Ultimate Algorithmic Trading System

One Bar
Strength
Two Bar
Strength
Three Bar
Strength
FIGURE 1.1
Examples of strength differences between pivot high points on daily bars.
either paradigm or across both, meaning that some systems require both approaches
to be fully described and programmed. Most traders can easily describe and probably
program a consecutive bar-type algorithm. However, traders that can’t put their
ideas into such a simple form and have had little or no programming experience have
a more difficult time reducing their ideas into a formal description, not to mention
pseudocode.
The Variable Bar Sequence Jumping headfirst into paradigm #1, the variable bar
sequence, here is a somewhat creative design that incorporates pivot points and a
sequence that can occur over a variable amount of days. For those of you who are
not familiar with pivot points, Figure 1.1 shows different examples of pivot high
points on daily bars and their differing strengths.
The strength of the pivot bar is based on the number of bars preceding and
following the high bar. A two-bar pivot is simply a high bar with two bars before
and after that have lower highs. The preceding/following highs do not necessarily
have to be in a stairstep fashion. Here is our long entry signal description using
step-by-step instructions.
Buy:
Step 1: Wait for a pivot high bar of strength 1 to appear on the chart and mark the
high price.
Step 2: Wait for the first low price that is 2 percent lower than the high price
marked in Step 1. If one occurs, move to Step 3. If the market moves above
the high marked in Step 1, then go back to Step 1 and wait for another
pivothighbar.
13
INTRODUCTION TO TRADING
www.rasabourse.com