TRADERS’ TIPS

January 2014

Tips Article Thumbnail

For this month’s Traders’ Tips, the focus is mainly John Ehlers’ article in this issue, “Predictive And Successful Indicators.” Here we present the January 2014 Traders’ Tips code with possible implementations in various software.

Code for TradeStation is already provided in Ehlers’ article. Subscribers will find that code at the Subscriber Area of our website, www.Traders.com. (Click on “Article Code” from the S&C menu.) Presented here is an overview of possible implementations for other software.

Traders’ Tips code is provided to help the reader implement a selected technique from an article in this issue. The entries are contributed by various software developers or programmers for software that is capable of customization.


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TRADESTATION: JANUARY 2014 TRADERS’ TIPS CODE

In “Predictive And Successful Indicators” in this issue, author John Ehlers describes a new method for smoothing market data while reducing the lag that most other smoothing techniques have. Ehlers has provided some TradeStation code in his article for several indicators and describes an approach for creating a strategy. For convenience, we will make the same code available at our EasyLanguage support forum as well as an example strategy based on Ehlers’ description.

To download the EasyLanguage code, please visit our TradeStation and EasyLanguage support forum. The code can be found here: www.tradestation.com/TASC-2014. The ELD filename is “_TASC_PredictiveIndicators.ELD.” For more information about EasyLanguage in general, please see www.tradestation.com/EL-FAQ.

The code is also shown below.

_Ehlers_SuperSmoother Filter (Indicator)

variables:
	a1( 0 ), 
	b1( 0 ), 
	c1( 0 ), 
	c2( 0 ), 
	c3( 0 ),
	Filt( 0 ) ; 

a1 = ExpValue( -1.414 * 3.14159 / 10 ) ;
b1 = 2 * a1 * Cosine( 1.414 * 180 / 10 ) ;
c2 = b1 ;
c3 = -a1 * a1 ;
c1 = 1 - c2 - c3 ;
Filt = c1 * ( Close + Close[1] ) 
	/ 2 + c2 * Filt[1] + c3 * Filt[2] ;

Plot1( Filt, "SuperSmooth" ) ;


_Ehlers_Roofing Filter (Indicator)

variables:
	alpha1( 0 ), 
	HP( 0 ), 
	a1( 0 ), 
	b1( 0 ), 
	c1( 0 ), 
	c2( 0 ), 
	c3( 0 ),
	Filt( 0 ) ; 
	
alpha1 = ( Cosine( .707 * 360 / 48 ) 
	+ Sine ( .707 * 360 / 48 ) - 1 )
	/ Cosine( .707 * 360 / 48 ) ;
	
HP = ( 1 - alpha1 / 2 ) * ( 1 - alpha1 / 2 )
	* ( Close - 2 * Close[1] + Close[2] ) 
	+ 2 * ( 1 - alpha1 ) * HP[1] - ( 1 - alpha1 ) 
	* ( 1 - alpha1 ) * HP[2] ;

a1 = ExpValue( -1.414 * 3.14159 / 10 ) ;
b1 = 2 * a1 * Cosine( 1.414 * 180 / 10 ) ;
c2 = b1 ;
c3 = -a1 * a1 ;
c1 = 1 - c2 - c3 ;
Filt = c1 *( HP + HP[1] ) / 2 
	+ c2 * Filt[1] + c3 * Filt[2] ;	

Plot1( Filt, "SS Filter" ) ;
Plot2( 0, "Zero Line" ) ;


_Ehlers_SuperSmoothStoch (Indicator)

inputs:
	Length( 20 ), 
	OBLevel( .8 ), 
	OSLevel( .2 ) ;
		
variables:
	alpha1( 0 ), 
	HP( 0 ), 
	a1( 0 ), 
	b1( 0 ), 
	c1( 0 ), 
	c2( 0 ), 
	c3( 0 ),
	Filt( 0 ), 
	HighestC( 0 ), 
	LowestC( 0 ), 
	count( 0 ), 
	Stoc( 0 ), 
	MyStochastic( 0 ) ;

alpha1 = ( Cosine( .707 * 360 / 48 ) 
	+ Sine ( .707 * 360 / 48 ) - 1 )
	/ Cosine( .707 * 360 / 48 ) ;
	
