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trading systems - intermediate level

  1. andrewk4

    1,368 posts.
    If you’ve been able to replicate a few basic systems like moving average crossovers (as per my post 2 weeks ago; trading systems-basics), then youll realise that you need something better.
    You need a little knowledge of formula language, which was the point in learning a simple MA system that doesn’t actually work in flukey markets.
    Youll also find subtle differences in language for diff brands of software. I use FCN (short for Function) whereas some software (metastock) might use FML (formula) to mean the same thing. Youll also see things like ‘enter long- when shortMA crosses above long MA’ – which is fine, and then ‘exit long choices – opposite of enter long, crosses below, or exit by money management’ and youll have to work out which choice is right for you. I found opposite of enter long to be wrong, in that it returns a 1 or 0 (binal) result, and that it exits the day after it enters. Such trial and error is all normal in getting to know your software.

    1-Exploders
    description- This system looks for Securities up over 20% this week or 40% over a month. This system is better used in a bull market, but you can modify it and just reverse the formula for stocks that are about to sink down bigtime, if you are a short seller in this market.
    Formula;
    RateOfChange(5) > 20 OR RateOfChange(23) > 40
    {5 periods is a week; 23 periods is a month}

    2-20 Day Rally in IT Uptrend
    description- Higher than 20 days ago and above 50 day MA
    Formula;
    Higher than 20 days ago and above 50 day MA

    3-Breaking Out After 30+ Days
    description- Finds stocks approaching a breakout to new highs
    Formula;
    Period: 30
    ThresholdPercent: 5
    AllTimeHigh = Highest(High, CUM(1))
    ThresholdTest = 100 * (AllTimeHigh - Close) / AllTimeHigh < ThresholdPercent
    MinDaysTest = HighestBarsAgo(High, CUM(1)) >= Period
    ThresholdTest AND MinDaysTest
    {This will flag all stocks that are presently within 5% of their all-time highs, with the additional caveat that the all-time high took place at least 30 trading days ago.}

    4-Bullish Convergence
    description- Finds stocks approaching a breakout to new highs
    Formula;
    Period: 30
    ThresholdPercent: 5
    AllTimeHigh = Highest(High, CUM(1))
    ThresholdTest = 100 * (AllTimeHigh - Close) / AllTimeHigh < ThresholdPercent
    MinDaysTest = HighestBarsAgo(High, CUM(1)) >= Period
    ThresholdTest AND MinDaysTest
    {This will flag all stocks that are presently within 5% of their all-time highs, with the
    additional caveat that the all-time high took place at least 30 trading days ago.}

    5-Down,down,down, down
    description- Flags items that down over week, month, three month and year periods.
    Formula;
    IsFalling(C,5) AND IsFalling(C,23) AND IsFalling(C,125) AND IsFalling(C,250)

    6-Rsi
    description- buys when rsi crosses above 30.
    Formula;
    CrossAbove(rsi(14),30)


    Im not saying any of these systems are the holy grail, or that they will make you a lot of money. What Im saying is that an understanding of these systems will boost your trading skills up a level. For instance, I use the down down down down system a bit. I don’t just rely on it as it is , but I modify it. Eg- I would prefer to see up down down down, so that I can short sell stocks that are in general downtrend, but have risen a bit in the last week- so Im buying puts on the bear trap rally. So I used the formula IsRising(C,5) AND IsFalling(C,23) AND IsFalling(C,125) AND IsFalling(C,250) to show stocks that fit my requirements.

    NB that these are all bull systems, and that all you do is change the trigger to the reverse to trade a bear market. So for 6- rsi, you would use
    description- sells when rsi crosses below 70.
    Formula;
    CrossBelow(rsi(10),70)
    I also use rsi value of 10 instead of 14, etc. for faster moves.

    I guess my whole point is get to know your software, and it will help you get your trading a bit more regimented, and less of making it all up on the fly.
    Advanced users should search on google for metastock language and find some of the many sites that cover these systems.

    Happy trades.

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