Strategy Based On Chart Pattern

trading strategies and money management discussion, code, results

Moderator: moderators

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Strategy Based On Chart Pattern

Postby fatdog1 » Thu May 18, 2006 4:07 pm

Hi Michal and everyone else.

I am starting the Trading Strategy Thread with request for help coding a strategy based on a chart pattern.

So far I have not been able to figure out how to come up with a math formula for the pattern.

I saw Michal's horizontal line on a bar chart to show the current price on the new message board.

It extends a horzontal trendline to the right which I will need for this pattern.

Avery has coded an indicator and a Radarscreen for the DarvosBox for me which draws a box around a congestion area using horizontal trendlines.

Avery was able to do a strategy using the DarvasBox indicator also.

That is what I need for this pattern, a box around a congestion area and extend trendlines to the right to trade a return to the area in the future.

I have included a screen shot of this pattern I trade that I call the upstair and downstair.

An upstair is a up candle followed by a congestion area where the bodies of the candles are fairly equal.

The candles are so equal that I can place horizontal lines across the top and bottom of the bodies of the candles in the congestion area like putting carpet on a staircase. The last candle is another up candle out of the pattern.

The first time back to a congestion area in the upstair pattern is a high odds, low risk long entry if the market you are trading is in an uptrend.


Once the market switches to making the downstair pattern, which is a down candle, a similar congestion area, and a down candle, the sellers are in control and I will short the first time back to the congestion area of a downstair pattern.


I have discovered that the market moves between the upstair pattern and the downstair pattern on every timeframe.

In fact, the market will build a upstair case when it is in an uptrend and a downstair case when it is in a downtrend.

What I need is a trendline that extends to the right from the top of the upstair and the bottom of the downstair so that I can buy or short the first pullback to that stair when the price revisits that area with a Tradestation automated strategy.

If any of you have the latest version of Tradestation, I could send you live workspaces so you could see the pattern trade live.

Thanks to all in advance, especially Avery for his amazing work with Tradestation.

Thanks for the new message board,



fatdog1
Attachments
@BP STAIR PATTERN.jpg
@BP STAIR PATTERN.jpg (94.52 KiB) Viewed 1859 times

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Thu May 18, 2006 4:09 pm

I will put the eld's for the DarvasBox in this file attachment post and a emini @ES workspaces I made early this morning with TS Version 3159.
Attachments
SMAA_DARVASBOX.ELD
Code for indicator and Radarscreen
(15.76 KiB) Downloaded 121 times
$DARVASBOX.ELD
Strategy
(12.04 KiB) Downloaded 148 times
Last edited by fatdog1 on Thu Jun 22, 2006 12:29 pm, edited 1 time in total.

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Fri May 19, 2006 7:04 am

Here are a couple of screen shots of the eMini Dow for today
showing the areas of supply (resistance) and demand (support)
based on the downstair and upstair patterns.
I will also post the actual workspace for anyone who uses the latest version of Tradestation.

FD1
Attachments
@YM 5-19-06 RESISTANCE.jpg
@YM 5-19-06 RESISTANCE.jpg (86.31 KiB) Viewed 1835 times
@YM 5-19-06 SUPPORT.jpg
@YM 5-19-06 SUPPORT.jpg (75.11 KiB) Viewed 1837 times

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Fri May 19, 2006 8:25 am

Here is the eMini Dow workspace.

If you change the time on the workspace to 5 minutes, 15 minutes, and 60 minues you will see additional areas of support (upstair pattern) and resistance (downstair pattern) for the Dow marked off.
The first time the Dow comes into the areas of resistance on each different time frame, it will either sell off, or go sideways either across from or just below the downstair pattern and build a upstair pattern to absorb the supply in that area. If it is successful, it will rally out of that area to the next downstair.

That is happening right now on the 5 minute Dow chart at 11,198.
Attachments
@YM 5-19-06.tsw
(32 KiB) Downloaded 66 times
@YM 5-19-06 BUILDS UPSTAIR.jpg
@YM 5-19-06 BUILDS UPSTAIR.jpg (79.22 KiB) Viewed 1834 times

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Fri May 19, 2006 9:45 am

This is a perfect example of what I am trying to do in real time.

Here is the eMini Dow chart showing the upstair pattern failing at 11,200, leading to a short opportunity.

I would need the strategy to sell short with a sell stop
as soon as the price breaks below the trendline that is placed around the congestion area of the downstair at 11,194 to reduce any risk on this trade.

If the eMini Dow continues to move lower, it will make more downstair pattens which I can then move my stop loss behind as a trailing stop.

The eMini Dow would have to make a upstair pattern below or across from a downstair before it moves higher to close out my short.