HP = ( 1 - alpha1 / 2 ) * ( 1 - alpha1 / 2 )
	* ( Close - 2 * Close[1] + Close[2] ) 
	+ 2 * ( 1 - alpha1 ) * HP[1] - ( 1 - alpha1 ) 
	* ( 1 - alpha1 ) * HP[2] ;

a1 = ExpValue( -1.414 * 3.14159 / 10 ) ;
b1 = 2 * a1 * Cosine( 1.414 * 180 / 10 ) ;
c2 = b1 ;
c3 = -a1 * a1 ;
c1 = 1 - c2 - c3 ;
Filt = c1 *( HP + HP[1] ) / 2 
	+ c2 * Filt[1] + c3 * Filt[2] ;

HighestC = Filt ;
LowestC = Filt ;

For count = 0 to Length - 1 
	begin
	if Filt[count] > HighestC then 
		HighestC = Filt[count] ;
	if Filt[count] < LowestC then 
		LowestC = Filt[count] ;
	end;

Stoc = ( Filt - LowestC ) / ( HighestC - LowestC ) ;
MyStochastic = c1 * ( Stoc + Stoc[1] ) / 2 +
	c2 * MyStochastic[1] + c3 * MyStochastic[2] ;

Plot1( MyStochastic, "Stoch" ) ;
Plot2( OBLevel, "OverBought" ) ;
Plot6( OSLevel, "OverSold" ) ;


_Ehlers_SuperSmoothStoch (Strategy)

inputs:
	Length( 20 ), 
	OBLevel( .8 ), 
	OSLevel( .2 ) ;
		
variables:
	alpha1( 0 ), 
	HP( 0 ), 
	a1( 0 ), 
	b1( 0 ), 
	c1( 0 ), 
	c2( 0 ), 
	c3( 0 ),
	Filt( 0 ), 
	HighestC( 0 ), 
	LowestC( 0 ), 
	count( 0 ), 
	Stoc( 0 ), 
	MyStochastic( 0 ) ;

alpha1 = ( Cosine( .707 * 360 / 48 ) 
	+ Sine ( .707 * 360 / 48 ) - 1 )
	/ Cosine( .707 * 360 / 48 ) ;
	
HP = ( 1 - alpha1 / 2 ) * ( 1 - alpha1 / 2 )
	* ( Close - 2 * Close[1] + Close[2] ) 
	+ 2 * ( 1 - alpha1 ) * HP[1] - ( 1 - alpha1 ) 
	* ( 1 - alpha1 ) * HP[2] ;

a1 = ExpValue( -1.414 * 3.14159 / 10 ) ;
b1 = 2 * a1 * Cosine( 1.414 * 180 / 10 ) ;
c2 = b1 ;
c3 = -a1 * a1 ;
c1 = 1 - c2 - c3 ;
Filt = c1 *( HP + HP[1] ) / 2 
	+ c2 * Filt[1] + c3 * Filt[2] ;

HighestC = Filt ;
LowestC = Filt ;

For count = 0 to Length - 1 
	begin
	if Filt[count] > HighestC then 
		HighestC = Filt[count] ;
	if Filt[count] < LowestC then 
		LowestC = Filt[count] ;
	end;

Stoc = ( Filt - LowestC ) / ( HighestC - LowestC ) ;
MyStochastic = c1 * ( Stoc + Stoc[1] ) / 2 +
	c2 * MyStochastic[1] + c3 * MyStochastic[2] ;

if MyStochastic crosses over ObLevel then
	SellShort next bar at Market 
else if MyStochastic crosses under OsLevel then
	Buy next bar at Market ;

A sample chart is shown in Figure 1.

Image 1

FIGURE 1: TRADESTATION. This daily chart of IBM shows the indicators and strategy from John Ehlers’ article in this issue.

This article is for informational purposes. No type of trading or investment recommendation, advice, or strategy is being made, given, or in any manner provided by TradeStation Securities or its affiliates.

