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 and other issues.
Other code appearing in articles in this issue is posted in the Subscriber Area of our website at https://technical.traders.com/sub/sublogin.asp. Login requires your last name and subscription number (from mailing label). Once logged in, scroll down to beneath the “Optimized trading systems” area until you see “Code from articles.” From there, code can be copied and pasted into the appropriate technical analysis program so that no retyping of code is required for subscribers.
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.
For this month’s Traders’ Tips, the focus is Barbara Star’s article in this issue, “The DMI Stochastic.” Here we present the January 2013 Traders’ Tips code.
Source code for eSignal is already provided in Star’s article by the author, and subscribers will find this code in the Subscriber Area of our website, Traders.com. (Click on “Article Code” from our homepage.) Presented here is additional code and possible implementations for other software.
In the article “The DMI Stochastic” in this issue, author Barbara Star describes the use of a DMI oscillator indicator and a DMI stochastic indicator to help time entries into markets.
Potential long entries exist when the DMI oscillator is above zero and the DMI stochastic is oversold and potential short entries exist when the DMI oscillator is below zero and the DMI stochastic is overbought. For more on entry conditions, please reference Star’s article.
Based on this, we are providing four studies with two accompanying functions. The four studies have been applied to a chart of IBM and can be seen in the chart in Figure 1. The PaintBar study was used to paint the bars red or blue based on the DMI oscillator value (above or below zero). The ShowMe (dot markers in price subgraph) study is used to identify reversals of the DMI stochastic as described by Star.
FIGURE 1: TRADESTATION, FOUR STUDIES. Here is a daily bar chart of IBM with the four studies applied.
The two indicators provided here are for the DMI oscillator and the DMI stochastic extreme as described in the article. Once you have the studies applied to your chart, you can save this analysis group to allow for quicker application to another chart. To save the analysis group once you have the chart set up as desired, from the main platform, select Format→Save Analysis Group from the menus.
To download the EasyLanguage code for this strategy, first navigate to the EasyLanguage FAQs and Reference Posts Topic in the EasyLanguage Support Forum (https://www.tradestation.com/Discussions/Topic.aspx?Topic_ID=47452), scroll down, and click on the link labeled “Traders’ Tips, TASC.” Then select the appropriate link for the month and year. The ELD filename is “_DMI_Stochastic.ELD.”
The EasyLanguage code is also shown below.
_DMI Oscillator ( Indicator )
{ "The DMI Stochastic" }
{ Barbara Star, PhD }
{ TASC, January 2013 }
inputs:
int DMILength( 10 ), { DMI calculation length }
bool PlotOBandOSLines( true ),
double OverBought( 20 ),
double OverSold( -20 ),
bool ColorCellBGOnOBorOS( true ), { if true, cell
background color will be if DMI Oscillator is in
overbought or oversold territory }
int BackgroundColorOnOBorOS( DarkGray ) ; { if
ColorCellBGOnOBorOS is true, this input specifies
the color to which the cell background will be
changed; if ColorCellBGOnOBorOS is false, then
this input has no effect }
variables:
intrabarpersist bool InAChart( false ),
double DMIOsc( 0 ) ; { holds DMI Oscillator
value }
once { determine if the application is a chart }
InAChart =
GetAppInfo( aiApplicationType ) = cChart ;
{ calculate the DMI oscillator value }
DMIOsc = _DMI_Oscillator( DMILength ) ;
{ plot the DMI oscillator value }
Plot1( DMIOsc, "DMIOsc" ) ;
if InAChart then
Plot2( DMIOsc, "DMIOscL" ) ; { line plot }
if PlotOBandOSLines then
begin
Plot3( OverBought, "OverBought" ) ;
Plot4( OverSold, "OverSold" ) ;
end ;
{ grid application specifics }
if ColorCellBGOnOBorOS then { if true, set the
background color if the DMI Oscillator is overbought
or oversold; note that SetPlotBGColor has no effect
in Charting }
begin
if DMIOsc > OverBought then
SetPlotBGColor( 3,
BackgroundColorOnOBorOS ) ;
if DMIOsc < OverSold then
SetPlotBGColor( 4,
BackgroundColorOnOBorOS ) ;
end ;
{ alerts }
if AlertEnabled then
begin
if DMIOsc > OverBought then
Alert( "DMI Oscillator overbought." ) ;
if DMIOsc < OverSold then
Alert( "DMI Oscillator oversold." ) ;
end ;
_DMI Stochastic Extreme ( Indicator )
{ "The DMI Stochastic" }
{ Barbara Star, PhD }
{ TASC, January 2013 }
inputs:
int DMILength( 10 ), { DMI calculation length }
int HLPeriod( 3 ),
int SumPeriod( 3 ),
bool PlotMarkers( true ),
int OBCrossColor( Magenta ), { dot color for cross
of OverBought level }
int OSCrossColor( Cyan ), { dot color for cross of
OverSold level }
double OverBought( 90 ), { overbought level }
double OverSold( 10 ) ; { oversold level }
variables:
double DMIStoch( 0 ) ; { holds DMI Stochastic
value }
DMIStoch = _DMI_Stochastic_Extreme( DMILength,
HLPeriod, SumPeriod ) ;
{ plots }
Plot1( DMIStoch, "DMIStoch" ) ;
Plot2( OverBought, "OverBought" ) ;
Plot3( OverSold, "OverSold" ) ;
{ alerts and markers }
if DMIStoch crosses over OverSold then
begin
if PlotMarkers then
Plot4( DMIStoch, "OSCross", OSCrossColor ) ;
Alert( "DMIStoch crossed over oversold." ) ;
end;
if DMIStoch crosses under OverBought then
begin
if PlotMarkers then
Plot5( DMIStoch, "OBCross", OBCrossColor ) ;
Alert( "DMIStoch crossed under overbought." ) ;
end ;
_DMI Oscillator PB ( PaintBar )
{ "The DMI Stochastic" }
{ Barbara Star, PhD }
{ TASC, January 2013 }
inputs:
int DMILength( 10 ), { DMI calculation length }
int UpColor( Blue ), { PaintBar color if DMI
Oscillator is greater than 0 }
int DownColor( Red ) ; { PaintBar color if DMI
