Log in to see Cloud of Tags

Wealth-Lab Wiki

TASC 2008-07 | Leader Of The MACD (Siligardos)

RSS

Traders' Tip text

Programming "complex" divergences in Wealth-Lab 6 is not complex and can be accomplished in different ways (for example, see February Traders' Tip "Trading Divergences"). Here we present an alternative approach that identifies a divergence between price and the "Leader of the MACD" when it fails to confirm a highest high, in its turn, creating a lower peak. (To save space, the rules are for short trades but reversing them is pretty easy.)

Image

Figure 1. Illustrating on a short trade in Sugar futures, the "Leader of the MACD" helps spot a complex bearish divergence.

Strategy Code


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

namespace WealthLab.Strategies { public class LeaderOfMACD : DataSeries { public LeaderOfMACD ( Bars bars ) : base(bars,"Leader of the MACD") { EMACalculation cm = EMACalculation.Modern; EMA ema12 = EMA.Series( bars.Close, 12, cm ); EMA ema26 = EMA.Series( bars.Close, 26, cm ); DataSeries Indicator1 = ema12 + EMA.Series( bars.Close - ema12, 12, cm ); DataSeries Indicator2 = ema26 + EMA.Series( bars.Close - ema26, 26, cm );

for (int bar = FirstValidValue; bar < bars.Count; bar++) this[bar] = Indicator1[bar] - Indicator2[bar]; } public static LeaderOfMACD Series( Bars bars ) { LeaderOfMACD _LeaderOfMACD = new LeaderOfMACD( bars ); return _LeaderOfMACD; } }

/* Leader of the MACD divergence: Price sets a highest high but the indicator fails to confirm the new high and turns down */ public class Leader_Divergence : WealthScript { private StrategyParameter paramHighest; public Leader_Divergence() { paramHighest = CreateParameter("Highest high of", 20, 5, 50, 1); } protected override void Execute() { bool peak = false; int peakBar = -1; int high = paramHighest.ValueInt; LeaderOfMACD leader = LeaderOfMACD.Series( Bars ); Highest indicatorHighest = Highest.Series( leader, high ); Highest hHigh = Highest.Series( High, high ); MACD macd = new MACD( Close, "MACD" ); macd.Description = "MACD"; EMA signal = EMA.Series( macd, 9, EMACalculation.Modern ); signal.Description = "Signal Line of MACD"; HideVolume(); LineStyle solid = LineStyle.Solid; ChartPane leaderPane = CreatePane( 50, false, true ); PlotSeries( leaderPane, leader, Color.Red, solid, 2 ); PlotSeries( leaderPane, macd, Color.Black, solid, 1 ); PlotSeries( leaderPane, signal, Color.Blue, solid, 1 );

for(int bar = 80; bar < Bars.Count; bar++) { if (!IsLastPositionActive) { /* 1st peak: both price and indicator */ if( peak == false ) { if( ( High[bar-1] == Highest.Series( High, high )[bar-1] ) & ( leader[bar-1] == Highest.Series( leader, high )[bar-1] ) & TurnDown( bar, High ) & TurnDown( bar, leader ) ) { peak = true; peakBar = bar-1; } } if( peak == true ) { if( ( High[bar] != Highest.Series( High, high )[bar] ) & ( leader[bar] == Highest.Series( leader, high )[bar] ) ) peak = false; }

/* 2nd peak: price high not confirmed by the indicator */

if( peak == true ) { if( ( High[bar-1] == Highest.Series( High, high )[bar-1] ) & ( High[bar-1] >= High[peakBar] ) & ( leader[bar-1] != Highest.Series( leader, high )[bar-1] ) & ( leader[bar-1] < leader[peakBar] ) & TurnDown( bar, High ) & TurnDown( bar, leader ) ) { peak = false; ShortAtClose( bar ); /* Highlight divergence */ for (int b = peakBar; b <= bar; b++) SetPaneBackgroundColor( leaderPane, b, Color.FromArgb( 30, Color.LightCoral ) ); DrawLine( PricePane, peakBar, High[peakBar], bar-1, High[bar-1], Color.Red, solid, 2 ); DrawLine( leaderPane, peakBar, leader[peakBar], bar-1, leader[bar-1], Color.Blue, solid, 2 ); } } } else { /* Exit after 5 days */ Position p = LastPosition; if ( bar+1 - p.EntryBar >= 5 ) CoverAtMarket( bar+1, p, "Timed" ); } } } } }

Important Disclaimer: The information provided by Wealth-Lab is strictly for informational purposes and is not to be construed as advice or solicitation to buy or sell any security.  The owner of Wealth-Lab.com assumes no liability resulting from the use of the material contained herein for investment purposes. By using this web site, you agree to the terms of this disclaimer and our Terms of Use.


ScrewTurn Wiki. Some of the icons created by FamFamFam.