TRADERS’ TIPS
For this month’s Traders’ Tips, the focus is Ken Calhoun’s article from the February issue, “Volume-Weighted Moving Average Breakouts.” Here, we present the April 2017 Traders’ Tips code with possible implementations in various software.
The Traders’ Tips section is provided to help the reader implement a selected technique from an article in this issue or another recent issue. The entries here are contributed by software developers or programmers for software that is capable of customization.
In “Volume-Weighted Moving Average Breakouts,” which appeared in the February 2017 issue of Technical Analysis of STOCKS & COMMODITIES, author Ken Calhoun describes using a modified moving average calculation that combines price and volume information. The author states that by including volume, this technique can help avoid false breakouts.
Here, we are providing the TradeStation EasyLanguage code for the volume-weighted moving average indicator. The indicator includes an additional simple moving average (SMA), making it useful for scanning for crossovers using the TradeStation Scanner. We have also provided a companion strategy as well as a function to allow you to easily use the volume-weighted moving average calculation in your own code.
Indicator: Volume-Weighted Moving Average // Volume Weighted Moving Average // TASC APR 2017 // Author: Ken Calhoun inputs: Price( Close ), MALength( 70 ), VWMALength( 50 ) ; variables: MAValue( 0 ), VWMAValue( 0 ) ; VWMAValue = _MovingAvgVolumeWeighted( Price, VWMALength ) ; MAValue = Average( Price, MALength ) ; Plot1( VWMAValue, "VWMA" ) ; Plot2( MAValue, "MA" ) ; if VWMAValue crosses over MAValue then Alert( "VWMA cross above MA" ) ; Strategy: _Volume-Weighted Moving Average // Volume Weighted Moving Average // TASC APR 2017 // Author: Ken Calhoun inputs: Price( Close ), MALength( 70 ), VWMALength( 50 ), StopDollarsPerShare( 2 ), TrailEnableProftPosition( 200 ), TrailAmountPerShare( 2 ) ; variables: MAValue( 0 ), VWMAValue( 0 ) ; VWMAValue = _MovingAvgVolumeWeighted( Price, VWMALength ) ; MAValue = Average( Price, MALength ) ; if VWMAValue crosses over MAValue then Buy next bar at Market else if VWMAValue crosses under MAValue then Sell next bar at Market ; SetStopShare ; SetStopLoss( StopDollarsPerShare ) ; if MaxPositionProfit >= TrailEnableProftPosition then SetDollarTrailing( TrailAmountPerShare ) ; Function: _MovingAvgVolumeWeighted // Vol Weighted Mov Avg Function // TASC APR 2017 // Author: Ken Calhoun inputs: Price( NumericSeries ), Length( NumericSimple ) ; variables: VSum( 0 ), PVSum( 0 ), AnyVol( 0 ) ; if BarType >= 2 and BarType < 5 then AnyVol = Volume else AnyVol = Ticks ; VSum = Summation( AnyVol, Length ) ; PVSum = Summation( Price * AnyVol, Length ) ; if VSum <> 0 then _MovingAvgVolumeWeighted = PVSum / VSum ;
To download this EasyLanguage code for the indicator and function, please visit our TradeStation and EasyLanguage support forum. The code for this article can be found here at https://community.tradestation.com/Discussions/Topic.aspx?Topic_ID=147651. The ELD filename is “TASC_APR2017.ELD.”
For more information about EasyLanguage in general, please see https://www.tradestation.com/EL-FAQ.
A sample chart is shown in Figure 1.
FIGURE 1: TRADESTATION. Here, the volume-weighted moving average indicator and strategy are applied to a 15-minute chart of Toll Brothers.
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.
The VWMA strategy described by Ken Calhoun in his February 2017 S&C article “Volume-Weighted Moving Average Breakouts” can be easily applied in TC2000 version 17 using the new EasyScan columns and enhanced custom formula language.
We used the new EasyScan features of version 17 to scan for stocks where the 50-bar VWMA has crossed up through the 70-bar simple moving average within the last five bars on a 15-minute chart.