Oscillator is less than or equal to 0 }
variables:
double DMIOsc( 0 ), { holds DMI Oscillator value }
int PlotColor( 0 ) ; { PaintBar Color }
{ calculate the DMI oscillator value }
DMIOsc = _DMI_Oscillator( DMILength ) ;
{ set PaintBar color based on DMI Oscillator value }
if DMIOsc > 0 then
PlotColor = UpColor
else
PlotColor = DownColor ;
PlotPaintBar( High, Low, Open, Close, "DMIOscPB",
PlotColor ) ;
_DMI Stochastic Reversal ( ShowMe )
{ "The DMI Stochastic" }
{ Barbara Star, PhD }
{ TASC, January 2013 }
inputs:
int DMILength( 10 ), { DMI calculation length }
int HLPeriod( 3 ),
int SumPeriod( 3 ),
int DMIStochMALength( 3 ),
bool PlotMarkers( true ),
double CrossOverPlotPrice( Low ), { dot location
when DMIStoch crosses over its moving average }
double CrossUnderPlotPrice( High ), { dot location
when DMIStoch crosses under its moving average }
int CrossOverColor( Cyan ), { dot color for
DMIStoch cross over moving average }
int CrossUnderColor( Magenta ) ; { dot color for
DMIStoch cross under moving average }
variables:
double DMIStoch( 0 ), { holds DMI Stochastic
value }
double DMIStochMA( 0 ) ; { moving average of DMI
Stochastic value }
DMIStoch = _DMI_Stochastic_Extreme( DMILength,
HLPeriod, SumPeriod ) ;
DMIStochMA = Average( DMIStoch, DMIStochMALength ) ;
if CurrentBar > DMIStochMALength then { ensure
adequate bars have been calculated to obtain valid
values }
begin
if DMIStoch crosses over DMIStochMA then
begin
if PlotMarkers then
Plot1( CrossOverPlotPrice, "CrossOver",
CrossOverColor ) ;
Alert( "DMIStoch crossed over MA." ) ;
end ;
if DMIStoch crosses under DMIStochMA then
begin
if PlotMarkers then
Plot2( CrossUnderPlotPrice, "CrossUnder",
CrossUnderColor ) ;
Alert( "DMIStoch crossed under MA." ) ;
end ;
end ;
_DMI_Oscillator ( Function )
{ "The DMI Stochastic" }
{ Barbara Star, PhD }
{ TASC, January 2013 }
inputs:
int DMILength( numericsimple ) ; { length for
DMI calculations }
variables:
double DMIPlusValue( 0 ),
double DMIMinusValue( 0 ),
double DMIOsc( 0 ) ;
once { function designed for Daily, Weekly, or Monthly
bars}
begin
if BarType < 2 or BarType > 4 then
RaiseRunTimeError( "_DMI_Oscillator " +
"function designed to work with Daily, " +
"Weekly, or Monthly Bars" ) ;
end ;
DMIPlusValue = DMIPlus( DMILength ) ;
DMIMinusValue = DMIMinus( DMILength ) ;
DMIOsc = DMIPlusValue - DMIMinusValue ;
_DMI_Oscillator = DMIOsc ;
{ force series function, since otherwise this function
can verify as simple, but needs to be called at every
bar to return correct results }
if false then
Value1 = _DMI_Oscillator[1] ;
_DMI_Stochastic_Extreme ( Function )
{ "The DMI Stochastic" }
{ Barbara Star, PhD }
{ TASC, January 2013 }
inputs:
int DMILength( numericsimple ), { DMI calc
length }
int HLPeriod( numericsimple ),
int SumPeriod( numericsimple ) ;
variables:
double DMIOsc( 0 ), { holds DMI Oscillator
value }
double HighestDMIOsc( 0 ),
double LowestDMIOsc( 0 ),
double DMIStoch( 0 ), { holds DMI Stochastic
value }
double SumNumerator( 0 ), { numerator sum }
double SumDenominator( 0 ), { denominator sum }
int LoopCounter( 0 ) ;
{ calculate the DMI oscillator value }
DMIOsc = _DMI_Oscillator( DMILength ) ;
HighestDMIOsc = Highest( DMIOsc, HLPeriod ) ;
LowestDMIOsc = Lowest( DMIOsc, HLPeriod ) ;
SumNumerator = 0 ;
SumDenominator = 0 ;
for LoopCounter = 0 to SumPeriod - 1
begin
SumNumerator += DMIOsc[LoopCounter] -
LowestDMIOsc[LoopCounter] ;
SumDenominator += HighestDMIOsc[LoopCounter] -
LowestDMIOsc[LoopCounter] ;
end ;
if SumDenominator > 0 then
DMIStoch = SumNumerator / SumDenominator * 100 ;
_DMI_Stochastic_Extreme = DMIStoch ;
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.
Barbara Star’s article in this issue, “The DMI Stochastic,” includes multiple formulas. The MetaStock version of those formulas are listed here, courtesy of Star.
Name: DMI Osc
Formula:
PDI(10)-MDI(10)
Change the line style to a histogram. Once the histogram is plotted, place a one period simple moving average on the DMI Oscillator to outline the shape.
Name: DMI Stochastic
Formula:
(Sum(PDI(10)-MDI(10)-LLV(PDI(10)-MDI(10 ),3),3)/
Sum(HHV(PDI(10)-MDI(10),3)-LLV(PDI(10)-MDI(10 ),3),3))*100
Expert Advisor:
Highlights:
Name: DMI Oscillator Above Zero
Color: Blue
Formula:
Fml("DMI Osc") > 0
Name: DMI Oscillator Below Zero
Color: Red
Formula:
Fml("DMI Osc") < 0
Symbols:
Name: Lower Extreme
Symbol: Up Arrow
Color: Green
Position: Below Prices
Formula:
(Fml("DMI Stochastic")>10)AND When(Ref(Fml("DMI Stochastic"),-1)<=10)
Name: Upper Extreme
Symbol: Down Arrow
Color: Red
Position: Above Prices
Formula:
(Fml("DMI Stochastic")<90)AND When(Ref(Fml("1 A DMI Stochastic"),-1)>=90)
Name: Reversal Alerts to Upside
Symbol: Diamond
Color: Green
Position: Below Prices
Formula:
Cross(Fml("DMI Stochastic"),Mov(Fml("DMI Stochastic"),3,S))
Name: Reversal Alerts to Downside
Symbol: Diamond
Color: Red
Position: Above Prices
Formula:
Cross(Mov(Fml("DMI Stochastic"),3,S),(Fml("DMI Stochastic")))
In “The DMI Stochastic” in this issue, author Barbara Star provides an in-depth discussion on how to use two classic technical analysis calculations in conjunction with each other to deliver one new study. The classic studies used are the directional movement index (DMI) and a stochastic oscillator. The DMI oscillator combines the trending recognition of the DMI with the trading level (overbought or oversold) indication of the stochastic. This results in a much faster and more responsive oscillator that is based on trending direction.
We have created several studies for thinkorswim users in our proprietary scripting language, thinkScript. Adjust the parameters of the study within the Edit Studies window to fine-tune behavior.
A sample chart is shown in Figure 2.
FIGURE 2: THINKORSWIM. Here are the DMI oscillator and DMI stochastic extreme oscillator on a thinkorswim chart of the NASDAQ.
