Rectange trading system (Acme R) by Eugene

This strategy was featured in the November 2009 issue of Active Trader magazine.

System Concept:

The system identifies tradable rectangle patterns by comparing the size of a consolidation to the size of a preceding trending range, looking for the consolidation range rather tight than volatile.

Strategy rules:
Setup:
  • The consolidation's high-low range is less than or equal to 30 percent of the reference range.
  • The rectangle's height is less than one unit of the 30-period ATR.
  1. Buy the next bar with a stop order at the four-day highest high plus 25 percent of the 30-day ATR.
  2. Sell short the next bar with a stop order at the four-day lowest low minus 25 percent of the 30-day ATR
  3. Exit long at the next bar with a stop order when price falls to the entry price minus the 30-day ATR.
  4. Exit long at the next bar with a limit order when price rises two times the 30-day ATR above the entry price.
  5. Cover short at the next bar with a stop order when price rises to the entry price plus the 30-day ATR.
  6. Cover short at the next bar with a limit order when price falls two times the 30-day ATR below the entry price.
Author: Eugene
Category: Chart Patterns
Creation Date: 10/7/2009
Licence: Freeware
Availability: Globally
Instructions for Script Download
  1. In Wealth-Lab client software, open the Strategy Explorer (Ctrl+O)
  2. Click the "Download..." button
  3. Click "Begin Download"