June 2011

BLOOMBERG: PRICE ZONE OSCILLATOR

The chart in Figure 2 shows the price zone oscillator (Pzo), which is described in “Entering The Price Zone” in this issue by Walid Khalil and David Steckler as a followup to their article last month, “In The Volume Zone,” which presented their volume zone oscillator (Vzo).

Figure 2: BLOOMBERG, PRICE ZONE OSCILLATOR. This chart shows General Dynamics (GD) from November 2010, when an uptrend began, through mid-April 2011, when the stock appears to have rolled over and may be beginning a new trend lower.

Last month in Traders’ Tips, we presented a sample chart of the Vzo with a bullish signal. This month, we show the Pzo in what looks like a bearish setup (Figure 2).

In their article, the authors lay out the “downtrend system rules” that, when applied to General Dynamics (GD), show a setup for a possible continuation of lower prices in the stock. On April 8, the Pzo crossed from above 40 to below 40 (red circle). The price of GD moved below the 60-day Ema, and the Pzo proceeded to break below zero and continued under -20, which would, according to the authors, help reduce possible whipsaws in the market on the short side. Time will tell whether this particular signal results in a profitable trade, and that result should be revealed by the time you read this.

Using the CS.Net framework within the Stdy<GO> function on the Bloomberg Terminal, C# or Visual Basic code can be written to display the price zone oscillator. The C# code for this indicator is shown below.

All Bloomberg code appearing in Traders’ Tips can also be found in the sample files provided with regular Sdk updates. The studies will also be included in the Bloomberg global study list.

using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using Bloomberg.Study.API;
using Bloomberg.Study.CoreAPI;
using Bloomberg.Study.Util;
using Bloomberg.Study.TA;
using Bloomberg.Math;

namespace Price_Zone_Oscillator
{
    
    public partial class PriceZoneOscillator
    {
        //Create the user defineable input 'Period' to use in the EMA's
        public StudyIntegerProperty Period = new StudyIntegerProperty(14);

        private void Initialize()
        {
            //Create a Study Panel beneath the price chart panel
            Panels.Add("PZOPanel", new StudyPanel());

            //Create the Price Zone Oscillator Line
            Output.Add("PZO", new TimeSeries());
            StudyLine PZOLine = new StudyLine("PZO", Color.Blue);
            Panels["PZOPanel"].Visuals.Add("PZO", PZOLine);
            PZOLine.DisplayName = "Price Zone Oscillator";
            //Display user defined period on PZO legend
            PZOLine.SetDisplayNameSuffix(Period);

            //Add horizontal to show the oscillator levels referenced within the Trader's Tips column
            Output.Add("Level1", new TimeSeries());
            StudyHorizontalLine Level1 = new StudyHorizontalLine(60, Color.Green, VisualLineStyle.Solid);
            Level1.Style = VisualLineStyle.Dot;
            Level1.Width = 4;
            Panels["PZOPanel"].Visuals.Add("Level1", Level1);

            Output.Add("Level2", new TimeSeries());
            StudyHorizontalLine Level2 = new StudyHorizontalLine(40, Color.Green, VisualLineStyle.Solid);
            Level2.Width = 2;
            Panels["PZOPanel"].Visuals.Add("Level2", Level2);

            Output.Add("Level3", new TimeSeries());
            StudyHorizontalLine Level3 = new StudyHorizontalLine(15, Color.DarkGray, VisualLineStyle.Solid);
            Level3.Width = 2;
            Panels["PZOPanel"].Visuals.Add("Level3", Level3);

            Output.Add("ZeroLine", new TimeSeries());
            StudyHorizontalLine zeroline = new StudyHorizontalLine(0, Color.Black, VisualLineStyle.Solid);
            zeroline.Width = 2;
            Panels["PZOPanel"].Visuals.Add("ZeroLine", zeroline);

            Output.Add("Level4", new TimeSeries());
            StudyHorizontalLine Level4 = new StudyHorizontalLine(-5, Color.DarkGray, VisualLineStyle.Solid);
            Level4.Width = 2;
            Panels["PZOPanel"].Visuals.Add("Level4", Level4);

            Output.Add("Level5", new TimeSeries());
            StudyHorizontalLine Level5 = new StudyHorizontalLine(-40, Color.Red, VisualLineStyle.Solid);
            Level5.Width = 2;
            Panels["PZOPanel"].Visuals.Add("Level5", Level5);

            Output.Add("Level6", new TimeSeries());
            StudyHorizontalLine Level6 = new StudyHorizontalLine(-60, Color.Red, VisualLineStyle.Solid);
            Level6.Style = VisualLineStyle.Dot;
            Level6.Width = 4;
            Panels["PZOPanel"].Visuals.Add("Level6", Level6);
        }

        public override void Calculate()
        {
            TimeSeries close = Input.Close;
            TimeSeries R = new TimeSeries(close.Count);

            for (int ii = 1; ii < close.Count; ii++)
            {
                if (close[ii] < close[ii - 1])
                {
                    R[ii] = close[ii] * -1;
                }
                else
                {
                    R[ii] = close[ii];
                }
            }
            TimeSeries CP = Indicator.EMAvg(R, Period.Value);
            TimeSeries TC = Indicator.EMAvg(close, Period.Value);
            TimeSeries PZO = 100 * (CP / TC);

            Output.Update("PZO", PZO); 
        }
    }
}

—Bill Sindel, Bloomberg, LP
wsindel@bloomberg.net
www.bloomberg.com/professional

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eSIGNAL: PRICE ZONE OSCILLATOR

For this month’s Traders’ Tip, we’ve provided two formulas, PriceZoneOsc.efs and PriceZoneOscWL.efs, based on the formula code given in Walid Khalil and David Steckler’s article in this issue, “Entering The Price Zone.”

The code from these Efs files is shown below.

Both studies contain a formula parameter to set the number of periods, which may be configured through the Edit Chart window. The PriceZoneOsc.efs code set is designed for the chart, which displays the oscillator (Figure 3). The PriceZoneOscWL.efs formula is designed for the watchlist (Figure 4), which outputs the state of the oscillator (supersold, oversold, negative, flat, positive, overbought, superbought). The watchlist study also contains additional parameters to set the type of output, font color, and custom colors for each of the oscillator states.

Figure 3: eSIGNAL, WATCHLIST. The formula code for the watchlist (“Price-ZoneOscWL.efs”) outputs the state of the oscillator (supersold, oversold, negative, flat, positive, overbought, superbought).

Figure 4: eSIGNAL, PRICE ZONE OSCILLATOR

To discuss these studies 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/.

eSignal code from “eSignal_PriceZoneOsc.efs” file

 
/*********************************
Provided By:  
    Interactive Data Corporation (Copyright © 2010) 
    All rights reserved. This sample eSignal Formula Script (EFS) is for educational purposes only. Interactive Data Corporation reserves the right to modify and overwrite this EFS file with each new release. 
	