The chart in Figure 2 shows the VWMA crossover occurred within the last five bars (circled in red).
FIGURE 2: TC2000. This sample chart of KKR shows a 15-minute timeframe. We scanned 1,000 high-cap stocks to find where the crossover occurred within the last five bars. You can shorten or lengthen the “within last x bars” setting to suit your needs.
If you would like a copy of this layout already set up with the scan and plots in place, just send an email to support@tc2000.com and we’ll be happy to send it to you.
Ken Calhoun’s article in the February 2017 issue of Technical Analysis of STOCKS & COMMODITIES, “Volume-Weighted Moving Average Breakouts,” presented a trading system based on the volume-weighted moving average. The MetaStock formulas for the buy and sell signals for this system are shown here.
Buy Signal: entry:= Cross( Mov(C, 50, VOL), Mov(C, 70, S) ); entry OR ( Mov(C, 50, VOL) > Mov(C, 70, S) AND H > Ref(HighestSince(1, entry, H),-1)) Sell Signal: Cross( Mov(C, 70, S), Mov(C, 50, VOL) )
For this month’s Traders’ Tip, we’re providing the study VWMA.efs based on the formula described in Ken Calhoun’s article in the February 2017 issue, “Volume-Weighted Moving Average Breakouts.”
In the article, the author presents a strategy of trading based on the crossover of a 70-period and 50-period volume-weighted moving average on a 15-day 15-minute chart.
The study contains formula parameters that may be configured through the edit chart window (right-click on the chart and select “edit chart”). A sample chart is shown in Figure 3.
FIGURE 3: ESIGNAL. Here is an example of the VWMA study plotted on a 15-minute chart of FAS.
To discuss this study or download a complete copy of the formula code, please visit the EFS Library Discussion Board forum under the forums link from the support menu at www.esignal.com or visit our EFS KnowledgeBase at https://www.esignal.com/support/kb/efs/. The eSignal formula script (EFS) is also available for copying & pasting below.
/*********************************
Provided By:
eSignal (Copyright c eSignal), a division of Interactive Data
Corporation. 2016. All rights reserved. This sample eSignal
Formula Script (EFS) is for educational purposes only and may be
modified and saved under a new file name. eSignal is not responsible
for the functionality once modified. eSignal reserves the right
to modify and overwrite this EFS file with each new release.
Description:
Volume-Weighted Moving Average by Ken Calhoun
Version: 1.00 02/10/2017
Formula Parameters: Default:
SMA Length 70
WVMA Length 50
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();
function preMain(){
setPriceStudy(true);
setDefaultBarFgColor(Color.RGB(255,106,0),1);
setCursorLabelName("SMA", 0);
setCursorLabelName("VWMA", 1);
var x=0;
fpArray[x] = new FunctionParameter("SMALength", FunctionParameter.NUMBER);
with(fpArray[x++]){
setLowerLimit(1);
setUpperLimit(1000);
setDefault(70);
setName("SMA Length");
}
fpArray[x] = new FunctionParameter("VWMALength", FunctionParameter.NUMBER);
with(fpArray[x++]){
setLowerLimit(1);
setUpperLimit(1000);
setDefault(50);
setName("VWMA Length");
}
}
var bInit = false;
var bVersion = null;
var bIsLong = false;
var bWasLong = false;
var xSMA = null;
var xVWMA = null;
function main(SMALength, VWMALength){
if (bVersion == null) bVersion = verify();
if (bVersion == false) return;
if (getBarState() == BARSTATE_ALLBARS){
bInit = false;
}
if (!bInit){
bIsLong = false;
bWasLong = false;
xSMA = sma(SMALength);
xVWMA = vwma(VWMALength);
bInit = true;
}
if (xSMA.getValue(-1) == null || xVWMA.getValue(-1) == null) return;
var nSMA = xSMA.getValue(0);
