Ultimate Algorithmic Trading System

direction of the 200-day moving average but waits for a pullback for longs and rallies
for shorts. The Bollinger B% function returns the location of the current close in relationship
to the upper and lower Bollinger bands. If the function returns a small value,
then the close is close to the lower band and vice-versa for a high value. This system is
programmed in EasyLanguage and the source code will be revealed in the Chapter 7.
Box 3.4 Mean Reversion (MR)
Calculate the 200-day moving average of closing prices
Calculate the 5-day Bollinger B% value
Calculate the 3-day moving average of the Bollinger B% value
If c > MAV(c,200) and MAV(BB%,3) < 0.25, then buy next bar at open
If c < MAV(c,200) and MAV(BB%,3) > 0.75, then sell short next bar at open
Liquidate long MOC when BB% > .75 or close < entryPrice - 2000/big-
PointValue
Liquidate short MOC when BB% < 0.25 or close > entryPrice +
2000/bigPointValue
Take a look at the equity curve in Figure 3.8. Here is a pattern system that trades
the stock indices as well.
109
$54,000
$48,000
$42,000
$36,000
$30,000
Closed Trade Equity Curve
COMPLETE TRADING ALGORITHMS
$24,000
$18,000
$12,000
$6,000
$0
FIGURE 3.8
14 28 42 56 69 83 97
Equity curve that reflects a pattern system.
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