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Let us use another example for the popular Stochastic trading
system.To smooth the oscillator and avoid undesirable whipsaws, we will
study the trading properties of Y=DEMA(StochD(X),X1);The basket of
stocks was ^NDX, AAPL, AMZN, BEAS, CSCO, DELL, MSFT, ORCL, RFMD, SYMC, YHOO
and QQQand the period was the last 720 bars. Settings were trade at Open,
Delay +1, commission 0.5%and all stops disabled.Is there a universal
level system to trade this basket of stocks ?The optimal solution is coming
from the
optimizationX=20;X1=15;Y=DEMA(StochD(X),X1);B1=Optimize("B1",15,10,30,5);S1=Optimize("S1",65,50,80,5);Buy=Cross(Y,B1);Sell=Cross(Y,S1);Buy=ExRem(Buy,Sell);Sell=ExRem(Sell,Buy);Short=Cross(S1,Y);Cover=Cross(B1,Y);Short=ExRem(Short,Cover);Cover=ExRem(Cover,Short);and
the results are presented on Fig. 1.If we use B1=20 and S1=55 we may reach
the ideal total Net profit +189%.Note that profits decrease dramatically as
we change B1, S1 values [only 5 combinations perform better than
+100%]Let us apply now the transcendental use of data : All these 12 stocks
will follow one uniqueStochastic curve, which will produce the universal
trading signals for any stock.The new optimization AFL code
isNUM=Optimize("NUM",4,0,12,1);N=WriteIf(NUM==0,"^NDX",WriteIf(NUM==1,"AAPL",WriteIf(NUM==2,"AMZN",WriteIf(NUM==3,"BEAS",WriteIf(NUM==4,"CSCO",WriteIf(NUM==5,"DELL",WriteIf(NUM==6,"INTC",WriteIf(NUM==7,"MSFT",WriteIf(NUM==8,"ORCL",WriteIf(NUM==9,"RFMD",WriteIf(NUM==10,"SYMC",WriteIf(NUM==11,"YHOO","QQQ"))))))))))));H=Foreign(N,"H");L=Foreign(N,"L");C=Foreign(N,"C");X=20;X1=15;Y=DEMA(StochD(X),X1);B1=Optimize("B1",15,10,30,5);S1=Optimize("S1",65,50,80,5);Buy=Cross(Y,B1);Sell=Cross(Y,S1);Buy=ExRem(Buy,Sell);Sell=ExRem(Sell,Buy);Short=Cross(S1,Y);Cover=Cross(B1,Y);Short=ExRem(Short,Cover);Cover=ExRem(Cover,Short);The
results are on Fig. 2 and speak better.CSCO or ^NDX Stochastic give more
profitable pattern for the whole basket than individual Stochasticper stock.
How about the smart money ? From the Market Profile we see
that buyers acted better : the higher % of money spent were in the
area[10,20]. On the other side, a lot of money were spent in the [50,60]
interval : Sellers are forced for apremature exit, when Stochastic is
ascending, or take delayed action when stochastic is descending.The majority
of the capital spent does not make interesting profits, from the Stochastic
point of view !!Dimitris
Tsokakis
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