Bullish Engulfing Strategy
Author: stevek99022
Creation Date: 6/22/2011 11:27 AM
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stevek99022

#1
Greetings Everyone. Newbie here trying to either find or refine a buy strategy that involves the bullish engulfing candle. It seems to me, (and I could be wrong) that this system provides great stock trading opportunities, and I don't believe it needs an exit strategy like some of the other systems, instead, just use a trailing stop on these trades and your good to go. (maybe wrong about this too). I've been scanning several different websites for such a strategy but always seem to come up empty. So here I am. And I figured if anyone is going to know how or where to find this, it's going to be someone in this forum. Any help, direction or suggestions will be greatly appreciated!

Steve
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Eugene

#2
Steve,

Have you already installed Wealth-Lab, and tried creating a new strategy from Rules? Everything's already there - the Bullish Engulfing as well as a number of different stops.
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stevek99022

#3
Hi Eugene, thanks for getting back to me as this is proving to be a real challenge. I have looked at and tried using the strategies that are available in the software concerning the Bullish Engulfing Candle. It does seem to work pretty well, I guess my question should have been more targeted at putting some added polish to that particular strategy, or, if anyone was using this setup with their added twist to it. I like the software itself, and it appears to be pretty powerful if you know programming (which I don't) It just seems like i'm missing something as this strategy could be tweaked somewhat. What do you think?
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Cone

#4
QUOTE:
targeted at putting some added polish to that particular strategy... It just seems like i'm missing something as this strategy could be tweaked somewhat
You're not missing anything. Wealth-Lab is a platform that helps you experiment with tweaks. We write trading systems and tweak on a daily basis, but even the same strategy that "works" for someone might not work for someone else due to account size, risk tolerances, broker commissions, etc.

Keep trying and learning. You're up against a lot of other traders that want your money. And although it's unlikely that someone will give you a winning trading strategy for free, we've published many on the site and magazines that will work for many people. Even with these, however, your mileage will vary based on the DataSet (or watch list) you use, Position Sizing, account size, etc..

Good luck, and if you have specific questions about how to do something in a strategy, just ask.
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stevek99022

#5
Hey, thanks for the insight with this problem, I really appreciate it. Maybe i'm trying to build a better mousetrap the wrong way. Let me try this again, wording it a little differently this time. The Bullish engulfing candle works fairly well by itself from what i'm seeing in the alerts it comes up with, and when I put stochastics oversold/overbought criteria with it, it gets even better. Here's my question for you folks that write code. Is there a piece of code that can be written to tell the software to search for a certain length of engulfing candle? I'm seeing time after time, that the longer the engulfing candle is, the larger the move up on the next day, and the longer the trend seems to last. Is there a way of telling the software to look for that particular criteria, or is it already in the software someplace that I am missing. Thank you for your help in advance....
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Cone

#6
There is a way to do everything. You have to be specific. What is "length"? It's is points?, percentage from previous close?, an ATR multiple?, or the length of zebra stripe? (Don't ask why that last image came to mind).

The point is, if you ask, "how can I add the condition that says that the bullish candle must be at least 3 times the 5-day ATR?", then we can show you how to do it. Otherwise, you're asking us to write your conditions, and no one has time for that.

Careful though, we can get you going, but no one likes going back and forth with a 1-liner change every time a new thought crosses your mind. Even if you're not a programmer, you can take the thousands of examples from the site, wiard code, Wiki, QuickRef, Programming Guide, etc. and learn how to make changes to conditions yourself.

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stevek99022

#7
Understood, and I wouldn't want to put anyone through something like that. I was under the impression that there was going to be just a couple of lines of code for this. (I'm obviously wrong) Anyway, I see you're point about the candle length, and what I've been wanting to test is a bullish candle that is >= twice the candle of the previous day, along with the volume for that days trading to be >= 25% more than the previous days volume. I'm of the opinion that the greater the candle and volume, the greater the overall interest in that particular stock. (And again, I could be completely wrong about this, but that's what i'm seeing on my charting data so far. As far as the ATR goes, I don't know what that is. But you can bet after this new post I'm going to find out...Thanks again for your interest with solving my dilemma. And when this thing is up and running and as polished as I dare get it, I'll be sure to post the strategy for everyone to use.
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Cone

#8
You can almost get there with the existing rules, but some minor modifications are required.

First, from the "Price (or Volume) Action" category, add "Price is higher than it was a number of bars ago". Click on the condition on the right after you add it and in the Parameters, change "Close" to "Volume" and use 1 for the Lookback Period.

Next, in the General Indicators category, add "Indicator is above its value a number of bars ago". For the indicator, select "True Range" and again 1 for the Lookback Period.

After you're satified with the setup of the rest of your Rules, save it so that you can come back to it later if needed. Now, in the Rules toolbar, click "Open Code in a New Strategy Window". This is where you have to make some minor edits in the code.

The conditions that you just added will appear as follows, perhaps in reverse order, which does not matter:
CODE:
Please log in to see this code.


You need only to add your factors, and the result should be clear to you:

CODE:
Please log in to see this code.
Click the "Compile" button after you make a change and are ready to test. Save the resulting Strategy. Hope this helps.

Note - TrueRange takes into account gaps in price too, so it's not precisely the "bar's range". It's usually close to it, and this is a game of probabilities, not precision.
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stevek99022

#9
Cone, you are awesome my friend. I think part of the answer was in front of me all this time and I couldn't even recognize it. Well, I will insert your supplied code, compile it and see how this turns out! Again, thank you sooo much for your help and direction with this, I couldn't have done this without you....

Steve
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Eugene

#10
stevek99022, please open a new support ticket to verify your Wealth-Lab entitlement.