TASC 2014-06 | Slope Divergence: Capitalizing On Uncertainty (Kaufman)

Modified on 2014/05/02 17:08 by Eugene — Categorized as: TASC Traders Tips

Traders' Tip text

This WealthScript Strategy implements the simplified version of Perry J. Kaufman's triple-divergence trading system from June 2014 issue. Users have the control to turn the system into long-only, as well as to configure its sensitivity by triggering a trading signal after one, two or three divergences on the same bar.

Figure 1 illustrates the application of the system's rules on the Daily chart of QQQ. The lower pane shows the 5-, 8-, and 13-day linear regression slope of the recent close price.

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

namespace WealthLab.Strategies
{
	enum Side { Buy = 1, Sell = -1, NA = 0 }
	
	public class TASC201406_Kaufman : WealthScript
	{
		Side SingleDivergence( int bar, int period, int momperiod, 
			DataSeries ps, DataSeries ms, out bool trendup, out bool trenddn, out int p, out int m )
		{
			trendup = (psbar > 0 && msbar > 0);
			trenddn = (psbar < 0 && msbar < 0);
			p = psbar >= 0 ? 1 : psbar < 0 ? -1 : 0;
			m = msbar >= 0 ? 1 : msbar < 0 ? -1 : 0;
			
			return ( psbar > 0 && msbar < 0 ) ? Side.Buy :
				( psbar < 0 && msbar > 0 ) ? Side.Sell : Side.NA;
		}

		void Colorize( int bar, Side side )
		{
			SetBackgroundColor( bar, Color.FromArgb(30, side == Side.Buy ? Color.Green : Color.Red ) );
		}
		
		private StrategyParameter paramNumDiv;
		private StrategyParameter paramLongOnly;
		
		public TASC201406_Kaufman()
		{
			paramNumDiv = CreateParameter("Divergences", 1, 1, 3, 1);
			paramLongOnly = CreateParameter("Long Only", 0, 0, 1, 1);
		}
		
		protected override void Execute()
		{
			int momperiod = 10, entrynumber = paramNumDiv.ValueInt, 
				dvgperiod1 = 5, dvgperiod2 = 8, dvgperiod3 = 13, maxdivergences = 3;
			bool longonly = (paramLongOnly.ValueInt == 0 ? false : true);
			LinearRegSlope lsp1 = LinearRegSlope.Series( Close,dvgperiod1 );
			LinearRegSlope lsp2 = LinearRegSlope.Series( Close,dvgperiod2 );
			LinearRegSlope lsp3 = LinearRegSlope.Series( Close,dvgperiod3 );
			StochK fastK = StochK.Series(Bars,momperiod);
			LinearRegSlope lsm1 = LinearRegSlope.Series( fastK,dvgperiod1 );
			LinearRegSlope lsm2 = LinearRegSlope.Series( fastK,dvgperiod2 );
			LinearRegSlope lsm3 = LinearRegSlope.Series( fastK,dvgperiod3 );
			
			ClearDebug(); HideVolume(); LineStyle ls = LineStyle.Solid;
			ChartPane lrspPane = CreatePane( 40,false,true );
			PlotSeries( lrspPane, lsp1, Color.DarkGreen, ls, 1 );
			PlotSeries( lrspPane, lsp2, Color.Blue, ls, 1 );
			PlotSeries( lrspPane, lsp3, Color.Red, ls, 1 );
			//ChartPane lrsmPane = CreatePane( 30,false,true );
			//PlotSeries( lrsmPane, fastK, Color.Black, ls, 1 );
			
			for(int bar = GetTradingLoopStartBar(Math.Max(momperiod,dvgperiod3)); bar < Bars.Count; bar++)
			{
				int nbuys = 0, nsells = 0, ps1 = 0, ps2 = 0, ps3 = 0, ms1 = 0, ms2 = 0, ms3 = 0,
					npriceslopeup = 0, npriceslopedown = 0, nmomslopeup = 0, nmomslopedown = 0;
				bool trend1up = false, trend2up = false, trend3up = false,
					trend1dn = false, trend2dn = false, trend3dn = false;

				Side _d1 = SingleDivergence( bar, dvgperiod1, momperiod, lsp1, lsm1, out trend1up, out trend1dn, out ps1, out ms1 );
				Side _d2 = SingleDivergence( bar, dvgperiod2, momperiod, lsp2, lsm2, out trend2up, out trend2dn, out ps2, out ms2 );
				Side _d3 = SingleDivergence( bar, dvgperiod3, momperiod, lsp3, lsm3, out trend3up, out trend3dn, out ps3, out ms3 );
				
				int d1 = (int)_d1;
				int d2 = (int)_d2;
				int d3 = (int)_d3;
					
				if( d1 > 0 ) nbuys += 1; if( d1 < 0 ) nsells += 1;
				if( d2 > 0 ) nbuys += 1; if( d2 < 0 ) nsells += 1;
				if( d3 > 0 ) nbuys += 1; if( d3 < 0 ) nsells += 1;
					
				if( ps1 > 0 ) npriceslopeup += 1; if( ps1 < 0 ) npriceslopedown += 1;
				if( ps2 > 0 ) npriceslopeup += 1; if( ps2 < 0 ) npriceslopedown += 1;
				if( ps3 > 0 ) npriceslopeup += 1; if( ps3 < 0 ) npriceslopedown += 1;
					
				if( ms1 > 0 ) nmomslopeup += 1; if( ms1 < 0 ) nmomslopedown += 1;
				if( ms2 > 0 ) nmomslopeup += 1; if( ms2 < 0 ) nmomslopedown += 1;
				if( ms3 > 0 ) nmomslopeup += 1; if( ms3 < 0 ) nmomslopedown += 1;
				
				if( nbuys >= entrynumber )
					Colorize( bar, Side.Buy );
				else
					if( nsells >= entrynumber )
						Colorize( bar, Side.Sell );
				if( false )
				PrintDebug( "bar: " + bar + ", d1: " + d1 + ", d2: " + d2 + ", d3: " + d3 + ", nbuys: " + nbuys + ", nsells: " + nsells + 
					", npriceslopeup: " + npriceslopeup + ", npriceslopedown: " + npriceslopedown +
					", nmomslopeup: " + nmomslopeup + ", nmomslopedown: " + nmomslopedown );
				
				if (IsLastPositionActive)
				{
					Position p = LastPosition;

					if( p.PositionType == PositionType.Long )
					{
						if( nsells >= entrynumber)
							SellAtClose( bar, p, "revLong");
					}
					else //if( p.PositionType == PositionType.Short )
					{
						if( nbuys >= entrynumber)
							CoverAtClose( bar, p, "revShort");
					}
					
					if( (npriceslopeup == maxdivergences && nmomslopeup == maxdivergences) ||
						(npriceslopedown == maxdivergences && nmomslopedown == maxdivergences) )						
					{
						ExitAtMarket( bar+1, p, p.PositionType == PositionType.Long ? "xLall" : "xSall" );
					}
				}
				else
				{
					if( nbuys >= entrynumber)
						BuyAtMarket(bar+1, "newBuy");
					else
						if( nsells >= entrynumber && longonly == false)
						ShortAtMarket(bar+1, "newSell");
				}
			}
		}
	}
}

Eugene
Wealth-Lab team
www.wealth-lab.com