—Doug McCrary
TradeStation Securities, Inc.
www.TradeStation.com

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eSIGNAL: JANUARY 2014 TRADERS’ TIPS CODE

For this month’s Traders’ Tip, we’ve provided the formulas MESA_Stochastic_Indicator.efs, Roofing_Filter.efs, and SuperSmoother_Filter.efs, based on the formulas described in John Ehlers’ article in this isuse, “Predictive And Successful Indicators.”

Image 1

FIGURE 2: eSIGNAL, MESA STOCHASTIC

The MESA_Stochastic_Indicator study (Figure 2) contains one formula parameter, length, which may be configured through the edit chart window (right-click on chart and select edit chart). The roofing filter is shown in Figure 3.

Image 1

FIGURE 3: eSIGNAL, ROOFING FILTER

To discuss this study or download a complete copy of the formula code, please visit the EFS Library Discussion Board forum under the Forums link from the support menu at www.esignal.com or visit our EFS KnowledgeBase at http://www.esignal.com/support/kb/efs/. The eSignal formula scripts (EFS) are also available for copying & pasting below.

MESA_Stochastic_Indicator.efs

/*********************************
Provided By:
    Interactive Data Corporation (Copyright © 2013)
    All rights reserved. This sample eSignal Formula Script (EFS)
    is for educational purposes only. Interactive Data Corporation
    reserves the right to modify and overwrite this EFS file with
    each new release.

Description:
    Stochastic Indicator by John F. Ehlers

Formula Parameters:                     Default:
Length                                  20

Version:            1.00  11/07/2013

Notes:
    The related article is copyrighted material. If you are not a subscriber
    of Stocks & Commodities, please visit www.traders.com.

**********************************/

var fpArray = new Array();

function preMain()
{
    setStudyTitle("MESA_Stochastic_Indicator");

    setCursorLabelName("BandLine1", 0);
    setCursorLabelName("BandLine2", 1);
    setCursorLabelName("MyStochastic", 2);

    setDefaultBarFgColor(Color.grey, 0);
    setDefaultBarFgColor(Color.grey, 1);
    setDefaultBarFgColor(Color.red, 2);

    setDefaultBarThickness(1, 0);
    setDefaultBarThickness(1, 1);
    setDefaultBarThickness(2, 2);

    setShowCursorLabel(false, 0);
    setShowCursorLabel(false, 1);
    setShowCursorLabel(true, 2);

    var x = 0;

    fpArray[x] = new FunctionParameter("fpLength", FunctionParameter.NUMBER);
    with(fpArray[x++])
    {
        setName("Length");
        setLowerLimit(2);
        setDefault(20);
    }
}

var bInit = false;
var bVersion = null;

var xHP = null;
var xFilt = null;
var xStoc = null;
var xMyStochastic = null;

var nBandLine1 = 0;
var nBandLine2 = 0;

function main(fpLength)
{
    if (bVersion == null) bVersion = verify();
    if (bVersion == false) return;

    if (!bInit)
    {
        xHP = efsInternal("Calc_HPSeries");
        xFilt = efsInternal("Calc_FiltSeries", xHP);
        xStoc = efsInternal("Calc_Stoc", xFilt, fpLength);
        xMyStochastic = efsInternal("Calc_MyStochastic", xStoc);

        nBandLine1 = 0.8;
        nBandLine2 = 0.2;

        bInit = true;
    }

    var nMyStochastic = xMyStochastic.getValue(0);

    return [nBandLine1, nBandLine2, nMyStochastic];
}

var xClose = null;

var alpha1 = 0;

function Calc_HPSeries()
{
    if (getBarState() == BARSTATE_ALLBARS)
    {
        xClose = close();

        alpha1 = (Math.cos((.707*360 / 48) * Math.PI / 180) +
                  Math.sin((.707*360 / 48) * Math.PI / 180) - 1) /
                  Math.cos((.707*360 / 48) * Math.PI / 180);
    }

    var nClose_0 = xClose.getValue(0);
    var nClose_1 = xClose.getValue(-1);
    var nClose_2 = xClose.getValue(-2);

