Ultimate Algorithmic Trading System

Step 3: Wait for another pivot high bar that exceeds the price in Step 1. Once a
high bar pivot occurs that fits the criteria, mark the high price.
Step 4: Once the subsequent pivot high bar is found, then wait for another low
price that is 2 percent below the high marked in Step 3. When a bar’s low
price fulfills the criteria buy that bar’s close. If the market moves above the
high marked in Step 3, then go back to Step 3 and wait for another pivot
high bar. The new high that just occurred may turn out to be the pivot high
bar that you are looking for in Step 3.
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INTRODUCTION TO TRADING
Additional notes: If 30 days transpire before proceeding from Step 1 to Step 4,
then reset.
Figure 1.2 illustrates the sequence the above description is trying to capture.
Ignore the state designations for now. They will become apparent in the following
discussion.
It is easy to see the designer/trader of this entry signal is trying to buy after two
pivot highs are separated and followed by a pullback of 2 percent. In addition, there
are a couple of conditions that must also be met before a buy signal is triggered:
(1) the second pivot high price must be higher than the first, and (2) the whole
sequence must take less than 30 bars to complete. When a system allows its entry
criteria to work across an unknown number of days or price levels, conditions must
be used to keep the integrity of the entry signal and limit the duration of the sequence.
Since there is variability in the instruction set, the programming of this paradigm is
definitely more difficult. However, as mentioned earlier, it is very doable. As a young
State 1
State 3
Buy Here
State 1
State 3
State 1
State 2
State 3
State 4
State 2
State 4
State 2
State 4
Pivot Point Finite State
Machine
Showing Progression
Through Different States
21 28 Jun4 11 18 25 Jul 9 16 23 30 Aug 6 13 20 27 Sep 10 17
FIGURE 1.2
A depiction of the variable-bar sequence described by the long entry signal.
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