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Hi Joe,
Yes, things are slowly returning to normal -- whatever that is
<VBG>. Extended family issues are resolving, health (except
for a bad cold and a re-sprained ankle) improving, real property issues decided,
current house/grounds plans progressing (but for my ankle), so I do hope to
appear here more often and help out where I can. Comcast is
still feuding with Yahoo I guess as my posts take anywhere from 20
minutes to > 4 hours to appear. I assure you I was long abed by the
time my 1-2-3 message last night says it was posted.
The method for the 1-2-3-4 was first developed (AFAIK) by Larry
Connors and Jeff Cooper in the early 90's. In Cooper's book Hit and
Run Trading (1996, pp. 31-46), Cooper says Connors developed
it. Connors in Advanced Trading Strategies
(1998, pp. 57-70) says they developed it jointly and credits W.D Gann's
observation that extremely strong markets (or weak for shorts) usually do not
correct for more than 3 days. Jeff Cooper subsequently published
a non-ADX version (it uses RSI) in Hit and Run Trading II (1998, pp.
39-44). Both Cooper's books have been re-released and can often be
purchased for about $100 each but are often available in a bundle along with a
training DVD for ~$195 from Trader's Library ( www.traderslibrary.com) and other
outlets. As a pattern trader (probably 90+% of my short term trades
are), I have long been a devotee of Connor and Cooper as well as Linda
Raschke, Tony Crabel, Michael Harris, Barry Rudd, Adrian Manz, and Dave
Landry (any relation?? <gg>). In roughly that order, their
books belong on a day and swing trader's shelves, IMHO. I have written AAs
for many of the patterns they cover and (depending on market conditions)
routinely check for a half dozen or more each night to develop my hit list for
the next day's trading. Currently, Lizards, 1-2-3-4, 180's, Gilligan's
Island, Slingshots and Whoops, along with some of my own creations like Bop the
Mole, Hop-Skip and Jump, Trap-door, Slip and Slide, and Hangman have been doing
well, despite the general market.
The 1-2-3-4 is a very simple setup to trade and IMHO, one of the more
reliable long strategies. The rules (from Connors and Cooper) for a
long are:
1. ADX(14) > 30 ;
2. +DI(14) > -DI(14);
3. Wait for a 1-2-3 correction: i.e., 3
consecutive intraday lower lows, or any combination of 2 lower lows and an
inside day.
4. On day four only, buy
1/8 tick above the day 3 high [ this was written in the pre decimalization
trading days -- I suggest using .05 now];
5. When filled, your initial protective stop
should be near the day 3 low;
6. As the position moves in your favor, trail you
stops, but allow a bit more breathing room because of the upside potential of
the move.
To modify the prior code to add the Day4 criteria as a selectable
param:
1) add the following (I have it just before the ADX param (Filter by ADX
above),
Setup =
Param("Run As Check for 1-2-3 Setup (1) or
Day 4 Entry (2)", 2, 1, 2, 1);
2) and then add the following after the Long123
pattern definition, and remove the TE param from the
"Organize Exploration Results"
section
// Day-4 condition
TE = Param("Recommended
entry, Trade above high by __" , 0.05 , 0.01, 0.75, 0.005); // enter
trade above prior day high -- C & C said .125, in pre decimal days; I find
..05 works well now
Entry_Day4 = C > Ref(H,-1) + TE
;
3) and finally change the Filter statement to the following:
Filter = IIf(setup == 1, (Long123 AND My_Other_Conditions AND My_Conditions) ,Ref(
Long123,-1) AND Entry_Day4);
Now when run on today's date it will give you today's either the 1-2-3
setup or today's 1-2-3-4's, and you explore prior dates the same way to see
the pattern's action.
Personal usage:
For trading (vs. longer swings and investments) I generally confine myself
to NAZ issues and first scan against a watchlist of NAZ issues trading
at $5-$300, and 125,000 shares 21 day avg volume. I will
generate a list of the 1-2-3 setups the night before and then intraday run
checks for the day 4 criteria against that list. For
particularly good looking setups or issues I'm familiar with, I add them to a
watchlist in QuoteTracker with an alert set for the entry point. If the
market looks to open very strong (not lately), I may enter some buy orders on a
few as buy stops because I may not have time to catch them if they are really
running.
My own exit technique for this strategy includes watching how the
stock goes into the close: if closing near the high of the day (especially with
volume picking up), I'll hold and look to the prior 3 day high as a
possible target. If the stock languishes on volume near the mid point of
it's day 4 range, it's good to sell. Of course, one must be watching all
this as a stray out of limits trade can skew the daily range and should be
ignored. For this reason, I've never bothered to code a backtest for how I
actually trade the strategy, but use it to find candidates to trade. It
would be interesting also to do an index or sector correlation with the
strategy: e.g., if trading semiconductor stocks, is the SMH or SOX trending up
when looking to go long with a 1-2-3-4 pattern. Another notion I've
not had time to play with is setting the entry point based on a % of ATR.
Always different tweaks to try and AB certainly lets you do it.
Peace and Justice --- Patrick
----- Original Message -----
Sent: Monday, May 22, 2006 6:15 AM
Subject: Re: [amibroker] 1-2-3
Setups
Good morning Patrick....Hope things have
settled down for you in the NW. Seems like you're on the board a bit
more than
in the past
months.
Your 1-2-3-4 script is a fine piece of
work and promises to yield good results.
I've just ran it against my ~3200
stock "universe" and I must say the 73
issues that result in the screen look very promising.
Would you point me to the underlying method by
Conners and Cooper?
Best regards
Joe
----- Original Message -----
Sent: Monday, May 22, 2006 1:36
AM
Subject: Re: [amibroker] 1-2-3
Setups
Hi Lal,
If you are referring to Larry Connors and Jeff Cooper's 1-2-3-4 See the
attached for a long version of the setup as a 1-2-3. I leave it to you
to code a short version and post it -- OK?
This code has a few of my tweaks for parameters that I've found helpful
to modify, buy it is set to default as a pure 1-2-3. It will also
allow you to send the results to a watchlist for tracking -- it is one of
the setups I regularly use (tho not with the settings originally described
by Connors and Cooper).
Enjoy.
Peace and Justice --- Patrick
----- Original Message -----
Sent: Sunday, May 21, 2006 2:42
AM
Subject: [amibroker] 1-2-3
Setups
Hello,
Has anyone coded 1-2-3 Buy and Sell setups in
Amibroker and is willing
to share the
code?
Thanks,
Lal
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