var nSMA_1 = xSMA.getValue(-1);
var nVWMA = xVWMA.getValue(0);
var nVWMA_1 = xVWMA.getValue(-1);
if (nSMA > nVWMA && bIsLong){
if (nSMA_1 <= nVWMA_1){
drawTextRelative(0, AboveBar1, "\u00EA", Color.red, null, Text.PRESET|Text.CENTER, "Wingdings", 10, "Exit"+rawtime(0));
drawText("Suggested Long Exit",BottomRow1,Color.red,Text.LEFT,"TextExit"+rawtime(0));
bIsLong = false;
}
else {
removeText("Long"+rawtime(0));
removeText("Text"+rawtime(0));
}
bIsLong = false;
}
if (!bIsLong && nSMA < nVWMA){
if (nSMA_1 > nVWMA_1){
drawTextRelative(0,BelowBar1, "\u00E9", Color.green, null, Text.PRESET|Text.CENTER, "Wingdings", 10, "Long"+rawtime(0));
drawText("Suggested Long Entry",TopRow1,Color.green,Text.LEFT,"Text"+rawtime(0));
bIsLong = true;
bWasLong = true;
}
else {
removeText("Exit"+rawtime(0));
removeText("TextExit"+rawtime(0));
if (bWasLong)
bIsLong = true;
}
}
return [nSMA, nVWMA];
}
function verify(){
var b = false;
if (getBuildNumber() < 779){
drawTextAbsolute(5, 35, "This study requires version 10.6 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;
}
In the article “Volume-Weighted Moving Average Breakouts” in the February 2017 issue of Technical Analysis of STOCKS & COMMODITIES, author Ken Calhoun provides a concise, useful addition to the usual collection of moving average studies. Not only does he add value to the concept of trading off of averages, but he also lays out a trading strategy using his ideas.
We took this strategy and recreated it using our proprietary scripting language, thinkscript. We have made the loading process extremely easy; simply click on the link https://tos.mx/ef1Xvj, then choose to view thinkScript strategy.
In the image in Figure 4, you can see the VWMABreakouts strategy added to a 10-day, 15-minute chart of FAS. Based on the article, when the VWMA 50-period line (the blue line) crosses above the 50-period moving average (the pink line), it is considered a buy signal.
FIGURE 4: THINKORSWIM. Here, the VWMABreakouts strategy is added to a 10-day, 15-minute chart of FAS. When the 50-period VWMA (blue line) crosses above the 50-period moving average (pink line), it is considered a buy signal.
This single strategy in thinkorswim contains the rules for entering the trade as well as exiting. More detail about the volume-weighted moving average breakout strategy can be found in the February 2017 issue of Technical Analysis of STOCKS & COMMODITIES.
The volume-weighted moving average (VWMA), which was discussed by Ken Calhoun in his February 2017 article in S&C, “Volume-Weighted Moving Average Breakouts,” offers an additional dimension to chart analysis by using volume in addition to price. Typically, the VWMA is used in conjunction with a simple moving average (SMA) of the same or different period.
Among the many cases where including the VWMA could be useful are:
Another example of where including the VWMA could be useful is the swing-trading setup that Calhoun outlines in his article, where the VWMA crossing above the SMA may signal a potential bullish trend change, and the opposite crossunder is used to close the position. We are providing some WealthScript code for this strategy. A sample chart implementing the strategy is shown in Figure 5.
FIGURE 5: WEALTH-LAB. This sample chart implementing the strategy highlights a successful trade in FAS.
In Wealth-Lab, you will find the VWMA indicator under the “TASC Magazine Indicators” group after you update the Wealth-Lab TASCIndicators library to v2017.03 or later. You can plot it on a chart or use it as an entry or exit condition in a rule-based strategy without having to program any code yourself.
