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Pal,
There is a trading system used by some traders called the Bollinger
Breakout System. It is similar to what DT has proposed. You buy when the
upper band is exceeded plus a small additional amount (opposite
for shorting). However, the standard deviation bands are much smaller than the
usual +/- 2. Usually, they are around +/- 0.4 or so. So, the bands are quite a
bit narrower and are used as breakout bands rather than the usual rebound bands
or support/resistance levels where one sells at the top of the upper band and
buys at the bottom of the lower band. Just a different way of looking at things.
It's a volatility breakout system of sorts. By the way, the exit is the opposite
of the entry: sell at the breakout from the lower band (if long originally).
AV
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
palsanand
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Wednesday, September 24, 2003 1:03
PM
Subject: [amibroker] Re: The Reverse
Engine Bollinger Bands Problem, IV
Hi,I would characterize your definition of upper or
lower breakout as a continuation signal not a breakout. In
my opinion an upper breakout always starts from the lower Bband and a
lower breakout always starts from the upper Bband. The trick there
is to find that particular value of the Z-Score (+/-2)that will detect the
breakout or counter-trend pullback. It is made much easier by
calculating a range of Z-Scores with different moving averages (2-21)
& performing a check on it using StochZ(50) &
StochZ(200).The Bollinger Bands are Standard Deviation
Bands. It's superiority is in showing your investments volatility
along with the likely support and resistance areas (Z=0). The
extremes of the band (+/-2)are considered "unusual". Every time you
see an investment reach the extremes, it is said to be at the "Bollinger
Band". However, it is also a key turning point. The price can
be expected to be anywhere within the 95% confidence band at any
time. The moment the investment hits the extremes, it is now
statistically significant and something has caused this new valuation and
it is time to search for a signal using your favorite Entry/Exit Trading
Signal Detection system.But, sometimes a breakout becomes a
counter-trend pullback & vice-versa. The trick there is to
detect the volatility. You may find that the volatility
characteristics are quite different for these two types of market
conditions.Regards,Pal--- In amibroker@xxxxxxxxxxxxxxx,
"Dimitris Tsokakis" <TSOKAKIS@xxxx> wrote:> Here is an
application of the method.> Suppose we trade BBands and suppose we buy
at the upper breakout and sell some, say 8, days later.> The usual
code would be, from 1/1/2003 till now> > // Without the
method> t=8;>
Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-t);> SetTradeDelays(
1, 1, 1, 1 ) ;> e2=Equity(1,3,1030101,1030924);> > where
bt is the BBandTop(C,n,f) upper Bollinger Band> Buy/Sell at Open with
delay +1.> > Now we know in advance the critical level X1 to
have a BB breakout tomorrow. > We may use it as a BuyPrice and set
Buy delay to 0.> The new system would be> > // With the
method> t=8;>
Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-t);BuyPrice=Ref(x1,-1);>
SetTradeDelays( 0, 1, 1, 1 ) ;e1=Equity(1,3,1030101,1030924);> >
The att. gif gives an outline of the improvement.> Of course, nothing
is free in this world, we have to decide, when the price reach the
critical level X1, that it will close higher !!> Explore the database
for the n=1 last quotations with> > n=10; f=2;>
Qn=Sum(C^2,n);Qn_1=Sum(C^2,n-1);> Sn=Sum(C,n);Sn_1=Sum(C,n-1);>
Mn=Sn/n;Mn_1=Sn_1/(n-1);>
Kn=(1/n)*sqrt(n*Qn-Sn^2);Kn_1=(1/(n-1))*sqrt((n-1)*Qn_1-Sn_1^2);>
bb=Mn-f*Kn;bt=Mn+f*Kn;> S=Sn_1;Q=Qn_1;>
A2=(n-1)*(f^2-n+1);> A1=-2*(f^2+1-n)*S;>
A0=f^2*n*Q-f^2*S^2-S^2;> x1=(-A1-sqrt(A1^2-4*A2*A0))/(2*A2);>
x2=(-A1+sqrt(A1^2-4*A2*A0))/(2*A2);> Plot(C,"C",1,8);>
Plot(X1,"",colorBlue,1);>
Plot(X2,"",colorBlue,1);Plot(bb,"BBandBot",7,1);Plot(bt,"BBandTop",7,1);>
PlotShapes(shapeDownTriangle*Cross(x2,Ref(C,1)),colorPink);>
PlotShapes(shapeDownArrow*(Cross(bb,C)),colorRed);>
PlotShapes(shapeUpTriangle*Cross(Ref(C,1),x1),colorAqua);>
PlotShapes(shapeUpArrow*(Cross(C,bt)),colorBrightGreen);> Title="The
next "+Name()+" Close should be "+"\n *below"+WriteVal(x2)+" [
"+WriteVal(100*(-1+x2/C))+"% ] for a BBandBot Cross"+> "\n
*above"+WriteVal(x1)+" ["+WriteVal(100*(-1+x1/C))+"% ] for a BBandTop
Cross"+> "\n Actual Next Close =
"+WriteIf(Cum(1)!=LastValue(Cum(1)),WriteVal(Ref(C,1)),"?");>
t=8;> // With the method>
Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-t);>
BuyPrice=Ref(x1,-1);> SetTradeDelays( 0, 1, 1, 1 ) ;>
e1=Equity(1,3,1030101,1030924);> // Without the method>
Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-t);> SetTradeDelays(
1, 1, 1, 1 ) ;> e2=Equity(1,3,1030101,1030924);>
Filter=e1>e2;> AddColumn(e2,"e Without");> AddColumn(e1,"e
With");> AddColumn(100*(-1+e1/e2),"Profits % Increment");>
> to get an idea of probable applications.> Dimitris
Tsokakis> > > > > > ----- Original
Message ----- > From: Dimitris Tsokakis > To:
amibroker@xxxxxxxxxxxxxxx > Sent: Tuesday, September 23, 2003 1:15
PM> Subject: Fw: The Reverse Engine Bollinger Bands Problem,
III> > > If you expect a BBandBot(C,10,3) to cross CSCO
Close, perhaps you should wait for long. > This type of cross never
occurred the last 45 months !!> There are some resctrictions in
BBandbot(C,n,f) parameters. > A. f upper limit> For a given n,
the values of f are limited.> This limit is not universal, it varies
from stock to stock.> In AA window, explore the current stock for the
last n=1 bars with> > // f upper limit for a given n> //
Explore ONLY current stock, n=1 last quotations> SetOption
("NoDefaultColumns" ,True);> AddTextColumn(Name(),"Name");>
n=10;> for(f=1.5;f<=3;f=f+0.1)> {>
b=BBandBot(C,n,f);> x=Cross(b,C);y=LastValue(Cum(x));>
if(y>0)> {AddColumn(y,"f="+WriteVal(f,1.1),1.0);}> }>
Filter=1;> > You may see the # of Cross(b,C) per f value.
the last column gives the upper limit of f for a given n.> For the
database it is better to use the code> > // f upper limit
for a given n> // Explore the database for the n=1 last
quotations> SetOption ("NoDefaultColumns" ,True);>
AddTextColumn(Name(),"Name");> n=10;>
for(f=1.5;f<=3;f=f+0.1)> {> b=BBandBot(C,n,f);>
x=Cross(b,C);y=LastValue(Cum(x));>
AddColumn(y,"f="+WriteVal(f,1.1),1.0);> }>
Filter=1;> > For the N100 database no stock exceeded f=3
since Jan2000.> > B. n lower limit> For a given f there
is a lower limit for n, also variable from stock to stock.>
> // n lower limit for a given f> // Explore the database for
the n=1 last quotations> SetOption ("NoDefaultColumns"
,True);> AddTextColumn(Name(),"Name");> f=2.5;>
for(n=3;n<20;n=n+1)> {> b=BBandBot(C,n,f);>
x=Cross(b,C);y=LastValue(Cum(x));>
AddColumn(y,"n="+WriteVal(n,1.0),1.0);> }> Filter=1;>
> You will see that n should be greater than n=8 for a probable
Cross(b,C)> > C. fmax for various n> For your
BBandBot parameters selection you should know the fmax for various
n.> // fmax for various n> SetOption ("NoDefaultColumns"
,True);> AddTextColumn(Name(),"Name");>
for(n=10;n<210;n=n+10)> {> for(f=1.5;f<=5;f=f+0.1)>
{> b=BBandBot(C,n,f);> x=Cross(b,C);y=LastValue(Cum(x));>
if(y>0)> {fmax=f;}> }> Filter=1;// explore for the n=1
last quotations.> AddColumn(fmax,"n="+WriteVal(n,1.0),1.1);>
}> > In the attached gif you may see the fmax distribution for a
group of stocks [test period Jan2000 till now]> It is better to
know the mutual f,n limitations before using the Reverse Engine BBands
mechanism.> Dimitris Tsokakis> > > -----
Original Message ----- > From: Dimitris Tsokakis > To:
amibroker@xxxxxxxxxxxxxxx > Sent: Monday, September 22, 2003 1:53
PM> Subject: The Reverse Engine Bollinger Bands Problem, II>
> > Here is the complete IB formula for BBandTop,
BBandbot.> > // Anticipating the next bar BBandBot or BBandTop
cross, by D. Tsokakis, Sept 2003> n=20; f=2;>
Qn=Sum(C^2,n);Qn_1=Sum(C^2,n-1);> Sn=Sum(C,n);Sn_1=Sum(C,n-1);>
Mn=Sn/n;Mn_1=Sn_1/(n-1);>
Kn=(1/n)*sqrt(n*Qn-Sn^2);Kn_1=(1/(n-1))*sqrt((n-1)*Qn_1-Sn_1^2);>
bb=Mn-f*Kn;bt=Mn+f*Kn;> S=Sn_1;Q=Qn_1;>
A2=(n-1)*(f^2-n+1);> A1=-2*(f^2+1-n)*S;>
A0=f^2*n*Q-f^2*S^2-S^2;> x1=(-A1-sqrt(A1^2-4*A2*A0))/(2*A2);>
x2=(-A1+sqrt(A1^2-4*A2*A0))/(2*A2);> Plot(C,"C",1,8);>
Plot(X1,"",colorBlue,1);>
Plot(X2,"",colorBlue,1);Plot(bb,"BBandBot",7,1);Plot(bt,"BBandTop",7,1);>
PlotShapes(shapeDownTriangle*Cross(x2,Ref(C,1)),colorPink);>
PlotShapes(shapeDownArrow*(Cross(bb,C)),colorRed);>
PlotShapes(shapeUpTriangle*Cross(Ref(C,1),x1),colorAqua);>
PlotShapes(shapeUpArrow*(Cross(C,bt)),colorBrightGreen);> Title="The
next "+Name()+" Close should be "+"\n *below"+WriteVal(x2)+" for a
BBandBot Cross"+> "\n *above"+WriteVal(x1)+" for a BBandTop
Cross"+> "\n Actual Next Close =
"+WriteIf(Cum(1)!=LastValue(Cum(1)),WriteVal(Ref(C,1)),"?");>
> The formula gives quite accurate results. Sometimes it is
useful.> At point Z1, the price should be below 13.845 and the next bar
close was 13.840.> At point Z2, the price should be above 20.840
and the next bar close was 20.850. > From the mathematical
point of view, both crosses come from the same 2nd degree equation
A2*X^2+A1*X+A0=0> Dimitris Tsokakis> [to be continued]>
> ----- Original Message ----- > From: Dimitris Tsokakis
> To: amibroker@xxxxxxxxxxxxxxx > Sent: Monday, September 22,
2003 11:26 AM> Subject: The Reverse Engine Bollinger Bands
Problem> > > What is the necessary next bar Close to see
prices below the next bar BBandbot ?> Steve Karnish is responsible
for the question [and the ...headache], some time ago.> The
following code is dedicated to him.> Paste in IB the> >
// Anticipating the next bar BBandbot cross, by D. Tsokakis, Sept
2003> n=10; > f=2;>
Qn=Sum(C^2,n);Qn_1=Sum(C^2,n-1);> Sn=Sum(C,n);Sn_1=Sum(C,n-1);>
Mn=Sn/n;Mn_1=Sn_1/(n-1);>
Kn=(1/n)*sqrt(n*Qn-Sn^2);Kn_1=(1/(n-1))*sqrt((n-1)*Qn_1-Sn_1^2);>
b=Mn-f*Kn;> S=Sn_1;Q=Qn_1;> A2=(n-1)*(f^2-n+1);>
A1=-2*(f^2+1-n)*S;> A0=f^2*n*Q-f^2*S^2-S^2;>
x2=(-A1+sqrt(A1^2-4*A2*A0))/(2*A2);>
Plot(X2,"",colorBlue,1);Plot(C,"C",1,8);Plot(b,"BBandBot",7,1);>
PlotShapes(shapeUpArrow*Cross(x2,Ref(C,1)),colorWhite);>
PlotShapes(shapeDownArrow*(Cross(b,C)),colorRed);> Title="The next
"+Name()+" Close should be <="+WriteVal(x2)+> "\nActual Next Close =
"+WriteIf(Cum(1)!=LastValue(Cum(1)),WriteVal(Ref(C,1)),"?");>
> The solution is the X2 array.> For visual verification, a
white arrow is plotted when the X2 crosses the next bar close and a red
arrow points the actual cross.> > Dimitris Tsokakis> [to
be continued]
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