The studies:
DMI_Oscillator:
declare lower;
input length = 10;
input paintBars = yes;
def diPlus = DMI(length)."DI+";
def diMinus = DMI(length)."DI-";
plot Osc = diPlus - diMinus;
plot Hist = Osc;
plot ZeroLine = 0;
Osc.SetDefaultColor(GetColor(1));
Hist.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);
Hist.SetLineWeight(3);
Hist.DefineColor("Positive", Color.UPTICK);
Hist.DefineColor("Negative", Color.DOWNTICK);
Hist.AssignValueColor(if Hist > 0 then Hist.Color("Positive") else Hist.Color("Negative"));
ZeroLine.SetDefaultColor(Color.GRAY);
DefineGlobalColor("Positive", Color.UPTICK);
DefineGlobalColor("Negative", Color.DOWNTICK);
AssignPriceColor(if !paintBars
then Color.CURRENT
else if Osc > 0
then globalColor("Positive")
else globalColor("Negative"));
DMI_ReversalAlerts:
input length = 10;
input highLowLength = 3;
input sumLength = 3;
input averageLength = 3;
def diPlus = DMI(length)."DI+";
def diMinus = DMI(length)."DI-";
def osc = diPlus - diMinus;
def hh = Highest(osc, highLowLength);
def ll = Lowest(osc, highLowLength);
def stoch = Sum(osc - ll, sumLength) / (Sum(hh - ll, sumLength)) * 100;
def avgStoch = Average(stoch, averageLength);
plot Above = stoch crosses above avgStoch;
plot Below = stoch crosses below avgStoch;
Below.SetDefaultColor(Color.DOWNTICK);
Below.SetPaintingStrategy(PaintingStrategy.BOOLEAN_ARROW_DOWN);
Above.SetDefaultColor(Color.UPTICK);
Above.SetPaintingStrategy(PaintingStrategy.BOOLEAN_ARROW_UP);
DMI_StochasticExtreme:
declare lower;
input length = 10;
input highLowLength = 3;
input sumLength = 3;
input over_bought = 90;
input over_sold = 10;
def diPlus = DMI(length)."DI+";
def diMinus = DMI(length)."DI-";
def osc = diPlus - diMinus;
def hh = Highest(osc, highLowLength);
def ll = Lowest(osc, highLowLength);
plot Stoch = Sum(osc - ll, sumLength) / (Sum(hh - ll, sumLength)) * 100;
plot OverBought = over_bought;
plot OverSold = over_sold;
plot Up = if Stoch crosses above over_sold then over_sold + 5 else Double.NaN;
plot Down = if Stoch crosses below over_bought then over_bought - 5 else Double.NaN;
Stoch.SetDefaultColor(GetColor(1));
OverBought.setDefaultColor(Color.GRAY);
OverSold.setDefaultColor(Color.GRAY);
Up.SetDefaultColor(Color.UPTICK);
Up.SetPaintingStrategy(PaintingStrategy.ARROW_UP);
Up.hideBubble();
Down.SetDefaultColor(Color.DOWNTICK);
Down.SetPaintingStrategy(PaintingStrategy.ARROW_DOWN);
Down.hideBubble();
In “The DMI Stochastic” in this issue, author Barbara Star presents a number of simple but universal oscillator setups that help get into a position, be it a trade in the direction of trend or a countertrend opportunity. The author applies stochastics to Wilder’s directional oscillator (+DI minus -DI), and uses both to identify the trend.
Most discussions of trading techniques are centered around entries into trades. But in truth, a trading system’s success ultimately depends on exits, position sizing, and portfolio selection — not entries. Unfortunately, the DMI stochastic is not a complete trading system. To compensate, we have added two generic exit strategies to evaluate its performance: a fixed-bars exit that terminates a position once the specified number of days in the position has been reached; and a combination of profitable/losing closes. These techniques can be used to backtest almost any entry style without adding prejudice.
Entry rules
Exit rules
Both the entries and exits can be applied separately; the choice is up to the user. To switch between the different entry and exit styles, drag the respective slider in the “Strategy parameter” box on the lower-left of the program’s workspace. The resulting strategy is available to Wealth-Lab users for downloading right inside the program; simply click the “download...” button in the application's “Open strategy” dialog.
A sample chart is shown in Figure 3 implementing this strategy.
FIGURE 3: WEALTH-LAB. This daily chart of the QQQ illustrates the application of the DMI oscillator/DMI stochastic.
C# Code:
using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
namespace WealthLab.Strategies
{
public class Star201301 : WealthScript
{
private StrategyParameter paramEntryType;
private StrategyParameter paramExitType;
private StrategyParameter paramFixedBars;
private StrategyParameter paramProfitableClosesTrend;
private StrategyParameter paramProfitableClosesCT;
private StrategyParameter paramLosingCloses;
public Star201301()
{
paramEntryType = CreateParameter("Entry type", 0, 0, 2, 1);
paramExitType = CreateParameter("Exit style", 0, 0, 1, 1);
paramFixedBars = CreateParameter("Fixed bars", 5, 1, 30, 1);
paramProfitableClosesTrend = CreateParameter("Prft closes (trend)", 10, 1, 15, 1);
paramProfitableClosesCT = CreateParameter("Prft closes (CT)", 5, 1, 15, 1);
paramLosingCloses = CreateParameter("Losing closes", 3, 1, 15, 1);
}
protected override void Execute()
{
int EntryType = paramEntryType.ValueInt == 0 ? 0 : paramEntryType.ValueInt == 1 ? 1 : 2;
int pBars = 0; int lBars = 0;
int FixedBars = paramFixedBars.ValueInt; // Exit after N fixed bars
int ProfitableClosesTrend = paramProfitableClosesTrend.ValueInt; // Number of profitable closes, trend mode
int ProfitableClosesCounter = paramProfitableClosesCT.ValueInt; // Number of profitable closes, counter-trend mode
int LosingCloses = paramLosingCloses.ValueInt; // Number of losing closes
DIPlus dmp = DIPlus.Series( Bars,10 ); // DMI Oscillator
DIMinus dmm = DIMinus.Series( Bars,10 );
DataSeries dmo = dmp - dmm;
dmo.Description = "DMI Oscillator";
ChartPane dmoPane = CreatePane( 30,true,true );
PlotSeries( dmoPane, dmo, Color.Red, LineStyle.Histogram, 3 );
DataSeries dmiStoch = new DataSeries( dmo, "DMI Stochastic" ); // DMI Stochastic - direct calculation
Highest hDmo = Highest.Series( dmo, 10 );
Lowest lDmo = Lowest.Series( dmo, 10 );
dmiStoch = 100 * ( dmo - lDmo ) / ( hDmo - lDmo );
dmiStoch = SMA.Series( dmiStoch, 3 );
dmiStoch.Description = "DMI Stochastic #1";