C# Code
using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
using TASCIndicators;
namespace WealthLab.Strategies
{
public class MyStrategy : WealthScript
{
private StrategyParameter paramPeriodVWMA;
private StrategyParameter paramPeriodSMA;
public MyStrategy()
{
paramPeriodVWMA = CreateParameter("VWMA Period",50,2,300,1);
paramPeriodSMA = CreateParameter("SMA Period",70,2,300,1);
}
protected override void Execute()
{
var sma = SMA.Series(Close,paramPeriodSMA.ValueInt);
var vwma = VWMA.Series(Bars,paramPeriodVWMA.ValueInt);
for(int bar = GetTradingLoopStartBar(1); bar < Bars.Count; bar++)
{
if (IsLastPositionActive)
{
if( CrossUnder(bar,vwma,sma))
SellAtMarket(bar+1, LastPosition);
}
else
{
if( CrossOver(bar,vwma,sma))
BuyAtMarket(bar+1);
}
}
PlotSeries(PricePane,vwma,Color.Red,LineStyle.Solid,1);
PlotSeries(PricePane,sma,Color.Blue,LineStyle.Solid,1);
}
}
}
A volume-weighted moving average breakout trading system such as the one described by Ken Calhoun in his February 2017 article in S&C, “Volume-Weighted Moving Average Breakouts,” can be easily implemented in NeuroShell Trader. Simply select new trading strategy from the insert menu and enter the following in the appropriate locations of the trading strategy wizard:
BUY LONG CONDITIONS: [All of which must be true]
CrossAbove(VolWgtAvg(Close,Volume,50),Avg(Close,70))
SELL LONG CONDITIONS: [All of which must be true]
CrossBelow(VolWgtAvg(Close,Volume,50),Avg(Close,70))
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 6.
FIGURE 6: NEUROSHELL TRADER. This NeuroShell Trader chart displays the volume-weighted moving average breakout system for FAS.
The AIQ code based on Ken Calhoun’s article in the February 2017 issue of Technical Analysis of STOCKS & COMMODITIES, “Volume-Weighted Moving Average Breakouts,” can be found at www.TradersEdgeSystems.com/traderstips.htm.
Please note that I tested the author’s system using the NASDAQ 100 list of stocks on daily bars rather than intraday bars from 12/31/2008 thru 2/10/2017. Figure 7 shows the resulting equity curve trading the author’s system with the cross-down exit. Figure 8 shows the ASA report for this test. The annualized return showed about a 17% return with a maximum drawdown of 19%.
FIGURE 7: AIQ. Here are sample test results from the AIQ Portfolio Manager taking three signals per day and 10 concurrent positions maximum run on NASDAQ 100 stocks (daily bar data) over the period 12/31/08 to 2/10/07.
FIGURE 8: AIQ. This shows the ASA report for the system, which shows the test metrics and settings.
Again, the code and EDS file can be downloaded from www.TradersEdgeSystems.com/traderstips.htm, and is also shown below.
!Volume-Weighted Moving Average Breakouts !Author: Ken Calhoun, TASC Apr 2017 !Coded by: Richard Denning 2/11/17 !www.TradersEdgeSystems.com !INPUTS: smaLen is 70. vwmaLen is 50. SMA is simpleavg([close],smaLen). VWMA is sum([close]*[volume],vwmaLen)/sum([volume],vwmaLen). HasData if hasdatafor(max(smaLen,vwmaLen)+10)>max(smaLen,vwmaLen). Buy if SMA < VWMA and valrule(SMA > VWMA,1) and HasData. Sell if SMA > VWMA. rsVWMA is VWMA / valresult(VWMA,vwmaLen)-1. rsSMA is SMA / valresult(SMA,smaLen)-1.
The TradersStudio code based on Ken Calhoun’s February 2017 article, “Volume-Weighted Moving Average Breakouts,” can be found at www.TradersEdgeSystems.com/traderstips.htm.
I tested the author’s system using the NASDAQ 100 list of stocks on daily bars rather than intraday bars from year 2000 through 2014. Figure 9 shows the equity curve trading the author’s system with the cross-down exit.
FIGURE 9: TRADERSSTUDIO. Here is the equity curve trading 200 shares of each of the NASDAQ 100 list of stocks from February 2000 through July 2014.