    if (nClose_1 == null || nClose_2 == null)
        return;

    var nHP_1 = ref(-1);
    var nHP_2 = ref(-2);

    var nReturnValue = (1 - alpha1 / 2) * (1 - alpha1 / 2) * (nClose_0 - 2 * nClose_1 + nClose_2)
                       + 2 * (1 - alpha1) * nHP_1 - (1 - alpha1) * (1 - alpha1) * nHP_2;

    return nReturnValue;
}

var a1 = 0;
var b1 = 0;
var c1 = 0;
var c2 = 0;
var c3 = 0;

function Calc_FiltSeries(xHP)
{
    if (getBarState() == BARSTATE_ALLBARS)
    {
        a1 = Math.exp(-1.414 * 3.14159 / 10);
        b1 = 2 * a1 * Math.cos((1.414 * 180 / 10)* Math.PI / 180);
        c2 = b1;
        c3 = -a1 * a1;
        c1 = 1 - c2 - c3;
    }

    var nHP_0 = xHP.getValue(0);
    var nHP_1 = xHP.getValue(-1);

    if (nHP_0 == null || nHP_1 == null)
        return;

    var nFilt_1 = ref(-1);
    var nFilt_2 = ref(-2);

    var nReturnValue = c1 * (nHP_0 + nHP_1) / 2 + c2 * nFilt_1 + c3 * nFilt_2;

    return nReturnValue;
}

function Calc_Stoc(xFilt, nLength)
{
    var nFilt = xFilt.getValue(0);
    var nHighestC = xFilt.getValue(0);
    var nLowestC = xFilt.getValue(0);

    if (nHighestC == null || nLowestC == null || nFilt == null)
        return;

    for (var i = 0; i < nLength; i++)
    {
       nFilt_i = xFilt.getValue(-i);

       if (nFilt_i == null)
           return;

       if (nFilt_i > nHighestC)
           nHighestC =  nFilt_i;
       if (nFilt_i < nLowestC)
           nLowestC =  nFilt_i;
    }

    var nReturnValue = (nFilt - nLowestC) / (nHighestC - nLowestC);

    return nReturnValue;
}

function Calc_MyStochastic(xStoc)
{
    if (getBarState() == BARSTATE_ALLBARS)
    {
        a1 = Math.exp(-1.414 * 3.14159 / 10);
        b1 = 2 * a1 * Math.cos((1.414 * 180 / 10)* Math.PI / 180);
        c2 = b1;
        c3 = -a1 * a1;
        c1 = 1 - c2 - c3;
    }

    var nStoc_0 = xStoc.getValue(0);
    var nStoc_1 = xStoc.getValue(-1);

    if (nStoc_0 == null || nStoc_1 == null)
        return;

    var nMyStochastic_1 = ref(-1);
    var nMyStochastic_2 = ref(-2);

    var nReturnValue = c1 * (nStoc_0 + nStoc_1) / 2 + c2 * nMyStochastic_1 + c3 * nMyStochastic_2;

    return nReturnValue;
}

function verify()
{
    var b = false;
    if (getBuildNumber() < 779)
    {
        drawTextAbsolute(5, 35, "This study requires version 8.0 or later.",
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "error");
        drawTextAbsolute(5, 20, "Click HERE to upgrade.@URL=http://www.esignal.com/download/default.asp",
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "upgrade");
        return b;
    }
    else
    {
        b = true;
    }

    return b;
}

Roofing_Filter.efs

/*********************************
Provided By:  
    Interactive Data Corporation (Copyright © 2013) 
    All rights reserved. This sample eSignal Formula Script (EFS)
    is for educational purposes only. Interactive Data Corporation
    reserves the right to modify and overwrite this EFS file with 
    each new release. 

Description:        
    Roofing Filter by John F. Ehlers
    
Version:            1.00  11/07/2013

Notes:
    The related article is copyrighted material. If you are not a subscriber
    of Stocks & Commodities, please visit www.traders.com.

