, the bars are not only colored, but also, there is an indicator in the lower panel that oscillates from zero (downswing) to 1 (upswing).

Figure 10: TRADERSSTUDIO, CLEAR METHOD. Here is a sample chart of the SP contract with the swing indicator.

Using the CLEAR_ST swing function, I also created two systems that are always in the market. One trades counter to the swing (CLEAR_CT) and the other trades with the swing (CLEAR_TF). Upon testing the two systems on a portfolio of 38 futures markets, I noticed that mainly the index futures, such as the S&P contract, were able to produce consistent profits using the counterswing system. I used a total of $100 per trade for slippage and commissions round-turn. This turned out to be too much for most of the futures markets to overcome, as both systems showed downsloping equity curves when run on the portfolio of futures markets without the indexes. For the most part, only the index futures showed positive results trading countertrend to the swing indicator.

Figure 11: TRADERSSTUDIO, equity curve. Here is a sample chart of the equity curve for countertrend trading for a portfolio of five futures indexes.

In Figure 11, I show the equity curve generated from trading a portfolio of index futures (using data from Pinnacle) for the following markets: DJ, MD, ND, RL, and SP. All index markets showed a positive net profit for the test period (see the table in Figure 12). Only two of the 35 non-index markets showed a net profit when trading countertrend, and only one of the 35 non-index markets showed a net profit when trading in a trend-following mode.

Figure 12: TRADERSSTUDIO, TABLE OF RETURNS. Here are market-by-market results for the countertrend trading system.

This code can be downloaded from the TradersStudio website at www.TradersStudio.com → Traders Resources → FreeCode and also from www.TradersEdgeSystems.com/traderstips.htm.

' GETTING CLEAR WITH SHORT-TERM SWINGS
' Author: Ron Black, TASC September 2010
' Coded by: Richard Denning 7/14/2010
' www.TradersEdgeSystems.com

Function CLEAR_ST()
    Dim hH As BarArray
    Dim lL As BarArray
    Dim lH As BarArray
    Dim hL As BarArray
    Dim upsw As BarArray
    Dim SwLine As BarArray

    If BarNumber=FirstBar Then
        hH = H
        lL = L
        lH = H
        hL = L
        upsw = 0
        SwLine = 0
    End If

    If upsw=1 Then
        If H>hH Then
            hH=H
        End If
        If L>hL Then
            hL=L
        End If
        If H<hL Then
            upsw=0
            lL=L
            lH=H
        End If
    End If
    If upsw=0 Then
        If L<lL Then
            lL=L
        End If
        If H<lH Then
            lH=H
        End If
        If L>lH Then
            upsw=1
            hH=H
            hL=L
        End If
    End If
CLEAR_ST = upsw
End Function
'--------------------------------------------------
Sub CLEAR_ST_TF()
    Dim SwingDir As BarArray
    SwingDir = CLEAR_ST()
    If SwingDir = 1 Then Buy("LE",1,0,Market,Day)
    If SwingDir = 0 Then Sell("SE",1,0,Market,Day)
    MARKETBREAKDOWN2()
End Sub
'--------------------------------------------------
Sub CLEAR_ST_CT()
    Dim SwingDir As BarArray
    SwingDir = CLEAR_ST()
    If SwingDir = 0 Then Buy("LE",1,0,Market,Day)
    If SwingDir = 1 Then Sell("SE",1,0,Market,Day)
    MARKETBREAKDOWN2()
End Sub
'--------------------------------------------------
Sub CLEAR_ST_IND()
    plot1(CLEAR_ST())
    If CLEAR_ST() = 1 Then BarColor(0) = vbGreen
    If CLEAR_ST() = 0 Then barcolor(0) = vbRed
End Sub
'---------------------------------------------------

—Richard Denning
info@TradersEdgeSystems.com
for TradersStudio

BACK TO LIST

NINJATRADER: THE CLEAR METHOD

The short-term swing indicator discussed in Ron Black’s article in this issue, “Getting Clear With Short-Term Swings,” has now been implemented as an indicator available for download at www.ninjatrader.com/SC/September2010SC.zip.