The following code files are provided in the download:
Figure 9 shows the equity curve trading 200 shares of each of the NASDAQ 100 list of stocks from February 2000 through July 2014. The system does relatively well during bull market periods but suffers during bear periods. Adding some simple trend-following market timing to the system would probably significantly reduce the drawdown during bear periods. I did not provide code to add the market timing.
The code is shown here:
'Volume-Weighted Moving Average Breakouts
'Author: Ken Calhoun, TASC Apr 2017
'Coded by: Richard Denning 2/11/17
'www.TradersEdgeSystems.com
function VWMA(vwmaLen)
VWMA = summation(C*V,vwmaLen) / summation(V,vwmaLen)
End Function
'---------------------------------------------------
Sub VWMA_SMA_XO(vwmaLen,smaLen)
Dim myVWMA As BarArray
Dim mySMA As BarArray
myVWMA = VWMA(vwmaLen)
mySMA = Average(C,smaLen)
If mySMA < myVWMA And mySMA[1] > myVWMA[1] Then
Buy("LE",1,0,Market,Day)
End If
If mySMA > myVWMA Then ExitLong("LX","",1,0,Market,Day)
End Sub
'-----------------------------------------------------
The VWMABreakout strategy, as discussed in the February 2017 S&C article “Volume-Weighted Moving Average Breakouts” by Ken Calhoun, is available for download at the following links for NinjaTrader 8 and NinjaTrader 7:
Once the file is downloaded, you can import the strategy in NinjaTader 8 from within the control center by selecting Tools → Import → NinjaScript Add-On and then selecting the downloaded file for NinjaTrader 8. To import in NinjaTrader 7, from within the control center window, select the menu File → Utilities → Import NinjaScript and select the downloaded file.
You can review the strategy’s source code in NinjaTrader 8 by selecting the menu New → NinjaScript Editor → Strategies from within the control center window and selecting the VWMABreakout file. You can review the strategy’s source code in NinjaTrader 7 by selecting the menu Tools → Edit NinjaScript → Strategy from within the control center window and selecting the VWMABreakout file.
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. Here, the VMABreakout is displayed on the FAS 15-minute chart in NinjaTrader 8.
Our Traders’ Tip for this month is based on the article by Ken Calhoun in the February 2017 issue of S&C, “Volume-Weighted Moving Average Breakouts.”
In the article, the author proposes a volume-weighted average method of signaling when breakout patterns might have greater persistence. This system enters a net long position when the short-term average crosses the long-term average upwards, and enters a net short when the short-term average crosses the long-term average downwards.
The Updata code for this article is in the Updata library and may be downloaded by clicking the custom menu and 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.
'Volume Weighted MA Cross
PARAMETER "Period 1" #PERIOD=50
PARAMETER "Period 2" #PERIOD2=70
NAME VWMA
DISPLAYSTYLE 2LINES
INDICATORTYPE TOOL
COLOUR RGB(200,0,0)
COLOUR2 RGB(0,0,200)
@VP1=0
@VP2=0
FOR #CURDATE=#PERIOD+#PERIOD2 TO #LASTDATE
'VOLUME WEIGHTED AVERAGES
@VP1=SGNL(CLOSE*VOL,#PERIOD,M)/SGNL(VOL,#PERIOD,M)
@VP2=SGNL(CLOSE*VOL,#PERIOD2,M)/SGNL(VOL,#PERIOD2,M)
'ENTRY EXIT RULES
IF HASX(@VP1,@VP2,DOWN)
SELL CLOSE
SHORT CLOSE
ELSEIF HASX(@VP1,@VP2,UP)
COVER CLOSE
BUY CLOSE
ENDIF
@PLOT=@VP1
@PLOT2=@VP2
NEXT
Figure 11 shows the 50/70-period VWMA cross system applied to the 3x leveraged ETF FAS.
FIGURE 11: UPDATA. Here, the 50/70-period VWMA cross system is applied to the 3x leveraged ETF FAS.