ChartPane dmsPane = CreatePane( 30,true,true );
PlotSeries( dmsPane, dmiStoch, Color.Red, LineStyle.Solid, 2 );
Bars dmiBars = new Bars("DMI Bars (" + Bars.Symbol+")",Bars.Scale,Bars.BarInterval);
for(int bar = 0; bar < Bars.Count; bar++)
{
dmiBars.Add( Bars.Date[bar], dmo[bar], dmo[bar], dmo[bar], dmo[bar], 0 );
}
dmiBars = Synchronize( dmiBars ); // DMI Stochastic - version #2
DataSeries dmiStoch2 = StochD.Series( dmiBars, 10, 3 );
dmiStoch2.Description = "DMI Stochastic #2";
ChartPane dmsPane2 = CreatePane( 30,true,true );
PlotSeries( dmsPane2, dmiStoch2, Color.Green, LineStyle.Solid, 2 );
DrawHorzLine( dmsPane2, 10, Color.Blue, LineStyle.Dashed, 1 );
DrawHorzLine( dmsPane2, 90, Color.Red, LineStyle.Dashed, 1 );
HideVolume();
for(int bar = GetTradingLoopStartBar(10); bar < Bars.Count; bar++)
{
SetBarColor( bar, dmo[bar] > 0 ? Color.DarkBlue : Color.Red );
if (IsLastPositionActive)
{
Position p = LastPosition;
if( paramExitType.ValueInt == 0 ) // Fixed bars
{
if ( bar+1 - p.EntryBar >= FixedBars )
ExitAtMarket( bar+1, p, "Timed" );
}
else
{ // Profitable/losing closes
if( p.PositionType == PositionType.Long )
{
if( Bars.Close[bar] > p.EntryPrice )
pBars++;
else
if( Bars.Close[bar] < p.EntryPrice )
lBars++;
}
else
{
if( Bars.Close[bar] < p.EntryPrice )
pBars++;
else
if( Bars.Close[bar] > p.EntryPrice )
lBars++;
}
if( p.EntrySignal == "Pullback" )
{
if( pBars >= ProfitableClosesTrend )
ExitAtMarket( bar+1, p, "Profitable Closes.Pullback" );
}
else
if( p.EntrySignal == "Countertrend" )
{
if( pBars >= ProfitableClosesCounter )
ExitAtMarket( bar+1, p, "Profitable Closes.CounterTrend" );
}
if( lBars >= LosingCloses )
ExitAtMarket( bar+1, p, "Losing Closes" );
}
}
else
{
Position p = null;
// Pullback entries
if( EntryType == 0 || EntryType == 1 )
{
if( dmo[bar] > 0 && CrossOver( bar, dmiStoch2, 10 ) )
p = BuyAtMarket( bar+1, "Pullback" );
if( dmo[bar] < 0 && CrossUnder( bar, dmiStoch2, 90 ) )
p = ShortAtMarket( bar+1, "Pullback" );
}
// Countertrend entries
if( EntryType == 0 || EntryType == 2 )
{
if( p == null )
{
if( CrossUnder( bar, dmo, 20 ) )
p = ShortAtMarket( bar+1, "Countertrend" );
else
if( CrossOver( bar, dmo, -20 ) )
p = BuyAtMarket( bar+1, "Countertrend" );
}
}
if( p != null )
{
pBars = 0; lBars = 0;
}
}
}
}
}
}
In “The DMI Stochastic” in this issue, Barbara Star presents a trading technique using the directional movement index (DMI) and stochastic DMI.
A ready-to-use formula for the DMI is presented in Listing 1 and the formula for stochastic DMI is given in Listing 2. To display these indicators, simply type them in the Formula Editor and press “Apply indicator.” A sample chart is shown in Figure 4.
FIGURE 4: AMIBROKER. Here is a daily chart of AMGN with the DMI oscillator (middle pane) and the stochastic DMI (bottom pane).
LISTING 1.
// DMI Oscillator
Version( 5.60 ); //
range = Param("range", 10, 2, 100 );
DMI = PDI( range ) - MDI( range );
SetGradientFill( colorGreen, colorRed, 0, GetChartBkColor() );
Plot( DMI, "DMI Oscillator" + _PARAM_VALUES(),
colorDefault, styleLine | styleGradient );
LISTING 2.
function StochDMI( range, srange, smooth )
{
DMI = PDI( range ) - MDI( range );
Hd = HHV( DMI, srange );
Ld = LLV( DMI, srange );
FSDMI = 100 * Sum( DMI - Ld, smooth ) / Sum( Hd - Ld, smooth );
return FSDMI;
}
range = Param("DMI range", 10, 1 );
srange = Param("Stoch range", 3, 1 );
smooth = Param("Smoothing range", 3, 1 );
Plot( StochDMI( range, 3, smooth ), "StochDMI" + _PARAM_VALUES(), colorDefault, styleThick );
PlotGrid( 10, colorGreen );
PlotGrid( 90, colorRed );
PlotGrid( 50 );
The DMI stochastic and accompanying indicators described by Barbara Star in her article in this issue, “The DMI Stochastic,” can be easily implemented with a few of NeuroShell Trader’s 800+ indicators and Advanced Indicator Set #2. Simply select “New indicator” from the Insert menu and use the Indicator Wizard to set up the following indicators:
DMI Oscillator: Subtract( PlusDI( High, Low, Close, 10 ), MinusDI( High, Low, Close, 10 ) ) DMI Stochastic: Simple Stochastic Slow%D ( DMIOscillator, 10, 3, 3 ) UpTrend Entry: And2( A>B( DMIOscillator, 0 ), CrossAbove( DMIStochastic, 10 ) ) DownTrend Entry: And2( A<B( DMIOscillator, 0 ), CrossBelow( DMIStochastic, 90 ) ) Reversal Alert: Or2( MovAvgCrossAbove( DMIStochastic, 1, 3), MovAvgCrossBelow ( DMIStochastic, 1 ,3) UpTrend Countertrend: And2( A>B( DMIOscillator, 20 ), CrossBelow( DMIStochastic, 90 ) ) DownTrend Countertrend: And2( A<B( DMIOscillator, -20 ), CrossAbove( DMIStochastic, 10 ) )
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 5.
FIGURE 5: NEUROSHELL TRADER. This NeuroShell Trader chart displays the DMI oscillator, DMI stochastic, trend, reversal, and countertrend signals.
The AIQ code based on Barbara Star’s article in this issue, “The DMI Stochastic,” is provided at www.TradersEdgeSystems.com/traderstips.htm.
To test the author’s DMI stochastic indicator, I used the NASDAQ 100 list of stocks and AIQ’s Portfolio Manager. A long-only trading simulation was run with the following capitalization, cost, and exit settings:
I coded three similar test systems. The first is the basic system that uses the author’s parameters of 10 (buy signal) and 90 (sell signal) on the DMI stochastic indicator. A stock has a buy signal when it has both a positive DMI oscillator and the DMI stochastic is below the buy level.
In Figure 6, I show the resulting long-only equity curve compared to the S&P 500 index for the basic system with the 10 buy-level parameter. For the period 12/30/1994 to 11/9/2012, the system returned an average internal rate of return of 11.6% with a maximum drawdown of 68.7% on 2/6/2003 and a Sharpe ratio of 0.50.
FIGURE 6: AIQ, BASIC SYSTEM VS. S&P 500. Here is the long-only equity curve (blue) for the basic system compared to the S&P 500 (red) for the test period 12/30/1994 to 11/9/2012 trading the NASDAQ 100 list of stocks.
I also tried increasing the buy-level parameter up to 70, which improved the return somewhat. I added a trend filter using the 50-bar moving average of the S&P 500 index, but it resulted in a reduced return without improving the maximum drawdown very much. The equity curve for this test is not shown. For the period 12/30/1994 to 11/9/2012, this system returned an average internal rate of return of 8.5% with a maximum drawdown of 46.1% on 10/2/1998 and a Sharpe ratio of 0.46.
Finally, I tried adding an ADX filter such that the ADX level had to be above 30 to allow a signal. However, I also left the buy level at the high value of 70. In Figure 7, I show the resulting long-only equity curve for the basic system versus this modified ADX system. For the period 12/30/1994 to 11/9/2012, the system returned an average internal rate of return of 12.1% with a maximum drawdown of 56.1% on 2/6/2003 and a Sharpe ratio of 0.46.
FIGURE 7: AIQ, BASIC SYSTEM VS. MODIFIED SYSTEM. Here, the long-only equity curves are compared for the modified ADX system (blue) versus the basic system (red) for the test period 12/30/1994 to 11/9/2012 trading the NASDAQ 100 list of stocks.
The code and EDS file can be downloaded from www.TradersEdgeSystems.com/traderstips.htm, and is shown below.
!THE DMI STOCHASTIC
!Author: Barbara Star, TASC January 2013
!Coded by: Richard Denning 11/05/12
!www.TradersEdgeSystems.com
!INPUTS:
wLen is 10.
sLen is 3.
buyLvl is 70.
exitBuyLvl is 0.
sellLvl is 55.
exitSellLvl is 0.
!CODING ABREVIATIONS:
H is [high].
L is [low].
C is [close].
C1 is valresult(C,1).
H1 is valresult(H,1).
L1 is valresult(L,1).
! NOTE: Wilder to expontential averaging the formula is:
! Wilder length * 2 - 1 = exponential averaging length
eLen is wLen * 2 - 1.
!AVERAGE TRUE RANGE:
TR is Max(H-L,max(abs(C1-L),abs(C1-H))).
ATR is expAvg(TR,eLen).
!+DM -DM CODE:
rhigh is (H-H1).
rlow is (L1-L).
DMplus is iff(rhigh > 0 and rhigh > rlow, rhigh, 0).
DMminus is iff(rlow > 0 and rlow >= rhigh, rlow, 0).
AvgPlusDM is expAvg(DMplus,eLen).
AvgMinusDM is expavg(DMminus,eLen).
!DMI CODE:
PlusDMI is (AvgPlusDM/ATR)*100.
MinusDMI is AvgMinusDM/ATR*100.
!DMI OSCILATOR:
DMIosc is PlusDMI - MinusDMI. !Plot as historigram
!STOCHASTIC OF DMI:
HH is highresult(DMIosc,wLen).
LL is lowresult(DMIosc,wLen).
DMI_STOCH is (DMIosc - LL) / (HH - LL) * 100.
DMI_STO_SK is simpleavg(DMI_STOCH,sLen).
DMI_STO_SD is simpleavg(DMI_STO_SK,sLen). !Plot with 90/10 lines
!SYSTEM TO TEST INDICATOR:
!BASIC SYSTEM WITH AUTHOR'S SUGGESTED PARAMETERS:
Buy if DMIosc > 0 and DMI_STO_SD <= 10.
ExitBuy if DMIosc < 0.
Sell if DMIosc < 0 and DMI_STO_SD <= 90.
ExitSell if DMIosc > 0.
!SYSTEM WITH TREND FILTER AND MODIFIED PARAMETERS (LONG ONLY):
SPXc is tickerUDF("SPX",C).
SPXma is simpleavg(SPXc,50).
BuyT if DMIosc > exitBuyLvl
and DMI_STO_SD <= buyLvl
and SPXma > valresult(SPXma,10).
ExitBuyT if DMIosc < exitBuyLvl or SPXma < valresult(SPXma,10).
!SYSTEM WITH TREND STRENGTH FILTER AND MODIFIED PARAMETERS (LONG ONLY):
BuyADX if DMIosc > exitBuyLvl
and DMI_STO_SD <= buyLvl
and ADX > 30.
ExitBuyADX if DMIosc < exitBuyLvl.
!SIGNAL RANKING( use ADX):
ZERO if PlusDMI = 0 and MinusDMI = 0.
DIsum is PlusDMI + MinusDMI.
DX is iff(ZERO,100,abs(DMIosc)/DIsum*100).
ADX is expavg(DX,eLen).
List if C > 0.
The TradersStudio code based on Barbara Star’s article in this issue, “The DMI Stochastic,” is provided at the following websites:
The following code files are provided in the download:
Parameters:
The rules of the test system are simple. Go long when:
Go short when:
I set up a test session using the S&P 500 futures contract, SP, using data from Pinnacle Data. I then optimized the parameters separately for the long and short side. Note that I did not optimize the length of the DMI but rather just used the author’s value of 10. Although trading both the long and short side together resulted in more profit, the equity curve became erratic compared to trading just the long side.
FIGURE 8: TRADERSSTUDIO. Here is a three-dimensional parameter optimization graph for the system trading the S&P futures contract for the period 1982 through 2012.
In Figure 8, I show the parameter optimization map for trading just the long side with the system on the S&P contract from 4/21/1982 through 11/9/2012. The buy-level parameters between 65 and 80 together with the exit buy levels between -5 and +5 look good without any spikes in the map. I then ran a backtest trading one contract for the same period with parameter set buy level = 70 and exit buy level = 0 trading long only. The resulting equity curve and underwater equity curve are shown in Figure 9. The system returned a profit of $163,650 with a maximum drawdown of $64,150 on 9/25/2002.
FIGURE 9: TRADERSSTUDIO. Here are the equity & underwater equity curves for the system using one of the better parameter sets from the optimization tests (buy level = 70, exit buy level = 0, long only).
'THE DMI STOCHASTIC
'Author: Barbara Star, TASC January 2013
'Coded by: Richard Denning 11/05/12
'www.TradersEdgeSystems.com
Function SD(priceH As BarArray, priceL As BarArray, priceC As BarArray, stochLen, smoLen1, smoLen2)
Dim HH As BarArray
Dim LL As BarArray
Dim Stoch As BarArray
Dim SK As BarArray
HH = Highest(priceH,stochLen,0)
LL = Lowest(priceL,stochLen,0)
If HH - LL <> 0 Then Stoch = (priceC - LL) / (HH - LL) * 100
SK = Average(Stoch,smoLen1)
SD = Average(SK,smoLen2)
End Function
'-------------------------------------------------------------
Function DMI_STOCHASTIC(lenDS)
Dim DMIosc As BarArray
DMIosc = dmiplus(lenDS,0) - dmiminus(lenDS,0)
DMI_STOCHASTIC = SD(DMIosc,DMIosc,DMIosc,lenDS,3,3)
End Function
'-------------------------------------------------------------
Sub DMI_OSC_IND(lenDMI)
plot1(dmiplus(lenDMI,0)-dmiminus(lenDMI,0))
plot2(0)
End Sub
'-------------------------------------------------------------
Sub DMI_STOCHASTIC_IND(lenDS,buyLvl,sellLvl)
plot1(DMI_STOCHASTIC(lenDS))
PLOT2(buyLvl)
plot3(sellLvl)
End Sub
'-------------------------------------------------------------
Sub DMI_STOCHASTIC_SYS(lenDS,buyLvl,exitBuyLvl,sellLvl,exitSellLvl,longOnly)
'lenDS=10,buyLvl=70,exitBuyLvl=0,sellLvl=55,exitSellLvl=0,longOnly=2
Dim DMIosc As BarArray
Dim DMI_STOCH As BarArray
DMI_STOCH = DMI_STOCHASTIC(lenDS)
DMIosc = dmiplus(lenDS,0)-dmiminus(lenDS,0)
If longOnly = 1 Or longOnly = 0 Then
If DMIosc > exitBuyLvl And DMI_STOCH <= buyLvl Then Buy("LE",1,0,Market,Day)
If DMIosc < exitBuyLvl Then ExitLong("LX","LE",1,0,Market,Day)
End If
If longOnly = 2 Or longOnly = 0 Then
If DMIosc < exitSellLvl And DMI_STOCH >= sellLvl Then Sell("SE",1,0,Market,Day)
If DMIosc > exitSellLvl Then ExitShort("SX","SE",1,0,Market,Day)
End If
End Sub
The indicators DMIOscillator and DMIStochasticExtreme, as discussed in “The DMI Stochastic” by Barbara Star in this issue, has been implemented as an indicator available for download at www.ninjatrader.com/SC/January2013SC.zip.
Once you have downloaded it, from within the NinjaTrader Control Center window, select the menu File → Utilities → Import NinjaScript and select the downloaded file. This file is for NinjaTrader version 7 or greater.
You can review the indicator source code by selecting the menu Tools → Edit NinjaScript → Indicator from within the NinjaTrader Control Center window and selecting DMIOscillator or DMIStochasticExtreme.
NinjaScript uses 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 10.
FIGURE 10: NINJATRADER. This screenshot shows the DMIOscillator and DMI-StochasticExtreme applied to a daily chart of Amgen Inc. (AMGN).
This tip is based on “The DMI Stochastic” by Barbara Star in this issue.
In the article, Star derives two new indicators from the classic directional movement index (DMI). The first is an oscillator based on the difference between the +DI and -DI lines (DMI oscillator). The second parameterizes the DMI oscillator with a stochastic. The end result is two oscillators that capture three technical analysis basics: trend, momentum, and support/resistance, which can help to time trade entries and exits better.
The Updata code for this indicator has been entered in the Updata Library and may be downloaded by clicking the Custom menu and then Indicator Library. Those who cannot access the library due to a firewall may paste the code shown here into the Updata Custom editor and save it.
PARAMETER "DirMov Period" #Period=14
PARAMETER "Stoch. Period" #StochPer=10
PARAMETER "Stoch. Avg." #AvgPer=3
PARAMETER "Stoch. Buy" #StochBUY=10
PARAMETER "Stoch. Sell" #StochSELL=90
DISPLAYSTYLE 7LINES
INDICATORTYPE TOOL
INDICATORTYPE5 Chart
PLOTSTYLE CANDLE
COLOUR6 RGB(200,0,0)
COLOUR7 RGB(200,0,0)
@DirMovPlusDI=0
@DirMovMinusDI=0
@DirMovOsc=0
@Num=0
@Denom=0
@StochHigh=0
@StochLow=0
@StochAvg=0
NAME "DMI-Osc Candles" ""
NAME5 "DMI-Stoch. Avg. [" #Period "|" #AvgPer "]" ""
FOR #CURDATE=#Period To #LASTDATE
@DirMovPlusDI=DirMov(#Period,PlusDI)
@DirMovMinusDI=DirMov(#Period,MinusDI)
'1st Indicator
@DirMovOsc=@DirMovPlusDI-@DirMovMinusDI
@StochHigh=PHIGH(@DirMovOsc,#StochPer)
@StochLow=PLOW(@DirMovOsc,#StochPer)
@Num=SGNL(@DirMovOsc-@StochLow,#StochPer,M)*#StochPer
@Denom=SGNL(@StochHigh-@StochLow,#StochPer,M)*#StochPer
'2nd Indicator
@StochAvg=SGNL(100*@Num/@Denom,#AvgPer,M)
'Colour Candle According to DMI Osc
If @DirMovOsc>0
COLOUR RGB(0,0,200)
@PlotOpen=Open
@PlotHigh=High
@PlotLow=Low
@Plot=Close
Else
COLOUR RGB(200,0,0)
@PlotOpen=Open
@PlotHigh=High
@PlotLow=Low
@Plot=Close
EndIf
@Plot5=@StochAvg
@Plot6=#StochBUY
@PLot7=#StochSELL
NEXT
FIGURE 11: UPDATA. This chart shows the daily S&P 500 index with candles colored according to the DMI oscillator above/below zero. The lower chart shows the 14-period DMI stochastic (smoothed three periods).
The indicators discussed in “The DMI Stochastic” by Barbara Star in this issue can easily be used with our online charting tool at www.tradesignalonline.com. Just check the Infopedia section for our lexicon. You will see the indicator and the functions, which you can make available for your personal account. Click on it and select “open script.” You can then apply the indicator to any chart you wish (Figure 12).
FIGURE 12: TRADESIGNAL ONLINE. Here, the DMI stochastic oscillator and the DMI stochastic strategy are displayed on a daily chart of eBay.
