TASC 2010-09 | Clear Method (Black)

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Traders' Tip text

The accompanying WealthScript C# code demonstrates how to generate the “Clear Method” Swing Line and plot. We elected to plot manually using DrawLine instead of using the PlotSeries statements in order to show the transitions like in the article’s plots. While the author wasn’t necessarily advocating the method as a stand-alone trading strategy, we added a stop and reverse strategy based on “Clear” as a matter of interest. In a 5-year raw profit backtest using daily bars, only 5 of the Dow 30 symbols returned a profit (excluding commissions). An idea for another test would be to take “Clear” trades in lower timeframes but only in the direction of the larger trend.

Figure 1. “Clear” is certain to get you quickly into new trends, but you’ll have to live through the whipsaws along the way as with other trend-following strategies.

WealthScript Code (C#)

using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class ClearMethod : WealthScript
	{	
		protected override void Execute()
		{			
			Color clr = Color.Cyan;	
			DataSeries swingLine = new DataSeries(Bars, "Clear Series");
			DataSeries swingDir = new DataSeries(Bars, "Swing Direction");
			
			// init to swing is up, lowest high
			double HH = High[0];
			double LH = HH;
			double HL = Low[0];
			double LL = HL;
			bool upSwing = true;
			swingDir[0] = -1;
			swingLine[0] = LL;
			
			for(int bar = 1; bar < Bars.Count; bar++)
			{
				double hi = High[bar];
				double lo = Low[bar];
				if (upSwing)
				{
					// if (hi > HH) HH = hi; // inconsequential
					if (lo > HL) HL = lo;
					if (hi < HL)
					{
						upSwing = false;
						//LL = lo;
						LH = hi;
					}
				}
				else
				{
					// if (lo < LL) LL = lo; //inconsequential
					if (hi < LH) LH = hi;
					if (lo > LH) 
					{
						upSwing = true;
						// HH = hi;
						HL = lo;
					}
				}
				
				if (upSwing)
				{
					swingLine[bar] = HL;
					swingDir[bar] = -1;
				}
				else
				{
					swingLine[bar] = LH;
					swingDir[bar] = 0;
				}
				
				/* Plot the line manually to show crossovers and transitions */
				if (swingDir[bar] != swingDir[bar-1])
				{
					clr = (swingDir[bar] != 0) ? Color.Fuchsia : Color.Cyan;
					DrawLine(PricePane, bar - 1, swingLine[bar-1], bar, swingLine[bar-1], clr, LineStyle.Solid, 2);
				}
				else
				{
					clr = (swingDir[bar] != 0) ? Color.Cyan : Color.Fuchsia;
					DrawLine(PricePane, bar - 1, swingLine[bar-1], bar, swingLine[bar], clr, LineStyle.Solid, 2);
				}				
			}
							
			
			/* Basic Trend Following "Clear Method" Strategy */
			
			BuyAtMarket(1);
			for(int bar = 1; bar < Bars.Count; bar++)
			{
				Position p = LastPosition;
				if (swingDir[bar] != 0)	// trend up
				{
					if (IsLastPositionActive && p.PositionType == PositionType.Short) 
					{
						CoverAtMarket(bar + 1, p);
						BuyAtMarket(bar + 1);
					}
				}
				else
				{
					if (IsLastPositionActive && p.PositionType == PositionType.Long) 					
					{
						SellAtMarket(bar + 1, p);
						ShortAtMarket(bar + 1);	
					}
				}
			}
		}
	}
}