Once you have it downloaded, from within the NinjaTrader Control Center window, select the menu File → Utilities → Import NinjaScript and select the downloaded file. This indicator is for NinjaTrader version 7 or greater.

You can review the indicator’s source code by selecting the menu Tools → Edit NinjaScript → Indicator from within the NinjaTrader Control Center window and selecting “ShortTermSwings.”

NinjaScript indicators and strategies are compiled Dlls that run native, not interpreted, which provides you with the highest performance possible.

A sample chart implementing the strategy is shown in Figure 14.

Figure 14: NINJATRADER, CLEAR METHOD. This sample screenshot shows the ShortTermSwings indicator applied to a daily chart of General Electric (GE).

Raymond Deux & Art Runelis
NinjaTrader, LLC
www.ninjatrader.com

BACK TO LIST

WAVE59: THE CLEAR METHOD

In his article in this issue, “Getting Clear With Short-Term Swings,” Ron Black describes how he follows short-term swings using his clear swing line indicator.

We added buy and sell entries to the indicator to see how it would perform in the market. As you can see in Figure 16, it is catching a nice move in early 2010.

FIGURE 16: WAVE59, CLEAR METHOD. As you can see, Ron Black’s clear swing line indicator catches a nice move in early 2010.

The following script implements this indicator in Wave59. As always, users of Wave59 can download these scripts directly using the QScript Library found at www.wave59.com/library.

Indicator:  R_Black_ClearSwL
#Initialize variables on first bar
if (barnumber==barsback)
{
   hh=h;
   ll=l;
   lh=h;
   hl=l;
   upsw=0;
   swline=0;
}

if (upsw==1)
{
   if (h>hh) hh=h;
   if (l>hl) hl=l;

   if (h<hl)
   {             
      upsw=0;
      ll=l;
      lh=h;
   }
}       
if (upsw==0)
{
   if (l<ll) ll=l;
   if (h<lh) lh=h;
   if (l>lh)
   {
      upsw=1;
      hh=h;
      hl=l;
   }
}
if (upsw==1)
{
    plot1=hl;
    color1=aqua;
}
if (upsw==0)
{
    plot1=lh;
    color1=fuchsia;
}
if ((upsw==0) and (upsw[1]!=0))
    sell(1,c,"market","onebar");
if ((upsw==1) and (upsw[1]!=1))
    buy(1,c,"market","onebar");
--------------------------------------------

—Patrick J. Stiles
Wave59 Technologies Int’l, Inc.
www.wave59.com

BACK TO LIST

VT TRADER: LINEAR REGRESSION CROSS-TRADING SYSTEM

This Traders’ Tip is based on an article from the March 2010 issue of S&C titled “My Trading Strategy, Revised” by Leonardo Jafet. In the article, Jafet presents a “bare-bones” version of the linear regression trading system he initially described in his June 2009 S&C article, “Developing My Trading Strategy.”

We’ll be offering Jafet’s linear regression trading system for download in our client forums.

1. Ribbon → Technical Analysis menu → Trading Systems group → Trading Systems Builder command → [New] button
2. In the General tab, type the following text for each field:

   Name: TASC - 09/2010 - Linear Regression System
   Short Name: tasc_LinRegCross
   Label Mask: TASC - 09/2010 - Linear Regression System
        Fast Regression (%fpr%,%fper%) = %FastLinReg%
        Slow Regression (%spr%,%sper%) = %SlowLinReg%
   

3. In the Input Variable(s) tab, create the following variables:

   [New] button... Name: fpr , Display Name: Fast Regression Price , Type: price , Default: close
   [New] button... Name: fper , Display Name: Fast Regression Periods , Type: integer , Default: 14
   [New] button... Name: spr , Display Name: Slow Regression Price , Type: price , Default: close
   [New] button... Name: sper , Display Name: Slow Regression Periods , Type: integer , Default: 27
   

4. In the Output Variable(s) tab, create the following variables:

   	[New] button...
   Var Name: FastLinReg
   Name: Fast Regression
   * Checkmark: Indicator Output
   Select Indicator Output tab
   Line Color: blue
   Line Width: 2
   Ling Style: solid
   Placement: Price Frame
   [OK] button...
   