**********************************/

function preMain()
{   
    setStudyTitle("Roofing_Filter");

    setCursorLabelName("ZeroLine", 0);
    setCursorLabelName("Roofing_Filter", 1);
    
    setDefaultBarFgColor(Color.grey, 0);
    setDefaultBarFgColor(Color.red, 1);

    setDefaultBarThickness(1, 0);
    setDefaultBarThickness(2, 1);

    setShowCursorLabel(false, 0);
    setShowCursorLabel(true, 1);
}

var bInit = false;
var bVersion = null;

var xHP = null;
var xFilt = null;

function main() 
{
    if (bVersion == null) bVersion = verify();
    if (bVersion == false) return;

    if (!bInit)
    {                   
        xHP = efsInternal("Calc_HPSeries");
        xFilt = efsInternal("Calc_FiltSeries", xHP);

        bInit = true;
    }

    var nZeroLine = 0;

    var nFilt = xFilt.getValue(0);

    return [nZeroLine, nFilt];
}

var xClose = null;

var alpha1 = 0;

function Calc_HPSeries()
{
    if (getBarState() == BARSTATE_ALLBARS)
    {
        xClose = close();

        alpha1 = (Math.cos((.707*360 / 48) * Math.PI / 180) + 
                  Math.sin((.707*360 / 48) * Math.PI / 180) - 1) / 
                  Math.cos((.707*360 / 48) * Math.PI / 180);
    } 

    var nClose_0 = xClose.getValue(0);
    var nClose_1 = xClose.getValue(-1);
    var nClose_2 = xClose.getValue(-2);
    
    if (nClose_1 == null || nClose_2 == null)
        return; 
    
    var nHP_1 = ref(-1);
    var nHP_2 = ref(-2);   

    var nReturnValue = (1 - alpha1 / 2) * (1 - alpha1 / 2) * (nClose_0 - 2 * nClose_1 + nClose_2)
                       + 2 * (1 - alpha1) * nHP_1 - (1 - alpha1) * (1 - alpha1) * nHP_2;

    return nReturnValue;
}

var a1 = 0;
var b1 = 0;
var c1 = 0;
var c2 = 0;
var c3 = 0;

function Calc_FiltSeries(xHP)
{
    if (getBarState() == BARSTATE_ALLBARS)
    {
        a1 = Math.exp(-1.414 * 3.14159 / 10);
        b1 = 2 * a1 * Math.cos((1.414 * 180 / 10)* Math.PI / 180);
        c2 = b1;
        c3 = -a1 * a1;
        c1 = 1 - c2 - c3;
    } 

    var nHP_0 = xHP.getValue(0);
    var nHP_1 = xHP.getValue(-1);

    if (nHP_0 == null || nHP_1 == null)
        return; 

    var nFilt_1 = ref(-1);
    var nFilt_2 = ref(-2);

    var nReturnValue = c1 * (nHP_0 + nHP_1) / 2 + c2 * nFilt_1 + c3 * nFilt_2;

    return nReturnValue;
}

function verify() 
{
    var b = false;
    if (getBuildNumber() < 779) 
    {
        drawTextAbsolute(5, 35, "This study requires version 8.0 or later.", 
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "error");
        drawTextAbsolute(5, 20, "Click HERE to upgrade.@URL=http://www.esignal.com/download/default.asp", 
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "upgrade");
        return b;
    } 
    else 
    {
        b = true;
    }

    return b;
}

SuperSmoother_Filter.efs

/*********************************
Provided By:  
    Interactive Data Corporation (Copyright © 2013) 
    All rights reserved. This sample eSignal Formula Script (EFS)
    is for educational purposes only. Interactive Data Corporation
    reserves the right to modify and overwrite this EFS file with 
    each new release. 

Description:        
    The Super Smoother Filter by John F. Ehlers
    
Version:            1.00  11/07/2013

Notes:
    The related article is copyrighted material. If you are not a subscriber
    of Stocks & Commodities, please visit www.traders.com.