In “Volume-Weighted Moving Average Breakouts” in the February 2017 issue of Technical Analysis of STOCKS & COMMODITIES, author Ken Calhoun shows a simple swing trading strategy based on crossovers between the volume-weighted moving average and a simple moving average.
A ready-to-use formula that implements a chart with the moving averages is given here. A sample chart is shown in Figure 12.
vrange = Param("VWMA range", 50, 1, 200 );
mrange = Param("MA range", 70, 1, 200 );
vsum = Sum( Volume, vrange );
vpsum = Sum( Close * Volume, vrange );
vwma = vpsum / vsum;
Plot( C, Date() + " Close", colorDefault, styleCandle );
Plot( vwma, "VWMA" + vrange, colorRed );
Plot( MA( C, mrange ), "MA" + mrange, colorBlue );
FIGURE 12: AMIBROKER. This 15-minute chart of FAS shows crossover signals based on the 50-bar VWMA and 70 MA, replicating the chart from Calhoun’s February 2017 article.
The approach discussed by Ken Calhoun in his article in the February 2017 issue, “Volume-Weighted Moving Average Breakouts,” is designed around 15-minute interval bars with some reference to end-of-day levels as part of an exit strategy.
As there is not currently a free data source for historical intraday bars, we must upscale to end-of-day bars.
There are 26 15-minute intervals in the standard US trading day of 9:30 am to 4:00 pm. Using the 50-bar and 70-bar specifications for the averages, we can derive three bits of useful information:
Let’s take a look at the daily version of the FAS ETF used in Calhoun’s article.
FIGURE 13: EXCEL. Using VWMA(2) and MA(3) we find the up-cross on 11/7/2016 and the down-cross on 11/16/2016, corresponding to Ken Calhoun’s article in the February 2017 S&C.
Our calculated upscale from 15-minute bars to days seems to hold for this short uptrend. To see how it fares over a longer timeframe, let’s pull back a little and see what 200 days at these settings looks like.
In Figure 14 things are a little messy with too many, sometimes daily, indicator crossovers to be profitable, especially if you consider the impact of commissions and slippage on such a frequency of trades.
FIGURE 14: EXCEL, ANOTHER VIEW. A wider view shows that settings of 2 and 3 make for lots of whipsaws.
Primary entry and exits for this system are determined by the up-cross and down-cross of the moving averages. Figures 13 and 14 summarize the results of that bare logic using 2 and 3 as the settings for the moving averages.
Checkboxes in system logic controls to the right of the chart allow the user to activate the two stop-out ways of exiting a trade and the ability to reenter on an upside breakout within a continuing trend.
Try them out. With moving average settings of 2 and 3, the chart only gets more cluttered and appears to be a bit less profitable.
User controls allow for setting your choice of VWMA and MA periods as well as adjusting the trailing stop dollar amount and the stop-out settings based on aggregate support days.
FIGURE 15: EXCEL, MA SETTINGS. Here, the moving average settings are less frenetic.
With the 70 and 50 settings as shown in Figure 15, the moving averages almost kiss but do not cross at the 11/7/2016 beginning of the short, sharp uptrend we have been watching. Instead, we see that our most recent upcross takes place on 9/8/2016, and we are still in the trade as of 2/10/2017. The number of simulated trades and our overall profitability are both down at these settings.
FIGURE 16: EXCEL, SELL STOP HIT. The trailing stop values (blue horizontal bars) intercept the price on 9/15/2016. A trailing stop sell occurs on the next bar.
FIGURE 17: EXCEL, TRAILING HIGH. Pink bars represent trailing highs and only appear with the reentry selection while the VWMA is above the SMA. Reentry after a trailing or aggregate support stop-out requires a break above the previous (trailing) high to confirm a continuing uptrend. Using it here offers a slight improvement in profits over using a trailing stop alone.
There are a lot of “what ifs” that can be explored within this model. Enjoy!
The spreadsheet file for this Traders’ Tip can be downloaded here. To successfully download it, follow these steps: