I’ve been putting just about everything that needs measurement or arithmetic into paintbars on QuoteTracker. I’m pretty excited about making use of them next week. Most of them won’t mean anything to you, but I did make one that tries to help me spot the “dummy”-style trade entry. I thought that might be worth sharing. I’m not the Dummy authority–it’s relatively rare when I make those plays–but I codified the kind of thing I look for, anyway. I reviewed my old trades, and the dummy-a-day category at uglychart to decide what I wanted to highlight.
As with any indicator I make, I want to catch as many winning signals as possible, without painting the whole chart with noise. It’s a balance you have to strike, between catching everything that could possibly be a signal, and missing a lot of good signals. People probably have different tastes in this regard. To me, painting every narrow bar is too many paintbars to deal with. But, if I make sure it’s near a moving average, and facing the right way, etc… well, then I have few enough alerts that I can browse them effectively.
So, here’s what I came up with:
For longs:
- Inside NR3
- Bar is at most 1% wide
- Closes above 5MA
- 5MA is at most 0.15% below the low of the bar
- 5MA is rising for the last 3 bars
…and just invert the directional stuff for shorts:
- Inside NR3
- Bar is at most 1% wide
- Closes below 5MA
- 5MA is at most 0.15% above the high of the bar
- 5MA is falling for the last 3 bars
Forcing it to be an inside bar drops a lot of meaningless signals, but also gets rid of a fair amount of example winners. So, that was hard to decide. I could possibly make the rule such that it has to be “mostly” inside, like it can peek out in the direction of the expected trade by 0.1% or something. But, for now, I’m sticking with a strict inside bar policy.
I made two separate paintbars for the ‘long’ and ’short’ cases, so that I could paint longs above the candle, and shorts below it. Here’s an example (if you aren’t familiar with how dummy trades work, you would enter the bar after the arrow, if the price goes outside the arrow-bar in the right direction):
Here’s the code for longs:
if (SMA(5) > SMA(5)[1]) AND (SMA(5)[1] > SMA(5)[2]) AND (SMA(5) >= (Bar Low - (Bar Low * 0.0015))) AND (SMA(5) < Bar Close) AND (Bar High-Bar Low) <= (Bar High[2]-Bar Low[2]) AND (Bar High-Bar Low) <= (Bar High[3]-Bar Low[3]) AND (Bar High<=Bar High[1]) AND (Bar Low>=Bar Low[1]) AND ((Bar High - Bar Low) <= (Bar High * 0.01)) set color to Blue
… and shorts:
if (SMA(5) < SMA(5)[1]) AND (SMA(5)[1] < SMA(5)[2]) AND (SMA(5) <= (Bar High + (Bar High * 0.0015))) AND (SMA(5) > Bar Close) AND (Bar High-Bar Low) <= (Bar High[2]-Bar Low[2]) AND (Bar High-Bar Low) <= (Bar High[3]-Bar Low[3]) AND (Bar High<=Bar High[1]) AND (Bar Low>=Bar Low[1]) AND ((Bar High - Bar Low) <= (Bar High * 0.01)) set color to Blue
February 4th, 2007 at 9:24 am
Nice work. Might make it just that much faster to skim charts. Now, if we could get these rule into a stock screen, it would really have value. Maybe it can be done with trade ideas or some other one. I don’t have them, so I don’t know. If you figure out a way, should be able to make some money off it. Not only in trades, but in adding the results to your site in some way. Sort of like Knight Trader does.
February 4th, 2007 at 11:40 am
Zoomie,
Why don’t you program this in TS and have it alert you from the Radar Screen when this happens for the trades you watching. Make life easier. As I said, I like the concept of TS but the damn thing freezes up day in and day out. However, there are these things call dll that will run even if the program freezes. I will try programing this in TS and if I am successful, I will share it with you.
LP
February 4th, 2007 at 11:52 am
@yo: I haven’t played with it yet, but QuoteTracker does seem to let you fire alerts from paintbars. I’m not clear on whether the chart has to be up, or if it can just be in a watchlist linked to the chart, or whatever.
If the paintbar alert thing doesn’t work out, QT does have an API that gives you access to the real-time quotes, and I could write an add-on that alerted me to conditions like these in real-time. So, that’s definitely on the agenda.
Sorry, but I’m definitely not interested in trying to post real-time alerts on Move the Markets… especially for signals like these, that you usually have to act on within minutes.
February 4th, 2007 at 11:53 am
@LP: that’s exactly the kind of thing Rader Screen is supposed to be good for. I hope it works out for you.
February 4th, 2007 at 12:31 pm
@LP,
Thanks for the suggestion and the offer. I am slightly challenged when it comes to programming. But I think it may be worth learning if I could implement this in my trading. I am going to look into this for sure.
February 4th, 2007 at 6:46 pm
You can absolutely set these to alert you in QT as they happen! I’m working on getting mine all set up, and should have a tutorial about it written sometime tomorrow, unless somebody beats me to it. ;-)
February 5th, 2007 at 1:11 am
from my experience… the only way to get an audio or visual alert for any paintbar condition is to have the chart open. A bit of a downer. Also… having the alerts on while looking at a chart can be very, very distracting. For instance, with a NR7 alert… that could happen at the start of any trading session. I have turned all my audio alerts off and and just flip through my watchlist to look for the visual paintbar alerts or colors. Much more manageable that way. I went paintbar crazy when I first discovered them a while back and needed to scale back my use of them. It’s not the holy grail but yet another visual indicator of potential developing patterns.
February 5th, 2007 at 1:17 am
OONR7: I was hoping the chart wouldn’t have to be open, since it doesn’t have to be open to get trendline alerts. But, I haven’t tried it yet.
And yes, they are obviously not a holy grail. Just a time saver.
February 5th, 2007 at 2:17 pm
[...] The particular setup I’m going to be focusing on here is the ubiquitous “Dummy” setup, and I’ll be using Richard’s Dummy paintbar rules. There’s a bit of work that goes into getting this going, but it should save time over repeatedly cycling through charts every 15-30 minutes visually scanning for a dummy setup. [...]
February 5th, 2007 at 3:30 pm
Flatwallet,
Can you please keep me updated on this for Radar Screen. Thanks
February 5th, 2007 at 10:41 pm
I use Amibroker, which is probably the best Charting/Backtesting tool.
Very powerful formula logic for those who are into scripting … you can pretty much write any type of logic you want and fire off alerts when those conditions hit.
I built a dummy 5MA system about a year ago and used it (i’ve since moved onto futures) to alert me of potential candidates every 15 mins out of a narrowed candidate list of about 100 stocks via auditory and text alert.
AB has probably one of the biggest user communities so it’s easy to find support from other users.
Take a look at it if you get serious about programming your own systems.