Source code for DMI stochastic oscillator.eqi
Meta:
Subchart( True ),
Synopsis("The DMI Stochastic Oscillator based on Barbara Stars 01/2013 Article in Technical Analysis of Stocks and Commodities"),
Weblink("https://www.tradesignalonline.com/lexicon/edit.aspx?id=19093");
Inputs:
DMI_Period( 10 , 1 ),
STO_Period( 10 , 1 ),
STO_Fast_Smooth( 3 , 1 ),
STO_Slow_Smooth( 3 , 1 ),
Overbought_Level( 90 , 1 ),
Oversold_Level( 10 , 1 );
Vars:
dmiOscillator, dmiStochastic;
dmiOscillator = DMO( DMI_Period );
StochasticExp( dmiOscillator, dmiOscillator, dmiOscillator, STO_Period, STO_Fast_Smooth, STO_Slow_Smooth, dmiStochastic, value1 );
DrawLine( dmiStochastic, "DMI Oscillator Stochastic", StyleSolid, 2, Blue );
DrawLIne( Overbought_Level, "Over Bought", StyleDash, 1, Black );
DrawLIne( Oversold_Level, "Over Sold", StyleDash, 1, Black );
// *** Copyright tradesignal GmbH ***
// *** www.tradesignal.com ***
Source code for DMI stochastic strategy.eqs
Meta:
Subchart( False ),
Synopsis("The DMI Stochastic Oscillator Strategy based on Barbara Stars 01/2013 Article in Technical Analysis of Stocks and Commodities"),
Weblink("https://www.tradesignalonline.com/lexicon/edit.aspx?id=19093");
Inputs:
DMI_Period( 10 , 1 ),
STO_Period( 10 , 1 ),
STO_Fast_Smooth( 3 , 1 ),
STO_Slow_Smooth( 3 , 1 ),
Overbought_Level( 90 , 1 ),
Oversold_Level( 10 , 1 );
Vars:
dmiOscillator, dmiStochastic, longSig, shortSig;
dmiOscillator = DMO( DMI_Period );
StochasticExp( dmiOscillator, dmiOscillator, dmiOscillator, STO_Period, STO_Fast_Smooth, STO_Slow_Smooth, dmiStochastic, value1 );
longSig = dmiOscillator > 0 And dmiStochastic < Oversold_Level And Close > Open;
shortSig = dmiOscillator < 0 And dmiStochastic > Overbought_Level And Close < Open;
If longSig Then
Buy("DMI Stoch") Next Bar at Market
Else If shortSig Then
Short("DMI Stoch") Next Bar at Market;
// *** Copyright tradesignal GmbH ***
// *** www.tradesignal.com ***
We’ve provided two short scripts for the DMI oscillator and DMI stochastic devised and discussed by Barbara Star in her article in this issue, “The DMI Stochastic.” A dialog box enables you to adjust the period length of each indicator if you prefer.
FIGURE 13: SHARESCOPE. Here’s an example of the DMI oscillator and DMI stochastic implemented in ShareScope.
When adding indicators to a chart in ShareScope (Figure 13), it is normal to use the same price periods as the main chart (daily, weekly, or monthly). However, you can add daily, weekly, and monthly indicators to the chart if it aids analysis.
//@Name:DMI Oscillator
//@Description:As described on Stocks & Commodities magazine, Jan 2013 issue.
var period = 14;
function init(status){
if (status == Loading || status == Editing)
period = storage.getAt(0);
if (status == Adding || status == Editing){
dlg = new Dialog("Settings...", 145, 55);
dlg.addOkButton();
dlg.addCancelButton();
dlg.addIntEdit("INT1",8,-1,-1,-1,"","Period",period,2,1000);
if (dlg.show()==Dialog.Cancel)
return false;
period = dlg.getValue("INT1");
storage.setAt(0, period);
}
setSeriesColour(0, Colour.Red);
setSeriesChartType(0, ChartType.Histogram);
setTitle(period+" DMI Oscillator");
setHorizontalLine(0);
}
function getGraph(share, data){
var dmio = [];
var adx1 = new ADX(period);
for (var i=1; i<data.length; i++){
adx1.next(data[i]);
dmio[i] = adx1.getPDI()-adx1.getNDI();
}
return dmio;
}
//@Name:DMI Stoch Extreme
//@Description:DMI Stochastic Extreme. As described on Stocks & Commodities magazine, Jan 2013 issue.
var stochPeriod = 10;
var stochSlow = 3;
function init(status){
if (status == Loading || status == Editing){
stochPeriod = storage.getAt(0);
stochSlow = storage.getAt(1);
}
if (status == Adding || status == Editing){
dlg = new Dialog("Settings...", 165, 55);
dlg.addOkButton();
dlg.addCancelButton();
dlg.addIntEdit("INT1",8,-1,-1,-1,"","DMI Stoch Period",stochPeriod,2,1000);
dlg.addIntEdit("INT2",8,-1,-1,-1,"","DMI Stoch Slow",stochSlow,1,1000);
if (dlg.show()==Dialog.Cancel)
return false;
stochPeriod = dlg.getValue("INT1");
stochSlow = dlg.getValue("INT2");
storage.setAt(0, stochPeriod);
storage.setAt(1, stochSlow);
}
setSeriesColour(0, Colour.Red);
setTitle(stochPeriod+", "+stochSlow+" DMI Stochastic Extreme");
setHorizontalLine(90);
setHorizontalLine(10);
}
function getGraph(share, data){
var adx1 = new ADX(stochPeriod);
var stoc1 = new StochOsc(stochPeriod,stochSlow,2);
var dmise = [];
for (var i=1; i<data.length; i++){
adx1.next(data[i]);
var dmio = adx1.getPDI()-adx1.getNDI();
var temp = {open:dmio,high:dmio,low:dmio,close:dmio,volume:0};
stoc1.next(temp);
dmise[i] = stoc1.getMain();
}
return dmise;
}
Trade Navigator offers everything needed to recreate the indicators and highlight bars discussed in “The DMI Stochastic” by Barbara Star in this issue.
The TradeSense code for the indicators and highlight bars, as well as step-by-step instructions for inputting the TradeSense code into Trade Navigator and displaying the indicator on a chart (Figure 14), are shown below.
FIGURE 14: TRADE NAVIGATOR. Here’s an example of the DMI stochastic and highlight bars on a Trade Navigator chart.
First, open the Trader’s Toolbox, click on the Functions tab and click the New button.
DMI Above (Highlight Bar):
Type in the following code:
(DMI plus (10 , False) - DMI minus (10 , False)) > 0
Click the Verify button.
When you are finished, click on the Save button, type a name for your new function and click OK.
Repeat these steps for the DMI Below, DMI Oscillator, DMI Stoch Reversal Down, DMI Stoch Reversal Up, DMI Stochastic Extreme, DMI Stochastic Extreme Down and DMI Stochastic Extreme Up functions using the following code.
DMI Below (Highlight Bar):
(DMI plus (10 , False) - DMI minus (10 , False)) < 0
DMI Oscillator (Indicator):
DMI plus (10 , False) - DMI minus (10 , False)
DMI Stoch Reversal Down (Highlight Bar):
Crosses Below (MovingAvg (Stochastic Custom (DMI plus (10 , False) - DMI minus (10 , False) , 3) , 3) , MovingAvg (MovingAvg (Stochastic Custom (DMI plus (10 , False) - DMI minus (10 , False) , 3) , 3) , 3))
DMI Stoch Reversal Up (Highlight Bar):
Crosses Above (MovingAvg (Stochastic Custom (DMI plus (10 , False) - DMI minus (10 , False) , 3) , 3) , MovingAvg (MovingAvg (Stochastic Custom (DMI plus (10 , False) - DMI minus (10 , False) , 3) , 3) , 3))
DMI Stochastic Extreme (Indicator):
MovingAvg (Stochastic Custom (DMI plus (10 , False) - DMI minus (10 , False) , 3) , 3)
DMI Stochastic Extreme Down (Highlight Bar):
Crosses Below (MovingAvg (Stochastic Custom (DMI plus (10 , False) - DMI minus (10 , False) , 3) , 3) , 91)
DMI Stochastic Extreme Up (Highlight Bar):
Crosses Above (MovingAvg (Stochastic Custom (DMI plus (10 , False) - DMI minus (10 , False) , 3) , 3) , 10)
When you are finished, click on the Save button, type a name for your new function and click OK.
