Ultimate Algorithmic Trading System

If marketPosition =-1 then
If c < entryPrice - 3* avgTrueRange(10) then buyToCover
this bar on close
if c > entryPrice + 1* avgTrueRange(10) then buyToCover
this bar on close
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STOCHASTICS AND AVERAGES AND RSI! OH, MY!
The description of this algorithm looks very similar to the RSI and stochastic
overbought/oversold, but there is one esoteric difference. Notice how the entries
are initiated. Long entries require the CCI to cross above −100, meaning that the
CCI has been in the oversold territory for at least one bar. Just the opposite is true
for short entries; CCI must cross below +100. This is different from the other
algorithms in that entries are delayed until the indicator starts moving in the same
direction as the desired market direction. This delay is a double-edged sword in that
you might get confirmation of market direction but at the cost of worse price.
Many of today’s trading and testing platforms have the keywords CROSS ABOVE
and CROSS BELOW built into the programming language. These keywords are
simple shortcuts meant to make programming easier to understand and implement.
Using the CCI indicator as an example, here are the equivalent computer codes to
the keywords:
CROSS ABOVE −100 : CCI[1] < −100 and CCI[0] > −100
CROSS BELOW +100 : CCI[1] > +100 and CCI[0] < +100
Remember the values inside the square brackets indicate the number of bars/days in
the past. In later chapters, where different platforms are discussed, you will see these
keywords. Figure 2.10 shows some trades generated by this first CCI algorithm.
Since the flowchart for this algorithm is so similar to the RSI and stochastic, it will
not be shown for brevity’s sake. However, the all-important performance metrics
are shown in Table 2.5.
FIGURE 2.10 Trades generated by the CCI algorithm when it crosses above 100 and below −100.
Source: TradeStation
www.rasabourse.com