Color-Based System
Author: O'B
Creation Date: 7/14/2011 12:18 PM
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O'B

#1
There was an article in the July issue of "Technical Analysis of Stocks and Commodities" magazine written by Edgar Kraut. Are you familiar with it? If so can you help me set up an 8 day system in Wealth Lab Pro?
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Eugene

#2
Welcome to the site!

Please click on "Strategies and Trading" to find the code of this (and many more strategies) disclosed. If you like, you can discuss this particular published strategy there; for that, follow the "N Discussions" link to the right of the strategy.

When you're there, note the advice on how to get all these strategies in WLP instantly, w/o having to copy/paste the code from a browser.

Finally, read the strategy's description for the corresponding Wiki link with our "Traders' Tip" content.
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O'B

#3
I can't seem to find this one, what did you name it or what date did you post it?
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Eugene

#4
Open your browser's Find dialog, and type in "color". Without quotes, of course.
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O'B

#5
Browser's "find dialog"? You mean search under forms?
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Eugene

#6
"S&C 2011-07 | Color Based System (Kraut)" is 6th from top when you click "Strategies and Trading".

Also you might like to know that we annouce our new strategy postings on the forum. Before creating a topic, it's a good idea to perform a forum search for e.g. "color Kraut". Again, an already existing forum thread will pop up.

Hope this helps.
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O'B

#7
Dahh - don't know how I missed that. How do I go about using this strategy in Wealth Lab? Is it already built in Wealth Lab or do I have to manually build it? I'm new to this system and it it looks like it would be a challenge to build it - any suggestions?
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Eugene

#8
Please refer to the User Guide and the WealthScript Programming Guide. There are tutorials to help you get started.
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mlejeune

#9
Helo,

I am new with Welath-Lab and I would like to have your suggestions.
I used the color-based strategy available on Wealth-Lab and backtested it on the period April 17, 2002 - April 17, 2003 (as did Kraut in his article). While Kraut reports a $12143 gain during that period, I obtain a loss of $1208.22. As strategy parameters, I use a 10-day lookback and a 1% trailing loss (as Mentioned by Kraut). As for the target %, I set it equal to 1%.
Could somebody explain how I obtain such drastically different results?
Thanks,

Miguel
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Eugene

#10
Welcome to the forums Miguel.

In such cases, the most prominent aspect is different data used by you and the author. Other factors include different chosen parameters, differences in indicator calculations between platforms, unstable indicator nuances (Help > Programming Guide > Indicators > Stability of Indicators), trading costs (Wealth-Lab's Preferences dialog > Commission, Slippage, Backtest settings).
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mlejeune

#11
Thank you for quick answer Eugene.
However, I am quite surprised. I apply the strategy for the same dates and for the same SPY stock. I obtain the same buy-and-hold return as Kraut. However, the return of the color-based strategy is drastically different: +123% in Kraut's article, and -11% with Wealth-Lab.
Such a difference is hard to understand.
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Eugene

#12
Where possible and where it makes sense, we often avoid following author's rules religiously and introduce own tweaks and variations. Same happened, according to Wiki, during preparation of this Traders' Tip:
QUOTE:
We replaced the default trailing exit with a combination of a profit target and a stop loss, and made the system exit on Red and Orange bars.

So you may add this factor to my list above: the rules were altered. Hopefully this explains the difference.
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sherab

#13
I'm new to Wealth-Lab also and I guess my question is more one of practicality and if this system is even possible to implement. The article states that it starts with a $10,000 investment and to buy on Blue and Green bars with a trailing stop set at 1%. Presumably trailing stops are most likely to trigger on Red/Orange days and on Blue/Green days if the day's range is greater than 1% to the downside.

The obvious question: today is a green day (at the end of the closing day, 3:58pm I execute my trade), so I go all in with my $10k. Price momentum keeps going and tomorrow is a green day as well (price only went up from the open). So I sit tomorrow out?

I'm just trying to follow this logically and maybe I'm missing something very obvious in the article?
Many thanks,
Julian