Avoiding announced takeovers
Author: Panache
Creation Date: 6/4/2015 11:27 AM
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Panache

#1
Many of my momentum strategies end up pick a company which is being taken over. In most cases, once a takeover is announced, the momentum is gone, and the stock becomes an arbitrage play.

From a technical perspective, a takeover usually consists of a relatively large one day jump in the stock price, followed by a very narrow trading range. Is there a technical indicator that I can use to find those price jumps without having to go through the data bar by bar?
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Eugene

#2
Reminds of CandlePattern.Bearish/BullishDojiStar. Why not design a technical indicator that would detect the condition, encapsulating the ugly internals? There many possible ways to detect both a price spike or a NR day.
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Panache

#3
Do technical indicators run any faster than Strategy code, ie. is building my own technical indicator going to save execution time or just make it easier to write Strategies?

I took a quick look at the code for TASCIndicators, which I assume is a good starting point. Is there any documentation on building technical indicators?
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Eugene

#4
QUOTE:
Do technical indicators run any faster than Strategy code, ie. is building my own technical indicator going to save execution time or just make it easier to write Strategies?

What does it mean to "run" a technical indicator? Sure it appears faster on a chart, but only on a pure chart, because there's no XX ms overhead required to compile a Strategy (once per load) utlizing that indicator compared to a stock chart. No time is to be saved in practical sense from building a "formal" indicator (that is, existing in binary form in an indicator library) as opposed to one that is contained in your Strategy's code. You benefit from being able to share it between strategies w/o having to copy the internals, use it in Rules or in Index-Lab, drag & drop, whatever.

QUOTE:
Is there any documentation on building technical indicators?

Sure:

1. Semi-formal: WealthScript Programming Guide > Indicators > Custom Indicators
2. Formal i.e. in binary form: Wealth-Lab Version 6 (.NET) Development Guide > "Create an Indicator Library"



However, let's focus on defining and coding your takeover pattern in this particular topic and reserve general indicator building studies for other threads.
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Panache

#5
QUOTE:
No time is to be saved in practical sense from building a "formal" indicator (that is, existing in binary form in an indicator library) as opposed to one that is contained in your Strategy's code.


That's what I guessed. Since I'm now using a custom framework for all of my code anyway http://www.wealth-lab.com/Forum/Posts/Starting-Positions-33298, it will be faster for me just to program it into my framework.