How to Trade like an O'Neil Disciple?

Author: mnoack

Creation Date: 6/18/2011 1:32 PM

Wealth Lab » Trading Strategies » How to Trade like an O'Neil Disciple?

mnoack

6/18/2011 1:32 PM

I'm a complete beginner to back testing systems and just started using WealthLab Pro-6. I'm interested in back testing the relatively simple trend following strategy presented in the above book.

Since its largely volume based, I wanted to begin by trying to generate a buy signal when the up volume is greater than the down volume for the previous 10 days and the price is a certain percentage above the 50 dma or 10 dma. It seemed that the volume conditions didn't allow for this, but I'm sure I'm wrong.

Thanks for any input or help pointing me in the right direction. - Matthew

Eugene

6/18/2011 1:56 PM

Hi and welcome to the forums.

What is the up/down volume, precisely?
What does it mean "for the previous 10 days"? For each, or what?

Cone

6/18/2011 4:36 PM

Up volume is the volume on an "up" day, which we'll assume is a day whose close is greater than the previous close. Down volume is the opposite.

So, we'll assume that if the sum of the 10-day up volume minus the 10-day down volume is greater than zero, then the volume condition is met.

Since we don't have an exit condition, the script below sells on a close below the 50 dma.

CODE:
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Up volume is the volume on an "up" day, which we'll assume is a day whose close is greater than the previous close.  Down volume is the opposite.

So, we'll assume that if the sum of the 10-day up volume minus the 10-day down volume is greater than zero, then the volume condition is met.

Since we don't have an exit condition, the script below sells on a close below the 50 dma.

[CODE]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
		StrategyParameter _pct;

public MyStrategy()
		{
			_pct = CreateParameter("Period", 5, 1, 20, 1);
		}

protected override void Execute()
		{
			int period = 50;
			DataSeries sma = SMA.Series(Close, period);
			DataSeries pctOverSma = sma * (1 + _pct.Value/100d);
			PlotSeries(PricePane, sma, Color.Blue, LineStyle.Solid, 2);
			PlotSeries(PricePane, pctOverSma, Color.Blue, LineStyle.Dotted, 1);
			
			// Create the up/down volume indicator
			DataSeries mo = Momentum.Series(Close, 1);
			DataSeries identity = mo / DataSeries.Abs(mo);
			DataSeries updownVolume = Volume * identity;
			updownVolume = Sum.Series(updownVolume, 10);
			updownVolume.Description = "10-Day Up/Down Volume";
			
			ChartPane cp = CreatePane(40, true, true);
			PlotSeries(cp, updownVolume, Color.Red, LineStyle.Histogram, 2);
			
			for(int bar = period; bar < Bars.Count; bar++)
			{				
				if (IsLastPositionActive)
				{
					Position p = LastPosition;
					if (CrossUnder(bar, Close, sma))
						SellAtMarket(bar + 1, p);
				}
				else
				{
					if (Close[bar] > pctOverSma[bar] && updownVolume[bar] > 0)
						BuyAtMarket(bar + 1);
				}
			}
		}
	}
}

*/[/CODE]

mnoack

6/19/2011 3:02 PM

Thanks a bunch for the quick feedback. The idea of the "up day" is correct, but i think the volume rule stated above may be a little off. The buy point, or pocket pivot, happens on an up volume day whose volume is higher than any down day volume in the prior 10 days. Thanks again for the help.

Cone

6/21/2011 7:05 AM

In that case we just need to find the Highest value of the Volume series on down days. No problem, and you've got 3 slider parameters ready for optimization...

CODE:
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Color:

In that case we just need to find the [i]Highest[/i] value of the Volume series on down days.  No problem, and you've got 3 slider parameters ready for optimization...

[CODE]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
		StrategyParameter _pct;
		StrategyParameter _smaPeriod;
		StrategyParameter _volumePeriod;

public MyStrategy()
		{
			_pct = CreateParameter("% above SMA", 5, 1, 20, 1);
			_smaPeriod = CreateParameter("SMA Period", 50, 5, 100, 5);
			_volumePeriod = CreateParameter("Volume Period", 10, 2, 21, 1);
		}

protected override void Execute()
		{			
			DataSeries sma = SMA.Series(Close, _smaPeriod.ValueInt);
			DataSeries pctOverSma = sma * (1 + _pct.Value/100d);
			PlotSeries(PricePane, sma, Color.Blue, LineStyle.Solid, 2);
			PlotSeries(PricePane, pctOverSma, Color.Blue, LineStyle.Dotted, 1);
			
			// Create a "highest down-day volume indicator"
			DataSeries mo = Momentum.Series(Close, 1);
			DataSeries identity = mo / DataSeries.Abs(mo);			
			DataSeries updownVolume = Volume * identity;
			updownVolume -= DataSeries.Abs(updownVolume);
			updownVolume /= 2;								
			DataSeries highestUDVolume = Highest.Series(DataSeries.Abs(updownVolume), _volumePeriod.ValueInt);
			highestUDVolume.Description = "Highest " + _volumePeriod.ValueInt + "-Day Down Volume";
			PlotSeries(VolumePane, highestUDVolume, Color.Black, LineStyle.Solid, 2);
					
			
			for(int bar = GetTradingLoopStartBar(10) ; bar < Bars.Count; bar++)
			{				
				if (IsLastPositionActive)
				{
					Position p = LastPosition;
					if (CrossUnder(bar, Close, sma))
						SellAtMarket(bar + 1, p);
				}
				else
				{
					if (Close[bar] > pctOverSma[bar] && Volume[bar] > highestUDVolume[bar])
					{
						SetBackgroundColor(bar, Color.FromArgb(50, Color.Blue));
						BuyAtMarket(bar + 1);
					}
				}
			}
		}
	}
}
[/CODE]

Wealth Lab » Trading Strategies » How to Trade like an O'Neil Disciple?