TASC 2009-08 | DMI and Moving Avg (Kerstens)

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Traders' Tip text

Wealth-Lab Version 6 code in C# for combining the DM and Moving Average indicators is presented below with the minor modification of making this a stop and reverse strategy. As the periods chosen seem quite arbitrary, it seems possible to find a sweeter spot for the strategy by optimizing. While adding complexity, it also may pay off investigating the use of a loose trailing stop in order to prevent whipsaws in the middle of a strong trend (possibly detected using ADX) like the one in September 2008 (Figure 1).

Figure 1. DMI and moving average crossovers often indicate the same trend on nearly the same bar.

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 CombinedDMI_MA : WealthScript
	{
		StrategyParameter maPeriod;
		StrategyParameter dmPeriod;
	
		public CombinedDMI_MA()
		{
			maPeriod = CreateParameter("MA Period", 30, 10, 55, 5);
			dmPeriod = CreateParameter("DM Period", 14, 10, 21, 1);
		}
	
		protected override void Execute()
		{			
			HideVolume();
			int maPer = maPeriod.ValueInt;
			int dmPer = dmPeriod.ValueInt;
			bool dmiLong = false;
			bool dmiShort = false;
			bool maLong = false;
			bool maShort = false;
			
			DataSeries ma = SMA.Series(Close, maPer);
			DataSeries diplus = DIPlus.Series(Bars, dmPer);
			DataSeries diminus = DIMinus.Series(Bars, dmPer);
			
			ChartPane diPane = CreatePane(40, true, true);
			PlotSeries(diPane, diplus, Color.Green, LineStyle.Solid, 2);
			PlotSeries(diPane, diminus, Color.Red, LineStyle.Solid, 2);
			PlotSeries(PricePane, ma, Color.Blue, LineStyle.Solid, 2);
			
			for(int bar = Math.Max(maPer, dmPer); bar < Bars.Count; bar++)
			{
				if( CrossOver(bar, diplus, diminus) ) {
					dmiLong = true;
					dmiShort = false;
				}
				else if( CrossUnder(bar, diplus, diminus) ) {
					dmiLong = false;
					dmiShort = true;
				}
				
				if( CrossOver(bar, Close, ma) )	{
					maLong = true;
					maShort = false;
				}
				else if( CrossUnder(bar, Close, ma) ) {
					maLong = false;
					maShort = true;
				}
				
				if (IsLastPositionActive)
				{
					Position p = LastPosition;
					if( p.PositionType == PositionType.Long )
					{
						if( dmiShort && maShort ) {
							SellAtClose(bar, p);
							ShortAtClose(bar);
						}
					}
					else if( dmiLong && maLong ) {
						CoverAtClose(bar, p);
						BuyAtClose(bar);
					}
				}
				else if( dmiLong && maLong )
					BuyAtClose(bar);
				else if( dmiShort && maShort )
					ShortAtClose(bar);
			}
		}
	}
}