I want to use the upstair patterns as a place to take a partial profit on the short trade like the first small upstair at 11,180 for example.

FD1
Attachments
@YM 5-19-06 UPSTAIR FAILS.jpg
@YM 5-19-06 UPSTAIR FAILS.jpg (73.61 KiB) Viewed 1825 times

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Fri May 19, 2006 10:05 am

Here is the Darvas Box strategy running on a one minute chart of the British Pound this AM.
I am runinng the short on one chart and the long on another chart
by formating the strategy and shutting off the buy and sell for the short
chart and the sell short and buy to cover for the other chart.

The Darvas boxes show the "downstair" pattern perfectly.
It is very close to what I am trying to acomplish.
Attachments
@BP DARVAS BOX SHORT.jpg
@BP DARVAS BOX SHORT.jpg (80.05 KiB) Viewed 1824 times

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Fri May 19, 2006 10:25 am

This screen shot shows the end of the selloff in the British Pound.
It also demonstrates how this pattern works on all time frames.
As soon as a upstair pattern forms inside of one of the Darvas Boxes and a pullback to the upstair results in a move higher, it is time to close the short.
Attachments
@BP DARVAS BOX SHORT COVER.jpg
@BP DARVAS BOX SHORT COVER.jpg (78.82 KiB) Viewed 1822 times

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Fri May 19, 2006 11:30 am

Last post for today on the @BP showing areas of support at upstair pattern and resistance at downstairs on 30 minute charts as the @BP attempts to regain some of the 2 cent loss today.

I expect the @BP to try to go sideways between 1.8760 and 1.8780 to try to take out the first area of resistance.

If it drops below 1.8759, I would want the strategy to re-enter a short position for me.

I have a second 30 minute chart showing 2 upstair patterns at 1.8713 and 1.8650 which will produce bounces if the @BP wants to move lower in the future. I would take profits on my short at each one of those places.
Attachments
@BP DARVAS BOX RESISTANCE AREA.jpg
@BP DARVAS BOX RESISTANCE AREA.jpg (84.87 KiB) Viewed 1818 times
@BP 30 MINUTE CHART SUPPORT 5-19-06.jpg
@BP 30 MINUTE CHART SUPPORT 5-19-06.jpg (117.63 KiB) Viewed 1818 times

User avatar
michal.kreslik
rank: 1000+ posts
rank: 1000+ posts
Posts: 1032
Joined: Sat May 13, 2006 2:40 am
Reputation: 0
Location: Monte Carlo, Monaco
Real name: Michal Kreslik
Gender: Male
Contact:

Postby michal.kreslik » Fri May 19, 2006 11:34 am

fatdog,

that really looks interesting. I hope this weekend I will have some time to have a look at it and recast the idea into the strategy code.

Have you ever tried to apply this concept to forex? Have a look at how that would fare on EURUSD, GBPUD, USDCHF etc.

Maybe you should post a littlebit narrower screenshots :D

fatdog1
rank: 150+ posts
rank: 150+ posts
Posts: 164
Joined: Thu May 18, 2006 11:58 am
Reputation: 0
Gender: Male
Contact:

Postby fatdog1 » Fri May 19, 2006 12:27 pm

Hi Michal,

I wish I could post a smaller screen shot, but this is my 17 inch laptop that I am working on. I will use the desktop computer next time from home.
I hope you can figure out a way to code this idea for me.
I would really appreciate it. It seems so simple and yet I can't think of a way to explain it to anyone who is a programmer. I just took the TS EL beginner course in February, so it is way above me at this stage.

As for forex, what I do is based on the laws of supply and demand so it will work on anything you want to trade.

I have a 60 min chart of GBPUSD below showing the areas I would trade at on pullbacks. If you are a breakout trader, you could use these patterns to help you cut down on the number of whipsaw trades by only trading a long breakout of the upstair pattern and only going short on the breakdown candle of the downstair pattern.
Those candles indicate that the resistance or support in that area has been absorbed.
I prefer to trade pullbacks to those areas instead because I can control the risk on the trade better by using buy and sell stops to enter only if the trade starts to go in my favor.

As for me trading in the spot forex market, I have a very bad taste in my mouth for forex because I am a victim of Refco FX stealing my trading account when they filed bankruptcy. I lost quite a bit of money and clients also. I hope it never happens to anyone else, but until the NFA and CTFC are officially able to regulate the spot forex market in the USA, I will not put any more money in that market.
Attachments
GBPUSD 60 MINUTE 5-19-06.jpg
GBPUSD 60 MINUTE 5-19-06.jpg (98.15 KiB) Viewed 1814 times

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.


Return to “strategy trading & money management”