Description:        
    The Price Zone Oscillator 
 
Version:            1.0  15/04/2011

Formula Parameters:                     Default:
    Period                                14

    

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

**********************************/



var fpArray = new Array();

var bVersion = null;

function preMain()

{

    setStudyMin(-100);

    setStudyMax(100);

    setStudyTitle("Price Zone Oscillator");

    setCursorLabelName("Price Zone Osc", 0);

    

    var x=0;
    fpArray[x] = new FunctionParameter("gPeriod", FunctionParameter.NUMBER);
    with(fpArray[x++])
    {
	setName("Period");
	setLowerLimit(1);
        setDefault(14);
    }



    fpArray[x] = new FunctionParameter("gLevels", FunctionParameter.BOOLEAN);
    with(fpArray[x++])
    {
	setName("Show Levels");
        setDefault(true);
    }

}



var bInit = false;

var xCls = null;

var xR = null;

var xCP = null;

var xTC = null;

function main(gPeriod, gLevels)

{



    if (bVersion == null) bVersion = verify();

    if (bVersion == false) return;     

        

    if (getBarState() == BARSTATE_ALLBARS)

    {

        if ( gLevels )

        {

                addBand(60, PS_DOT, 2, Color.green, "lev60");

                addBand(40, PS_DASH, 2, Color.darkgreen, "lev40");

                addBand(15, PS_SOLID, 1, Color.grey, "lev15");

                addBand(0, PS_SOLID, 2, Color.grey, "lev0");

                addBand(-5, PS_SOLID, 1, Color.grey, "lev5n");

                addBand(-40, PS_DASH, 2, Color.maroon, "lev40n");

                addBand(-60, PS_DOT, 2, Color.red, "lev60n");

                drawTextAbsolute(2, 61, "SuperBought", Color.green, null, Text.ONTOP | Text.BOTTOM, 'Arial', 10, "lT60");

                drawTextAbsolute(2, 41, "Overbought", Color.darkgreen, null, Text.ONTOP | Text.BOTTOM, 'Arial', 10, "lT40");

                drawTextAbsolute(2, -41, "Oversold", Color.maroon, null, Text.ONTOP | Text.TOP, 'Arial', 10, "lTN40");

                drawTextAbsolute(2, -61, "SuperSold", Color.red, null, Text.ONTOP | Text.TOP, 'Arial', 10, "lTN60");



        }

    }

    



    if (!bInit)

    {

        xCls = close();

        xR = efsInternal("calcSignedPrice", xCls);  

        xCP = ema(gPeriod, xR);

        xTC = ema(gPeriod, xCls);

        bInit = true;

    }

    var vCP = xCP.getValue(0);

    var vTC = xTC.getValue(0);

    if ( vCP == null ) return null;

    var vPZO = 100;  

    if ( vTC != 0 ) vPZO = 100 * vCP / vTC;      



    return vPZO;    

    

}



function calcSignedPrice(xCls)

{

        var vCls = xCls.getValue(0);

        var vCls1 = xCls.getValue(-1);

        if ( vCls1 == null ) return null;

        vCls = (vCls1 < vCls)? vCls : -vCls;

        return vCls;

}



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;

}

eSignal code from “eSignal_PriceZoneOscWatchList.efs” file

/*********************************
Provided By:  
    Interactive Data Corporation (Copyright © 2010) 
    All rights reserved. This sample eSignal Formula Script (EFS)
    is for educational purposes only. Interactive Data Corporation
    reserves the right to modify and overwrite this EFS file with 
    each new release. 
	
Description:        
    The Price Zone Oscillator for Watch List
 
Version:            1.0  15/04/2011

Formula Parameters:                     Default:
    Period                                14
    View Type                             Text
    Coloring Type                         Font
    Super Overbought Color                Color.green
    Overbought Color                      Color.lime 
    Positive Movement Color               Color.RGB(200,255,0)
    Flat Color                            Color.yellow
    Negative Movement Color               Color.RGB(255,155,0) 
    Oversold Color                        Color.maroon     
    Super Oversold Color                  Color.red
    
Notes:
    The related article is copyrighted material. If you are not
    a subscriber of Stocks & Commodities, please visit www.traders.com.

**********************************/

var fpArray = new Array();
var bVersion = null;
function preMain()
{
    setCursorLabelName("Price Zone Analyzer", 0);
    
    var x=0;
    fpArray[x] = new FunctionParameter("gPeriod", FunctionParameter.NUMBER);
    with(fpArray[x++])
    {
	setName("Period");
	setLowerLimit(1);
        setDefault(14);
    }

    fpArray[x] = new FunctionParameter("gViewOption", FunctionParameter.STRING);
    with(fpArray[x++])
    {
        setName("View Type");
        addOption("Value");
        addOption("Text");
        addOption("Sign");
        addOption("Nothing");
        setDefault("Text");
    }      
    fpArray[x] = new FunctionParameter("gColoringOption", FunctionParameter.STRING);
    with(fpArray[x++])
    {
        setName("Coloring Type");
        addOption("Font");
        addOption("Background");
        addOption("No coloring");
        setDefault("Font");
    }      
    fpArray[x] = new FunctionParameter("gSOBColor", FunctionParameter.COLOR);
    with(fpArray[x++])
    {
        setName("Super Overbought Color");
        setDefault(Color.green);
    }      
    fpArray[x] = new FunctionParameter("gOBColor", FunctionParameter.COLOR);
    with(fpArray[x++])
    {
        setName("Overbought Color");
        setDefault(Color.lime);
    }      
    fpArray[x] = new FunctionParameter("gPosColor", FunctionParameter.COLOR);
    with(fpArray[x++])
    {
        setName("Positive Movement Color");
        setDefault(Color.RGB(200,255,0));
    }      

    fpArray[x] = new FunctionParameter("gFlatColor", FunctionParameter.COLOR);
    with(fpArray[x++])
    {
        setName("Flat Color");
        setDefault(Color.yellow);
    }      

    fpArray[x] = new FunctionParameter("gNegColor", FunctionParameter.COLOR);
    with(fpArray[x++])
    {
        setName("Negative Movement Color");
        setDefault(Color.RGB(255,155,0));
    }      
    
    fpArray[x] = new FunctionParameter("gOSColor", FunctionParameter.COLOR);
    with(fpArray[x++])
    {
        setName("Oversold Color");
        setDefault(Color.maroon);
    }      
    fpArray[x] = new FunctionParameter("gSOSColor", FunctionParameter.COLOR);
    with(fpArray[x++])
    {
        setName("Super Oversold Color");
        setDefault(Color.red);
    }      

}

var bInit = false;
var xCls = null;
var xR = null;
var xCP = null;
var xTC = null;

var servTable = new Array();
var outVal = null;

function main(gPeriod, gViewOption, gColoringOption, gSOBColor, gOBColor, gPosColor, gFlatColor, gNegColor, gOSColor, gSOSColor)
{

    if (bVersion == null) bVersion = verify();
    if (bVersion == false) return;     
        
    if (!bInit)
    {
        xCls = close();
        xR = efsInternal("calcSignedPrice", xCls);  
        xCP = ema(gPeriod, xR);
        xTC = ema(gPeriod, xCls);

        servTable[0] = new Array (gSOSColor, gOSColor, gNegColor, gFlatColor, gPosColor, gOBColor, gSOBColor);
        if (gViewOption == "Text") servTable[1] = new Array("SUPERSOLD", "OVERSOLD", "NEGATIVE", "FLAT", "POSITIVE", "OVERBOUGHT", "SUPERBOUGHT");
        if (gViewOption == "Sign") servTable[1] = new Array("- - -", " - - ", "-", "+ / -", "+" ," + + ", "+ + +");

        bInit = true;
    }
    var vCP = xCP.getValue(0);
    var vTC = xTC.getValue(0);
    if ( vCP == null ) return null;
    var vPZO = 100;  
    if ( vTC != 0 ) vPZO = 100 * vCP / vTC;      
    
    var cond = 0; 
    if ( vPZO >= 15 ) cond = 1 ;
    if ( vPZO >= 40 ) cond = 2 ;
    if ( vPZO >= 60 ) cond = 3 ;    
    if ( vPZO <=-5  ) cond = -1 ;
    if ( vPZO <=-40 ) cond = -2 ;    
    if ( vPZO <=-60 ) cond = -3 ;    

    if ( gColoringOption == "Background" ) setBarBgColor(servTable[0][cond + 3]);
    if ( gColoringOption == "Font" ) setBarFgColor(servTable[0][cond+3]);
    if ( gViewOption == "Value" ) outVal = vPZO;
    if ( gViewOption == "Text" || gViewOption == "Sign" ) outVal = servTable[1][cond + 3];
    
    return outVal;    
 
}

function calcSignedPrice(xCls)
{
        var vCls = xCls.getValue(0);
        var vCls1 = xCls.getValue(-1);
        if ( vCls1 == null ) return null;
        vCls = (vCls1 < vCls)? vCls : -vCls;
        return vCls;
}

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
Interactive Data Desktop Solutions
800 815-8256, www.eSignal.com/support/

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AMIBROKER: PRICE ZONE OSCILLATOR

In “Entering The Price Zone” in this issue, authors Walid Khalil and David Steckler introduce the price zone oscillator (Pzo), which is very similar to the volume zone oscillator (Vzo) that they introduced in their article in the May 2011 issue, “In The Volume Zone.”

Pzo can be easily implemented using AmiBroker Formula Language. A ready-to-use formula for this indicator is shown here. To use it, enter the formula in the Afl Editor, then press “Insert indicator.” To modify the averaging period of the price zone oscillator, click on the chart with the right mouse button and select “parameters” from the context menu. The code also includes system rules that can be tested in the Automatic Analysis window.

AmiBroker code:

// PZO indicator 
function PZOsc( Period ) 
{ 
 R = sign( Close - Ref( Close, -1 ) ) * Close; 
 VP = EMA( R, Period ); 
 TV = EMA( Close, Period ); 
 return Nz( 100 * VP / TV ); 
} 

Period = Param( "PZO period", 14, 2 , 200 ); 
PZO = PZOsc( Period ); 
Plot( PZO, "PZO" + _PARAM_VALUES(), colorBlue, styleThick ); 

// grid lines 
PlotGrid( 60 ); 
Plot( 40, "", colorDarkGreen ); 
PlotGrid( 15 ); 
Plot( 0, "", colorBlack ); 
PlotGrid( -5 ); 
Plot( -40, "", colorBrown ); 
PlotGrid( -60 ); 

// system rules 
Buy = ADX(14) < 18 AND ( Cross( PZO, -40 ) OR Cross( PZO, 15 ) ); 
Sell = ( Cross( PZO, 40 ) AND ADX( 14 ) > 18 ) OR Cross( -5, PZO ); 

Short = ADX(14) < 18 AND ( Cross( 40, PZO ) OR Cross( -5, PZO ) ); 
Cover = ( Cross( -40, PZO ) AND ADX( 14 ) > 18 ) OR Cross( PZO, 15 );

Figure 6: AMIBROKER, PRICE ZONE OSCILLATOR. Here is a daily price chart of the DIA (upper pane) with 14-period price zone oscillator (middle pane).

—Tomasz Janeczko, AmiBroker.com
www.amibroker.com

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NEUROSHELL TRADER: PRICE ZONE OSCILLATOR

The price zone oscillator (Pzo) described by Walid Khalil and David Steckler in their article in this issue can be easily implemented with a few of NeuroShell Trader’s 800+ indicators. Simply select “New indicator” from the Insert menu and use the Indicator Wizard to create the following indicator:

Multiply2( 100, Divide( ExpAvg( Multiply2( NumPosNegMom(Close,1,1), Close), 14), ExpAvg(Close, 14) ) )

To set up a trading system based on the Pzo, select “New trading strategy” from the Insert menu and enter the following in the appropriate locations of the Trading Strategy Wizard:

Generate a buy long market order if ONE of the following is true:
AND3( A>B(Close, ExpAvg(Close, 60) ), A>B(ADX(High, Low, Close, 14, 14), 18 ), OR2( CrossAbove(PZO, -40), CrossAbove(PZO,0) ) )
AND2( A<B(ADX(High, Low, Close, 14, 14), 18 ), OR2( CrossAbove(PZO, -40), CrossAbove(PZO,15) ) )

Generate a sell long market order if ONE of the following is true:
AND2( A>B(PZO, 60), A<B(Momentum(PZO,1), 0 )
CrossBelow(PZO, 40)
AND2( A<B(Close, ExpAvg(Close, 60), A<B(PZO, 0) )
AND2( A<B(ValueEntryActivated(ADX(High, Low, Close, 14, 14)), 18), A<B(PZO, -5))

Generate a sell short market order if ONE of the following is true:
AND3( A<B(Close, ExpAvg(Close, 60) ), A>B(ADX(High, Low, Close, 14, 14), 18 ), OR2( CrossBelow(PZO, 40), CrossBelow(PZO,0) ) )
AND2( A<B(ADX(High, Low, Close, 14, 14), 18 ), OR2( CrossBelow(PZO, 40), CrossBelow(PZO,-5) ) )

Generate a cover short market order if ONE of the following is true:
AND2( A<B(PZO, -60), A>B(Momentum(PZO,1), 0 )
CrossAbove(PZO, -40)
AND2( A>B(Close, ExpAvg(Close, 60), A>B(PZO, 0) )
AND2( A<B(ValueEntryActivated(ADX(High, Low, Close, 14, 14)), 18), A>B(PZO, 15))

If you have NeuroShell Trader Professional, you can also choose whether the parameters should be optimized. After backtesting the trading strategy, use the “Detailed analysis” button to view the backtest and trade-by-trade statistics for the strategy.

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 previous Traders’ Tips.

A sample chart is shown in Figure 8.

Figure 8: NEUROSHELL TRADER, PRICE ZONE OSCILLATOR. This NeuroShell Trader chart shows the price zone oscillator and corresponding trading system.

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

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TRADERSSTUDIO: PRICE ZONE OSCILLATOR

Shown here is the TradersStudio code for the Pzo and Vzo indicators and related systems from Walid Khalil and David Steckler’s articles, “Entering The Price Zone” in this issue and “In The Volume Zone” from the May 2011 issue. One of the inputs to the Pzo system is called “usePzo.”

When this input is set to equal “1,” then the indicator and system use the Pzo. If set to any other value, then the indicator and system use the Vzo. Since my tests showed that trading the short side of the system resulted in net losses, I have also provided an input called “allowShorts” that will disable shorting if set to anything other than “1.” In the tests I ran, I set “allowShorts” = 0 so that shorting was disabled. The system code provided here for TraderStudio is based on the TradeStation code provided in the article and, as noted in the article, the divergence exit is not coded.

I ran a backtest using the Tradeplan module from 1/1/1992 to 4/15/2011 using a “Nasdaq 100–like” list of stocks, which contained 74 stocks. I used a Tradeplan that divided the capital into 74 equal pieces so that all signals could be taken. In Figure 10, I show the Tradeplan equity curve and in Figure 11, I show the Tradeplan underwater equity curve. For the test period, the compound annual return was 5.04% with a maximum drawdown of 24.52% on 3/11/2003.

Figure 10: TRADERSSTUDIO, PRICE ZONE OSCILLATOR/ VOLUME ZONE OSCILLATOR SYSTEM. Here is the equity curve from the Tradeplan module that resulted from a backtest of the PZO/VZO system using equal equity sizing, trading all signals from a list of 74 stocks similar to the NASDAQ 100.

Figure 11: TRADERSSTUDIO, SYSTEM DRAWDOWNS. This shows the underwater equity curve from the Tradeplan module that resulted from a backtest of the PZO/VZO system using equal equity sizing, trading all signals from a list of 74 stocks similar to the NASDAQ 100.

The code can be downloaded from the TradersStudio website at www.TradersStudio.com→Traders Resources→FreeCode or www.TradersEdgeSystems.com/traderstips.htm. The code is also shown below.

TradersStudio code

' ENTERING THE PRICE ZONE
' Authors: Walid Khalil and David Steckler,
'          TASC June 2011
' Coded by: Richard Denning 04/16/2011
' www.TradersEdgeSystems.com

Function PZO(pLen)
' Default:
'pLen is  14. 
Dim R As BarArray
Dim CP As BarArray
Dim TC As BarArray
R = IFF(C > C[1],C,-C)
CP = XAverage(R,pLen)
TC = XAverage(C,pLen)
PZO = (CP / TC) * 100
End Function
'----------------------------------------------
'PZO INDICATOR:

Sub PZO_IND(pLen)
plot1(PZO(PLen))
plot2(60)
plot3(40)
plot4(0)
Plot5(-40)
Plot6(-60)
End Sub
'----------------------------------------------
'PZO OR VZO SYSTEM:
Sub PZO_SYS(pLen,emaLen,usePZO,allowShorts)
' pLen = 14
'allowShorts = 1 trade both long and short else only trade long
Dim xADX As BarArray
Dim xEMA As BarArray
Dim xVZO As BarArray
Dim xPZO As BarArray
Dim xMax As BarArray
Dim xMin As BarArray
Dim B2_SU As BarArray
Dim S2_SU As BarArray 
Dim MP As BarArray

MP = marketpos(0)
xPZO = PZO(pLen)
xVZO = VZO(pLen)
xADX = ADX(pLen,0)
xEMA = XAverage(C,emaLen)
If BarNumber = FirstBar Then
    xMax = 0
    xMin = 0
    B2_SU = 0
    S2_SU = 0
End If

If usePZO = 1 Then
    xMax = xPZO
    xMin = xPZO
Else
    xMax = xVZO
    xMin = xVZO
End If

If CrossesOver(xMin,0) Then B2_SU = 1 Else B2_SU = B2_SU[1]
If CrossesUnder(xMax,0)Then S2_SU = 1 Else S2_SU = S2_SU[1]

If xADX > 18 Then
    'ADX > 18 cases
    If MP <= 0 And C > xEMA Then
        If CrossesOver(xMax,-40) Then Buy("LE1",1,0,Market,Day)
        If B2_SU = 1 And CrossesOver(xMax,15) Then Buy("LE2",1,0,Market,Day)
    End If
    If MP > 0 Then
        If xMax[1] > 60 And xMax < xMax[1] Then ExitLong("LX1","",1,0,Market,Day)
        If C < xEMA And xMin < 0 Then ExitLong("LX2","",1,0,Market,Day)
    End If
    If MP >= 0 And C < xEMA And allowShorts = 1 Then
        If CrossesUnder(xMin,40) Then Sell("SE1",1,0,Market,Day)  
        If S2_SU = 1 And CrossesUnder(xMin,-5) Then Sell("SE2",1,0,Market,Day)
    End If
    If MP < 0 Then
        If xMin[1] < -60 And xMin > xMin[1] Then ExitShort("SX1","",1,0,Market,Day)
        If C > xEMA And xMax > 0 Then ExitShort("SX2","",1,0,Market,Day)
    End If
    
Else
    'ADX <= 18 cases
    If MP <= 0 Then
        If CrossesOver(xMax,-40) Then Buy("LE3",1,0,Market,Day)
        If CrossesOver(xMax,15) Then Buy("LE4",1,0,Market,Day)
    End If
    If MP > 0 Then 
        If xMax > 40 Then
            If xMax[1] > 60 And xMax < xMax[1] Then ExitLong("LX3","",1,0,Market,Day)   
        Else
            If C < xEMA And xMin < 0 Then ExitLong("LX4","",1,0,Market,Day)
            If xMin < -5 Then ExitLong("LX5","",1,0,Market,Day) 
        End If
    End If    
    If MP >= 0 And allowShorts = 1 Then
        If CrossesUnder(xMin,40) Then Sell("SE3",1,0,Market,Day)
        If CrossesUnder(xMin,-5) Then Sell("SE4",1,0,Market,Day)
    End If
           
    If MP < 0 Then
        If xMin < -40 Then
            If xMin[1] < -60 And xMin > xMin[1] Then ExitShort("SX3","",1,0,Market,Day)
        Else
            If C > xEMA And xMax > 0 Then ExitShort("SX4","",1,0,Market,Day)
            If xMax > 15 Then ExitShort("SX5","",1,0,Market,Day)
        End If
    End If
End If

If CrossesUnder(xMin,15) Then B2_SU = 0 Else B2_SU = B2_SU[1]
If CrossesOver(xMax,-5) Then S2_SU = 0 Else S2_SU = S2_SU[1]

End Sub
End Sub

—Richard Denning
info@TradersEdgeSystems.com
for TradersStudio

BACK TO LIST

TRADECISION: PRICE ZONE OSCILLATOR

In their article “Entering The Price Zone” in this issue, authors Walid Khalil and David Steckler introduce the price zone oscillator (Pzo), a complementary indicator to their volume zone oscillator (Vzo) described in their previous article.

To recreate this indicator in Tradecision, use Tradecision’s Function Builder to set up the Pzo function by using the following code:

function (Period:Numeric=14):Numeric;
var
R:=0;
CP:=0;
TC:=0;
PZO:=0;
end_var

R:=iff(C >Ref(C, -1), C, -C);
CP:=Mov(R, period, E);
TC:=Mov(C, period, E);
PZO:=100 * (CP / TC);

return PZO;

Then one needs to create the PZO strategy using Tradecision's Strategy Builder:

Entry Long:

Vars
Price:= Close;
UsePZO:= true;
xADX:=0;
xEMA:=Price;
xVZO:=0;
xPZO:=0;
xMax:=0;
xMin:=0;
B2_SU:=false;
EntryLong:=false;
End_Var

xPZO := PZO(14);
xADX := ADX(14);
xEMA := EMA(Price, 60);

if HISTORYSIZE < 1 then
 B2_SU := B2_SU\1\;

if UsePZO then
   begin
        xMax:= xPZO;
        xMin:= xPZO;
   end;

if xADX > 18 then
begin { ADX > 18 cases}
   if IsShortPosition or IsInPosition=false and Price > xEMA then
      begin
           if  CrossAbove(xMAX,-40) then
              EntryLong:=true; {BUY1}
           if CrossAbove(xMIN,0) then B2_SU:= TRUE;
           if B2_SU and CrossAbove(xMAX,15) then
              EntryLong:=true; {BUY2}
      end;
end; else

begin  { ADX < 18 cases}

    if IsShortPosition or IsInPosition=false then
    begin
       if CrossAbove(xMax ,-40) then
              EntryLong:= true {BUY3};
       if CrossAbove(xMax,15) then
              EntryLong:= true {BUY4};
    end;
    
end;
if CrossBelow(xMin,15) then B2_SU:= FALSE;
return EntryLong;

Exit Long:

Vars
Price:= Close;
UsePZO:= true;
xADX:=0;
xEMA:=Price;
xVZO:=0;
xPZO:=0;
xMax:=0;
xMin:=0;
ExitLong:=false;
End_Var

xPZO := PZO(14);
xADX := ADX(14);
xEMA := EMA(Price, 60);

if UsePZO then
   begin
        xMax:= xPZO;
        xMin:= xPZO;
   end;

if xADX > 18 then
begin { ADX > 18 cases}

      if IsLongPosition then
      begin
         if xMax\1\ > 60 and xMax < xMax\1\ then
              ExitLong:=true; {SELL1}
         if Price < xEMA and xMin < 0 then
              ExitLong:=true; {SELL2}
      end;

end; else

begin  { ADX < 18 cases}
    if IsLongPosition then
    begin
       if xMax > 40 then
       begin
          if xMax\1\ > 60 and xMax < xMax\1\ then
              ExitLong:=true; {SELL3};
          if Price < xEMA and xMin < 0 then
              ExitLong:=true; {SELL4};
       end; else
          if xMin < -5 then
              ExitLong:=true; {SELL5};
    end;
end;
return ExitLong;

Entry Short:

Vars
Price:= Close;
UsePZO:= true;
xADX:=0;
xEMA:=Price;
xVZO:=0;
xPZO:=0;
xMax:=0;
xMin:=0;
S2_SU:=false;
EntryShort:=false;
End_Var

xPZO := PZO(14);
xADX := ADX(14);
xEMA := EMA(Price, 60);

if HISTORYSIZE < 1 then
 S2_SU := S2_SU\1\;

if UsePZO then
   begin
        xMax:= xPZO;
        xMin:= xPZO;
   end;

if xADX > 18 then
begin { ADX > 18 cases}

      if IsLongPosition or IsInPosition=false and Price < xEMA then
      begin
      if CrossBelow(xMin,40) then
              EntryShort:= true; {SELL SHORT1}
      if CrossBelow(xMax,0) then S2_SU:= TRUE;
      if S2_SU and CrossBelow(xMin,-5) then
              EntryShort:= true; {SELL SHORT2}
      end;
end; else

begin  { ADX < 18 cases}
    if IsLongPosition or IsInPosition=false then
    begin
       if CrossBelow(xMin,40) then
              EntryShort:= true {SELL SHORT3};
       if CrossBelow(xMin,-5) then
              EntryShort:= true {SELL SHORT4};
    end;
end;
if CrossAbove(xMax,-5) then S2_SU:= FALSE;

return EntryShort;

Exit Short:

Vars
Price:= Close;
UsePZO:= true;
xADX:=0;
xEMA:=Price;
xVZO:=0;
xPZO:=0;
xMax:=0;
xMin:=0;
ExitShort:=false;
End_Var

xPZO := PZO(14);
xADX := ADX(14);
xEMA := EMA(Price, 60);

if UsePZO then
   begin
        xMax:= xPZO;
        xMin:= xPZO;
   end;

if xADX > 18 then
begin { ADX > 18 cases}
      if IsShortPosition then
      begin
         if xMin\1\ < -60 and xMin > xMin\1\ then
              ExitShort:=true; {COVER1}
         if Price > xEMA and xMax > 0 then
              ExitShort:=true; {COVER2}
      end;
end; else

begin  { ADX < 18 cases}
    if IsShortPosition then
    begin
       if xMin < -40 then begin
          if xMin\1\ < -60 and xMin > xMin\1\ then
              ExitShort:=true; {COVER3};
          if Price > xEMA and xMax > 0 then
              ExitShort:=true; {COVER4};
       end; else
          if xMax > 15 then
              ExitShort:=true; {COVER5};
    end;
end;
return ExitShort;

To import the strategy into Tradecision, visit the area “Traders’ Tips from Tasc Magazine” at www.tradecision.com/support/tasc_tips/tasc_traders_tips.htm or copy the code above.

A sample chart is shown in Figure 13.

FIGURE 13: TRADECISION, PRICE ZONE OSCILLATOR. Here we see the volume zone oscillator and price zone oscillator plotted on a chart of Google (GOOG) with buy and sell signals generated by the PZO trading strategy.

—Yana Timofeeva, Alyuda Research
510 931-7808, sales@tradecision.com
www.tradecision.com

BACK TO LIST

TRADE NAVIGATOR: PRICE ZONE OSCILLATOR

Trade Navigator offers all the features you need to recreate and test the indicator and strategy presented in “Entering The Price Zone” by Walid Khalil and David Steckler in this issue.

First go to the Strategies tab in the Trader’s Toolbox. Click on the New button. Click the New Rule button.

To create the long entry rule (Long Entry # 1), input the following code:

IF ADX (14 , False) > 18 And Position <= 0 And Close > MovingAvg (Close , 60) And Crosses Above (PZO (14) , -40)

Set the Action to “Long Entry (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Repeat these steps for the other 17 rules using the following sets of code:

Long Entry # 2

IF (ADX (14 , False) > 18 And Position <= 0 And Crosses Above (PZO (14) , 0) And Crosses Above (PZO (14) , 15))

Set the Action to “Long Entry (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Long Entry # 3

IF ADX (14 , False) < 18 And Position <= 0 And Crosses Above (PZO (14) , -40)

Set the Action to “Long Entry (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Long Entry # 4

IF ADX (14 , False) < 18 And Position <= 0 And Crosses Above (PZO (14) , 15)

Set the Action to “Long Entry (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Long Exit # 1

IF ADX (14 , False) > 18 And Position > 0 And PZO (14).1 > 60 And PZO (14) < PZO (14).1

Set the Action to “Long Exit (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Long Exit # 2

IF ADX (14 , False) > 18 And Position > 0 And Close > MovingAvgX (Close , 60 , False) And PZO (14) < 0

Set the Action to “Long Exit (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Long Exit # 3

IF ADX (14 , False) < 18 And Position > 0 And PZO (14) > 40 And PZO (14).1 > 60 And PZO (14) < PZO (14).1

Set the Action to “Long Exit (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Long Exit # 4

IF ADX (14 , False) < 18 And Position > 0 And PZO (14) > 40 And Close < MovingAvgX (Close , 60 , False) And PZO (14) < 0

Set the Action to “Long Exit (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Entry # 1

IF ADX (14 , False) > 18 And Position >= 0 And Close < MovingAvgX (Close , 60 , False) And PZO (14) And Crosses Below (PZO (14) , 40)

Set the Action to “Short Entry (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Entry # 2

IF ADX (14 , False) > 18 And Position >= 0 And Crosses Below (PZO (14) , 0) And Crosses Below (PZO (14) , -5)

Set the Action to “Short Entry (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Entry # 3

IF ADX (14 , False) < 18 And Position >= 0 And Crosses Below (PZO (14) , 40)

Set the Action to “Short Entry (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Entry # 4

IF ADX (14 , False) < 18 And Position >= 0 And Crosses Below (PZO (14) , -5)

Set the Action to “Short Entry (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Entry # 5

IF ADX (14 , False) < 18 And Position > 0 And PZO (14) < 40 And PZO (14) < -5

Set the Action to “Short Entry (Sell)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Exit # 1

IF ADX (14 , False) > 18 And Position < 0 And PZO (14).1 < -60 And PZO (14) > PZO (14).1

Set the Action to “Short Exit (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Exit # 2

IF ADX (14 , False) > 18 And Position < 0 And Close > MovingAvgX (Close , 60 , False) And PZO (14) > 0

Set the Action to “Short Exit (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Exit # 3

IF ADX (14 , False) < 18 And Position < 0 And PZO (14) < -40 And PZO (14).1 < -60 And PZO (14) > PZO (14).1

Set the Action to “Short Exit (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Exit # 4

IF ADX (14 , False) < 18 And Position < 0 And PZO (14) < -40 And Close > MovingAvgX (Close , 60 , False) And PZO (14) > 0

Set the Action to “Short Exit (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Short Exit # 5

IF ADX (14 , False) < 18 And Position < 0 And PZO (14) > -40 And PZO (14) > 15

Set the Action to “Short Exit (Buy)” and the Order Type to “Market.”

Click on the Save button. Type a name for the rule and then click the OK button.

Settings
After you have all of the entry and exit rules set up, go to the Settings tab in the Strategy editor:

Place a check mark next to “Allow entries to reverse” and another one next to “Allow pyramiding.” Change the Maximum number of open entries per position to 5.

Save the strategy by clicking the Save button, typing a name for the strategy, and then clicking the OK button.

You can test your new strategy by clicking the Run button to see a report or you can apply the strategy to a chart for a visual representation of where the strategy would place trades over the history of the chart.

To set up the indicator, open the Trader’s Toolbox, click on the Functions tab and click the New button. Type in the following code:

&R := IFF (Close > Close.1 , Close , Close * -1) 
&CP := MovingAvgX (&R , period , False) 
&TC := MovingAvgX (Close , period , False) 
&PZO := 100 * &CP / &TC 
&PZO

Click the Verify button. When the Add Inputs window comes up, click the Add button. Change the default value to 14.

Click on the Save button, type a name for your new function, and click OK.

To see the indicator on a chart, go to the “Add to chart” window by clicking on the chart and typing “A” on the keyboard.

Click on the Indicators tab, find the PZO indicator in the list, and either doubleclick on it or highlight the name and click the Add button.

Genesis Financial Technologies is providing this strategy as a special downloadable file for Trade Navigator. To access it, click on the blue phone icon in Trade Navigator, select Download Special File, type “SC1106,” and click the Start button. The library name is “Entering The Price Zone,” the strategy name is “Entering The Price Zone,” and the indicator name is Pzo.

—Michael Herman
Genesis Financial Technologies
www.GenesisFT.com

BACK TO LIST

SHARESCOPE: PRICE ZONE OSCILLATOR

This script for ShareScope replicates the price zone oscillator (Pzo) described by Walid Khalil and David Steckler in their article in this issue, “Entering The Price Zone.” As you can see on the chart in Figure 16, strong signals are given by the oscillator entering and then exiting the +/- 40% levels.

Figure 16: SHARESCOPE, PRICE ZONE OSCILLATOR. Strong signals can be seen given by the oscillator entering and then exiting the +/- 40% levels.

ShareScope code for PZO
//@Name:PZO
//@Description: Draws the Price Zone Oscillator
//Author: Phil Tolhurst, ShareScript Support
// Care has been taken in preparing this code but it is provided without guarantee.
// You are welcome to modify and extend it. Please add your name as a modifier if you distribute it. 

function init()
{	
	setSeriesColour(0,Colour.Black);
	setSeriesLineStyle(0,0,0);
	
	setSeriesColour(1, Colour.Blue);
	setSeriesLineStyle(1, 0, 0);
	
	setSeriesColour(2, Colour.Green);
	setSeriesLineStyle(2, 0, 0);
	
	setSeriesColour(3, Colour.LightGreen);
	setSeriesLineStyle(3, 1, 0);
	
	setSeriesColour(4, Colour.LightBlue);
	setSeriesLineStyle(4, 2, 0);
	
	setSeriesColour(5, Colour.DarkGrey);
	setSeriesLineStyle(5, 0, 0);
	
	setSeriesColour(6, Colour.LightBlue);
	setSeriesLineStyle(6, 2, 0);
	
	setSeriesColour(7, Colour.LightRed);
	setSeriesLineStyle(7, 1, 0);
	
	setSeriesColour(8, Colour.Red);
	setSeriesLineStyle(8, 0, 0);
}

function getGraph(share, data)
{
	var TITLE = []; TITLE[data.length-1] = undefined;  //Sets Title Colour
	var EOB= [60]; // Extremely Overbought
	var OB = [40]; // Overbought
	var POS15 = [15]; //Positive fifteen
	var ZERO = [0]; //Zero Line
	var NEG5 = [-5]; //Negative fiften
	var OS = [-40]; //Oversold
	var EOS = [-60]; //Extremely Overslold
	
	var CP = []; //Closing Position
	var TC = []; //Total Close
	var PZO = []; //Price Zone Oscillator
	
	var period = 14;

	var CPmaCalc =  new MA(period,MA.Exponential);
	var TCmaCalc = new MA(period,MA.Exponential);

	for (var i=0;i<data.length;i++)
	{
		if (i==0)
		{
			CP[i] = CPmaCalc.getNext(data[i].close);
			TC[i] = TCmaCalc.getNext(data[i].close);
			continue;
		}
		else
		{
			if (data[i].close<data[i-1].close)
			{
				CP[i] = CPmaCalc.getNext(data[i].close*-1);
			}
			else
			{
				CP[i] = CPmaCalc.getNext(data[i].close);
			}
			TC[i] = TCmaCalc.getNext(data[i].close);
		}
		if (TC[i] == 0) 
		{	
			PZO[i]=0;
		}
		else 
		{
			PZO[i] = (CP[i]/TC[i])*100
		}
		EOB[i]=EOB[i-1];
		OB[i]=OB[i-1];
		POS15[i]=POS15[i-1];
		ZERO[i]=ZERO[i-1];
		NEG5[i]=NEG5[i-1];
		OS[i]=OS[i-1];
		EOS[i]=EOS[i-1];	
	}
	setTitle("PZO:"+(PZO[data.length-1].toFixed(2)));
	return[TITLE,PZO,EOB,OB,POS15,ZERO,NEG5,OS,EOS];
}

—Tim Clarke
www.sharescope.co.uk

BACK TO LIST

VT TRADER: PRICE ZONE OSCILLATOR

Our Traders’ Tip this month is based on “Entering The Price Zone” in this issue by Walid Khalil and David Steckler. In this second part of their series, the authors introduce a complementary indicator to their volume zone oscillator (Vzo) called the price zone oscillator (Pzo).

The Pzo uses several overbought and oversold levels (+60, +40, +15, 0, -5, -40, and -60) to help the trader determine whether the price is in a bullish or bearish zone. Khalil and Steckler write that the Pzo is useful in uptrending, downtrending, and even nontrending (ranging/sideways) market conditions and go on to describe four different trading methodologies for utilizing the Pzo in those various market conditions.

The VT Trader instructions for recreating the price zone oscillator are as follows:

1. VT Trader’s Ribbon→Technical Analysis menu→Indicators group→Indicators Builder→[New] button
2. In the General tab, type the following text into each corresponding text box:

   
   Name: TASC - 06/2011 - Price Zone Oscillator
   Function Name Alias: tasc_PZO
   Label Mask: TASC - 06/2011 - Price Zone Oscillator (%Periods%) = %PZO%
   Placement: New Frame
   Data Inspection Alias: Price Zone Osc.
   
   

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

   
   [New] button...
   Name: Periods
   Display Name: Periods
   Type: integer
   Default: 14
   
   

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

   
   [New] button...
   Var Name: PZO	
   Name: (PZO)
   Line Color: dark blue
   Line Width: slightly thicker
   Line Type: solid
   
   

5. In the Horizontal Line tab, create the following horizontal lines:

   
   [New] button...
   Value: +60
   Line Color: dark red
   Line Width: thin
   Line Type: dashed
   
   [New] button...
   Value: +40
   Line Color: red
   Line Width: thin
   Line Type: dashed
   
   [New] button...
   Value: +15
   Line Color: red
   Line Width: thin
   Line Type: dashed
   
   [New] button...
   Value: 0
   Line Color: black
   Line Width: thin
   Line Type: dashed
   
   [New] button...
   Value: -5
   Line Color: red
   Line Width: thin
   Line Type: dashed
   
   [New] button...
   Value: -40
   Line Color: red
   Line Width: thin
   Line Type: dashed
   
   [New] button...
   Value: -60
   Line Color: dark red
   Line Width: thin
   Line Type: dashed
   
   

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

   
   {Provided By: Capital Market Services, LLC & Visual Trading Systems, LLC}
   {Copyright: 2011}
   {Description: TASC, June 2011 -  "Entering the Price Zone" by Walid Khalil and David Steckler}
   {File: tasc_PZO.vtscr - Version 1.0}
   
   R:= If(C>Ref(C,-1),C,-C);
   CP:= Mov(R,Periods,E);
   TC:= Mov(C,Periods,E);
   PZO:= 100*(CP/TC);
   
   

7. Click the “Save” icon in the toolbar to finish building the Price Zone Oscillator (PZO).

Figure 18: VT TRADER, PRICE ZONE OSCILLATOR. Here is an example of the prize zone oscillator (PZO) on a EUR/USD one-hour candlestick chart.

To attach the indicator to a chart (Figure 18), click the right mouse button within the chart window and then select “Add Indicator”→“TASC — 06/2011 — Price Zone Oscillator” from the indicator list.

We’ll be offering the price zone oscillator (Pzo) for download in our VT client forums at https://forum.vtsystems.com along with hundreds of other precoded and free indicators and trading systems. To learn more about VT Trader, visit www.vtsystems.com.

Risk disclaimer: Forex trading involves a substantial risk of loss and may not be suitable for all investors.

—Chris Skidmore
Visual Trading Systems, LLC
212 871-1747, info@vtsystems.com
www.vtsystems.com

BACK TO LIST

PRICE ZONE OSCILLATOR — KHALIL & STECKLER ARTICLE CODE

Price Zone Oscillator

TradeStation:
Input:Period(14);
Vars: MV(0), R(0), VP(0), TV(0), PZO(0);

MV = iff(DataCompression >= 2, AbsValue(Close), Ticks);
R = Sign(Close - Close[1]) * MV;
VP = XAverage(R, Period);
TV = Xaverage(MV, Period);

if TV <> 0 then PZO = 100 * VP / TV;

Plot1(PZO, "PZO");
Plot2(+60, "+60");
Plot3(+40, "+40");
Plot4(+15, "+15");
Plot5(-5, "-5");
Plot6(-40, "-40");
Plot7(-60, "-60");
Plot99(0, "zero");

MetaStock:
Period: =Input("Y" ,2 ,200 ,14 ); 
R :=If(C>Ref(C,-1),C,-C); 
CP :=Mov(R,period ,E);
TC :=Mov(C,period ,E);
PZO :=100*(CP/TC);
PZO

PRICE ZONE OSCILLATOR CODE FOR TRADESTATION
With appreciation to Aapta member Bob Fulks for his invaluable help in coding the Pzo and Vzo strategies for TradeStation.

The articles explain there are three sell (or cover) signals when the Adx is greater than 18. One of these signals is to look for a divergence between price and the Vzo or Pzo. Because determining divergence is part art, part science, this signal was not written into the code.

TradeStation users will see that a buy signal may be followed by a sell short signal, rather than two signals: sell (the buy) and a sell short. Likewise, a sell short signal may be followed by a buy signal, rather than two signals: cover and a buy. TradeStation’s notation system is to show the net position; for example, from -100 shares to +100 shares means cover the 100 shares sold short and then buy 100 shares.

PZO strategy:
Input: PlotMode(1), Price(Close), UsePZO(TRUE);

Vars: xADX(0), xEMA(Price), xVZO(0), xPZO(0), xMax(0), xMin(0), 
		B2_SU(FALSE), S2_SU(FALSE), MP(0);

MP = MarketPosition;

xPZO = PZO(14);


xADX = ADX(14);
xEMA = XAverage(Price, 60);

if UsePZO then begin
	xMax = xPZO;	
	xMin = xPZO;

end;

if xADX > 18 then begin			// ADX > 18 cases
	if MP <= 0 and Price > xEMA then begin
		if xMax crosses over -40 then Buy("BUY1") next bar at market;
		if xMin crosses over 0 then B2_SU = TRUE;
		if B2_SU and xMax crosses over +15 then Buy("BUY2") next bar at market;
	end;
	if MP > 0 then begin
		if xMax[1] > +60 and xMax < xMax[1] then Sell("SELL1") next bar at market; 
		if Price < xEMA and xMin < 0 then Sell("SELL2") next bar at market; 
	end;
	



if MP >= 0 and Price < xEMA then begin
		if xMin crosses under +40 then SellShort("SELL SHORT1") next bar at market;
		if xMax crosses under 0 then S2_SU = TRUE;
		if S2_SU and xMin crosses under -5 then SellShort("SELL SHORT2") next bar at market;
	end;
	if MP < 0 then begin
		if xMin[1] < -60 and xMin > xMin[1] then BuyToCover("COVER1") next bar at market; 
		if Price > xEMA and xMax > 0 then BuyToCover("COVER2") next bar at market; 
	end;
end else begin						// ADX < 18 cases
	if MP <= 0 then begin
		if xMax crosses over -40 then Buy("BUY3") next bar at market;
		if xMax crosses over +15 then Buy("BUY4") next bar at market;
	end;
	if MP > 0 then begin
		if xMax > +40 then begin
			if xMax[1] > +60 and xMax < xMax[1] then Sell("SELL3") next bar at market; 
			if Price < xEMA and xMin < 0 then Sell("SELL4") next bar at market; 
		end else 
			if xMin < -5 then Sell("SELL5") next bar at market; 
	end;
	if MP >= 0 then begin
		if xMin crosses under +40 then SellShort("SELL SHORT3") next bar at market;
		if xMin crosses under -5 then SellShort("SELL SHORT4") next bar at market;
	end;
	if MP < 0 then begin
		if xMin < -40 then begin
			if xMin[1] < -60 and xMin > xMin[1] then BuyToCover("COVER3") next bar at market; 
			if Price > xEMA and xMax > 0 then BuyToCover("COVER4") next bar at market; 
		end else
			if xMax > +15 then BuyToCover("COVER5") next bar at market; 
	end;
end;

if xMin crosses under +15 then B2_SU = FALSE;
if xMax crosses over   -5 then S2_SU = FALSE;

—Walid Khalil, Cfte, Mfta
waleedkhalil@live.com
—David Steckler
DSteckler@aol.com

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THINKORSWIM.COM: PRICE ZONE OSCILLATOR

“Entering The Price Zone” by Walid Khalil and David Steckler in the June 2011 issue of S&C outlines a new oscillator that investors can use to help identify overbought and oversold levels in a security. The price zone oscillator (Pzo) strategy identifies entry and exit point based on crossovers of major levels along with retracements across those levels.

We have created four strategy files utilizing our proprietary programming language, thinkScript. When applied together, they will provide the signals generated by the authors’ methodology. In addition, we have included a script for the oscillator itself, without generating buy and sell signals on the chart. This script can be used independently of, or alongside, the strategies.

FIGURE 21: THINK OR SWIM PZO sample chart.

The code is shown here along with instructions for applying it.

1. From our TOS Charts, Select Studies → Edit Studies
2. Select the “Strategies” tab in the upper left-hand corner.
3. Select “New” in the lower left-hand corner.
4. Name the Long Entry (i.e., PriceZoneOscillatorLE)
5. Click in the script editor window, remove “declare LONG_ENTRY” and paste in the following code:

   
   declare LONG_ENTRY;
   
   input length = 14;
   input EMALength = 60;
   
   def CP = ExpAverage(Sign(close - close[1]) * close, length);
   def TC = ExpAverage(close, length);
   def PZO = 100 * CP / TC;
   
   def ADX = ADX(length);
   def EMA = ExpAverage(close, EMALength);
   
   def trend = ADX > 18;
   def trendUp = trend and close > EMA;
   rec below0 = trendUp and (below0[1] or PZO < 0);
   
   addOrder(trendUp and PZO crosses above -40);
   addOrder(trendUp and below0 and PZO crosses above 20);
   addOrder(!trend and PZO crosses above -40);
   addOrder(!trend and PZO crosses above 15);
   
   SetColor(GetColor(1));
   
   

6. Select OK.
7. Select “New” in the lower left-hand corner.
8. Name the Short Entry (i.e. PriceZoneOscillatorSE)
9. Click in the script editor window, remove “declare LONG_ENTRY” and paste in the following:

   
   declare SHORT_ENTRY;
   
   input length = 14;
   input EMALength = 60;
   
   def CP = ExpAverage(Sign(close - close[1]) * close, length);
   def TC = ExpAverage(close, length);
   def PZO = 100 * CP / TC;
   
   def ADX = ADX(length);
   def EMA = ExpAverage(close, EMALength);
   
   def trend = ADX > 18;
   def trendDown = trend and close < EMA;
   rec above0 = trendDown and (above0[1] or PZO > 0);
   
   addOrder(trendDown and PZO crosses below 40);
   addOrder(trendDown and above0 and PZO crosses above -20);
   addOrder(!trend and PZO crosses below 40);
   addOrder(!trend and PZO crosses below -5);
   
   SetColor(GetColor(2));
   
   

10. Select OK.
11. Select “New” in the lower left-hand corner.
12. Name the Long Exit (i.e. PriceZoneOscillatorLX)
13. Click in the script editor window, remove “declare LONG_ENTRY” and paste in the following:

    
    declare LONG_EXIT;
    
    input length = 14;
    input EMALength = 60;
    
    def CP = ExpAverage(Sign(close - close[1]) * close, length);
    def TC = ExpAverage(close, length);
    def PZO = 100 * CP / TC;
    
    def ADX = ADX(length);
    def EMA = ExpAverage(close, EMALength);
    
    def trend = ADX > 18;
    def trendUp = trend and close > EMA;
    def sellTrendUp = PZO[1] > 60 and PZO < PZO[1] or
      close < EMA and PZO < 0;
    rec above40 = !trend and (above40[1] or PZO > 40);
    
    addOrder(trend and sellTrendUp);
    addOrder(!trend and above40 and sellTrendUp);
    addOrder(!trend and !above40 and PZO < -5);
    
    SetColor(GetColor(2));
    
    

14. Select OK.
15. Select “New” in the lower left-hand corner.
16. Name the Short Exit (i.e., PriceZoneOscillatorSX)
17. Click in the script editor window, remove “declare LONG_ENTRY” and paste in the following:

    
    declare SHORT_EXIT;
    
    input length = 14;
    input EMALength = 60;
    
    def CP = ExpAverage(Sign(close - close[1]) * close, length);
    def TC = ExpAverage(close, length);
    def PZO = 100 * CP / TC;
    
    def ADX = ADX(length);
    def EMA = ExpAverage(close, EMALength);
    
    def trend = ADX > 18;
    def trendDown = trend and close < EMA;
    def coverTrendDown = PZO[1] < -60 and PZO > PZO[1] or
      close > EMA and PZO > 0;
    rec belowMinus40 = !trend and (belowMinus40[1] or PZO < -40);
    
    addOrder(trend and coverTrendDown);
    addOrder(!trend and belowMinus40 and coverTrendDown);
    addOrder(!trend and !belowMinus40 and PZO > 15);
    
    SetColor(GetColor(1));
    
    

18. Select OK.
19. (Optional) If you wish to add the oscillator itself, click Studies at the upper-left hand corner of the “Edit Studies and Strategies” window.
20. Select “New” in the lower left-hand corner.
21. Name the oscillator study (i.e., PriceZoneOsc)
22. Click in the script editor window, remove “plot Data = close;” and paste in the following:

    
    declare lower;
    
    input length = 14;
    
    def CP = ExpAverage(Sign(close - close[1]) * close, length); def TC = ExpAverage(close, length);
    
    plot PZO = 100 * CP / TC;
    plot "+60" = 60;
    plot "+40" = 40;
    plot "+15" = 15;
    plot "-5" = -5;
    plot "-40" = -40;
    plot "-60" = -60;
    plot ZeroLine = 0;
    
    PZO.SetDefaultColor(GetColor(1));
    "+60".SetDefaultColor(GetColor(6));
    "+40".SetDefaultColor(GetColor(6));
    "+15".SetDefaultColor(GetColor(3));
    "-5".SetDefaultColor(GetColor(3));
    "-40".SetDefaultColor(GetColor(5));
    "-60".SetDefaultColor(GetColor(5));
    ZeroLine.SetDefaultColor(GetColor(4));
    
    

23. Select OK.

—Victor Jones
thinkorswim, Division of TD AMERITRADE, Inc.
thinkorswim.com

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