   	[New] button...
   Var Name: SlowLinReg
   Name: Slow Regression
   * Checkmark: Indicator Output
   Select Indicator Output tab
   Line Color: red
   Line Width: 2
   Ling Style: solid
   Placement: Price Frame
   [OK] button...
   
   [New] button...
   Var Name: LongSignal
   Name: Long Signal
   * Checkmark: Graphic Enabled
   * Checkmark: Alerts Enabled
   Select Graphic Bookmark
   Font […]: Up Arrow
   Size: Medium
   Color: Blue
   Symbol Position: Below price plot
   	Select Alerts Bookmark
   		Alert Message: Long signal detected! Fast Regression crossed above Slow Regression.
   		Alert Sound: others.wav
   [OK] button...
   
   [New] button...
   Var Name: ShortSignal
   Name: Short Signal
   * Checkmark: Graphic Enabled
   * Checkmark: Alerts Enabled
   Select Graphic Bookmark
   Font [...]: Down Arrow
   Size: Medium
   Color: Red
   Symbol Position: Above price plot
   	Select Alerts Bookmark
   		Alert Message: Short signal detected! Fast Regression crossed below Slow Regression.
   		Alert Sound: others.wav
   [OK] button...
   
   [New] button...
   Var Name: OpenBuy
   Name: Open Buy
   * Checkmark: Trading Enabled
   Select Trading Bookmark
   Trading Action: BUY
   Trader's Range: 10
   [OK] button...
   
   [New] button...
   Var Name: CloseBuy
   Name: Close Buy
   * Checkmark: Trading Enabled
   Select Trading Bookmark
   Trading Action: SELL
   Trader's Range: 10
   [OK] button...
   
   [New] button...
   Var Name: OpenSell
   Name: Open Sell
   * Checkmark: Trading Enabled
   Select Trading Bookmark
   Trading Action: SELL
   Trader's Range: 10
   [OK] button...
   	
   [New] button...
   Var Name: CloseSell
   Name: Close Sell
   * Checkmark: Trading Enabled
   Select Trading Bookmark
   Trading Action: BUY
   Trader's Range: 10
   [OK] button...
   
   

5. In the Formula tab, copy and paste the following formula:

   {Provided By: Capital Market Services, LLC & Visual Trading Systems, LLC}
   {Copyright: 2010}
   {Description: TASC, March 2010 - "Developments & Improvements; My Trading 
                                     Strategy, Revised" by Leonardo Jafet}
   {File: tasc_LinRegCross.vttrs - Version 1.0}
   
   {Fast/Slow Linear Regression Indicators}
   
   FastLinReg:= LinReg(fpr,fper);
   SlowLinReg:= LinReg(spr,sper);
   
   {Signal Long and Short}
   
   LongSignal:= Cross(FastLinReg,SlowLinReg);
   ShortSignal:= Cross(SlowLinReg,FastLinReg);
   
   {Auto-Trading Functionality; Used in Auto-Trade Mode Only}
   
   OpenBuy:= LongSignal=1 AND (EventCount('OpenBuy') = EventCount('CloseBuy'));
   CloseBuy:= ShortSignal=1 AND (EventCount('OpenBuy') > EventCount('CloseBuy'));
   
   OpenSell:= ShortSignal=1 AND (EventCount('OpenSell') = EventCount('CloseSell'));
   CloseSell:= LongSignal=1 AND (EventCount('OpenSell') > EventCount('CloseSell'));
   
   

6. Click the “Save” icon to finish building the linear regression trading system.

To attach the trading system to a chart (Figure 18), select the “Add Trading System” option from the chart’s contextual menu, select “Tasc → 09/2010 → Linear Regression System” from the trading systems list, and click the [Add] button.

FIGURE 18: VT TRADER. Here is an example of Jafet’s linear regression system on a EUR/USD 30-minute candle chart.

To learn more about VT Trader, visit www.cmsfx.com.

—Chris Skidmore
CMS Forex
(866) 51-CMSFX, trading@cmsfx.com
www.cmsfx.com

BACK TO LIST