Creating the Chart
Now that we have the functions, on a daily 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 DMI Oscillator indicator in the list and either double click on it or highlight the name and click the Add button.
Repeat these steps for the DMI Stochastic Extreme indicators. Add a second copy of the DMI Oscillator.
Click on the name of one of the the DMI Oscillator indicators on the chart and drag it into the same pane as the other DMI Oscillator.
Go to the Add to Chart window again. Click on the HighlightBars tab. Find the DMI Above, DMI Below, DMI Stoch Reversal Down and DMI Stoch Reversal Up Highlight bars and add them to the chart. When you are adding the DMI Stoch Reversal Down and DMI Stoch Reversal Up Highlight bars change them to Highlight Markers.
Type the letter ‘E’ on your keyboard to bring up the Chart Settings window.
Highlight each indicator and/or highlight bar and change it to the desired color in the chart settings window.
Select one of the DMI Oscillator indicators and change the type to Histogram.
Highlight the DMI Stochastic Extreme indicator, then click the Add button at the bottom of the Chart Settings window, and select Add HighlightBars to Selected Indicator. Highlight the DMI Stochastic Extreme Down and DMI Stochastic Extreme Up in the list and click the Add button.
Once you have the indicators and highlight bars set the way you want them you can click the OK button.
You can create Studies of each of the panes on the chart. Go back into the Chart Settings window. Highlight the pane title you wish to make into a study. With the pane selected click the Save Study button at the bottom of the Chart Settings window. Type a name for the study and a description then click Save.
Now that you have the chart the way you want it, click on the Templates button in the toolbar and select <Manage chart templates>, click the New button, type a name for your template and click OK.
Genesis Financial Technologies is providing a library called “DMI Stochastic” that includes the custom indicators, highlight bars, and studies discussed in Star’s article. It also contains a template and a chart page to make it easier for you view these indicators. You can download the special file named “C201301” from within Trade Navigator to get this library.
Our Traders’ Tip this month is based on “The DMI Stochastic” by Barbara Star in this issue. In this article, Star introduces us to her DMI oscillator and DMI stochastic and describes some of the trading techniques she uses with them.
We’ll be offering the DMI oscillator and DMI stochastic for download in our VT client forums at https://forum.vtsystems.com along with hundreds of other precoded and free indicators and trading systems. In addition, instructions for recreating Star’s indicators in VT Trader are shown below.
DMI Oscillator
Name: TASC - 01/2013 - DMI Oscillator Function Name Alias: tasc_DmiOsc Label Mask: TASC - 01/2013 - DMI Oscillator (%Pr%) = %Hist% Placement: New Frame Data Inspection Alias: DMI Osc
[New] button... Name: Pr Display Name: DMI Periods Type: integer Default: 10
[New] button... Var Name: Hist Name: (DMI Histogram) Line Color: red Line Width: 1 Line Type: histogram [New] button... Var Name: HistMa Name: (Histogram 1-Period MA) Line Color: red Line Width: 1 Line Type: solid
[New] button... Value: +20 Line Color: dark red Line Width: thin Line Type: dashed [New] button... Value: -20 Line Color: dark red Line Width: thin Line Type: dashed
{Provided By: Visual Trading Systems, LLC}
{Copyright: 2013}
{Description: TASC, January 2013 - "Getting Into The Game, The DMI Stochastic" by Barbara Star, PhD}
{File: tasc_DmiOsc.vtscr - Version 1.0}
{DMI Oscillator}
PlusDI:= vt_DMI(Pr).PlusDI;
MinusDI:= vt_DMI(Pr).MinusDI;
Hist:= PlusDI - MinusDi;
HistMa:= Mov(Hist,1,S);
To attach the indicator to a chart click the right mouse button within the chart window and then select “Add Indicator” → “TASC - 01/2013 - DMI Oscillator” from the indicator list.
DMI Stochastic
Name: TASC - 01/2013 - DMI Stochastic Function Name Alias: tasc_DmiStoch Label Mask: TASC - 01/2013 - DMI Stochastic (%Pr%,%K%,%Sl%,%D%) = %DmiStDK%, %DmiStDD% Placement: New Frame Data Inspection Alias: DMI Stoch
[New] button... Name: Pr Display Name: DMI Periods Type: integer Default: 10 [New] button... Name: K Display Name: DMI Stochastic Periods Type: integer Default: 10 [New] button... Name: Sl Display Name: DMI Stochastic %K Slowing Periods Type: integer Default: 3 [New] button... Name: D Display Name: DMI Stochastic %D MA Periods Type: integer Default: 3
[New] button... Var Name: DmiStDK Name: (DMI Stochastic) Line Color: dark blue Line Width: 1 Line Type: solid [New] button... Var Name: DmiStDD Name: (DMI Stochastic MA) Line Color: blue Line Width: 1 Line Type: dashed
[New] button... Value: +90 Line Color: red Line Width: thin Line Type: dashed [New] button... Value: -10 Line Color: red Line Width: thin Line Type: dashed
{Provided By: Visual Trading Systems, LLC}
{Copyright: 2013}
{Description: TASC, January 2013 - "Getting Into The Game, The DMI Stochastic" by Barbara Star, PhD}
{File: tasc_DmiStoch.vtscr - Version 1.0}
{DMI Oscillator}
PlusDI:= vt_DMI(Pr).PlusDI;
MinusDI:= vt_DMI(Pr).MinusDI;
Hist:= PlusDI - MinusDi;
{DMI Stochastic}
DmiStK:= ((Hist-LLV(Hist,K))/(HHV(Hist,K)-LLV(Hist,K)))*100;
DmiStDK:= Mov(DmiStK,Sl,S);
DmiStDD:= Mov(DmiStDK,D,S);
To attach the indicator to a chart click the right mouse button within the chart window and then select “Add Indicator” → “TASC - 01/2013 - DMI Stochastic” from the indicator list.
A sample chart is shown in Figure 15.
FIGURE 15: VT TRADER. Here, the DMI oscillator and DMI stochastic are attached to a GBP/USD one-hour candlestick chart.
Risk disclaimer: Past performance is not indicative of future results. Forex trading involves a substantial risk of loss and may not be suitable for all investors.
In “The DMI Stochastic” in this issue, author Barbara Star’s approach is to use variations on the DMI to extract a lot of information from the price action.
As you can see by the sample Excel chart in Figure 16, things get a little busy when you put markers for all of Star’s indicators on the chart. Thus, I have provided some checkbox controls to allow you to display various combinations at your option.
Excel has no reasonable way to dynamically color candlesticks according to conditions found in the data. As a workaround, I have used two dummy series plotted as vertical bars to provide background coloration on the price chart in the areas that correspond to Star’s blue and red price bars.
The spreadsheet file for this Traders’ Tip can be downloaded here. To successfully download it, follow these steps:
FIGURE 16: EXCEL. Things get a little busy if you include all of the potential signal information that Barbara Star describes in her article.