**********************************/

function preMain()
{   
    setStudyTitle("SuperSmoother_Filter");
}

var bInit = false;
var bVersion = null;

var xFilt = null;

function main() 
{
    if (bVersion == null) bVersion = verify();
    if (bVersion == false) return;

    if (!bInit)
    {                   
        xFilt = efsInternal("Calc_FiltSeries");

        bInit = true;
    }

    var nFilt = xFilt.getValue(0);

    return nFilt;
}

var xClose = null;

var a1 = 0;
var b1 = 0;
var c1 = 0;
var c2 = 0;
var c3 = 0;

function Calc_FiltSeries()
{
    if (getBarState() == BARSTATE_ALLBARS)
    {
        xClose = close();

        a1 = Math.exp(-1.414 * 3.14159 / 10);
        b1 = 2 * a1 * Math.cos((1.414 * 180 / 10) * Math.PI / 180);
        c2 = b1;
        c3 = -a1 * a1;
        c1 = 1 - c2 - c3;
    } 

    var nClose_0 = xClose.getValue(0);
    var nClose_1 = xClose.getValue(-1);

    if (nClose_1 == null)
        return; 

    var nFilt_1 = ref(-1);
    var nFilt_2 = ref(-2);  

    var nReturnValue = c1 * (nClose_0 + nClose_1) / 2 + c2 * nFilt_1 + c3 * nFilt_2;

    return nReturnValue;
}

function verify() 
{
    var b = false;
    if (getBuildNumber() < 779) 
    {
        drawTextAbsolute(5, 35, "This study requires version 8.0 or later.", 
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "error");
        drawTextAbsolute(5, 20, "Click HERE to upgrade.@URL=http://www.esignal.com/download/default.asp", 
            Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
            null, 13, "upgrade");
        return b;
    } 
    else 
    {
        b = true;
    }

    return b;
}

—Jason Keck
eSignal, an Interactive Data company
800 779-6555, www.eSignal.com

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THINKORSWIM: JANUARY 2014 TRADERS’ TIPS CODE

In “Predictive And Successful Indicators” in this issue, author John Ehlers presents another innovative way to eliminate noise from classic indicators and introduces some new smoothing indicators. For thinkorswim users, we have created three new studies and a strategy in our proprietary scripting language, thinkScript. You can adjust the parameters within the edit studies window to fine-tune your variables.

Image 1

FIGURE 4: THINKORSWIM. A sample chart of IBM displays the roofing indicator and John Ehlers’ MESA Stochastic indicator described in his article in this issue.

Thinkorswim users can find the formulas for each indicator below:

—thinkorswim
A division of TD Ameritrade, Inc.
www.thinkorswim.com

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METASTOCK: JANUARY 2014 TRADERS’ TIPS CODE

John Ehlers’ article in this issue, “Predictive And Successful Indicators,” presents the reader with three new indicators. The MetaStock formulas for these indicators are given here:


SuperSmoother filter:
a1:= Exp(-1.414 * 3.14159 / 10);
b1:= 2*a1 * Cos(1.414*180 /10);
c2:= b1;
c3:= -a1 * a1;
c1:= 1 - c2 - c3;
c1 * (C + Ref(C, -1))/2 + c2*PREV + c3*Ref(PREV,-1)

Roofing filter:
alpha1:= (Cos(.707*360/48) + Sin(.707*360/48) -1)/Cos(.707*360/48);
HP:= (1-alpha1/2)*(1-alpha1/2)*(C - Ref(2*C,-1) + Ref(C,-2)) + 
2*(1-alpha1)*PREV - (1-alpha1)*(1-alpha1)*Ref(PREV,-1);
a1:= Exp(-1.414 * 3.14159 / 10);
b1:= 2*a1 * Cos(1.414*180 /10);
c2:= b1;
c3:= -a1 * a1;
c1:= 1 - c2 - c3;
c1 * (HP + Ref(HP, -1))/2 + c2*PREV + c3*Ref(PREV,-1)

MESA Stochastic:
alpha1:= (Cos(.707*360/48) + Sin(.707*360/48) -1)/Cos(.707*360/48);
HP:= (1-alpha1/2)*(1-alpha1/2)*(C - Ref(2*C,-1) + Ref(C,-2)) + 
2*(1-alpha1)*PREV - (1-alpha1)*(1-alpha1)*Ref(PREV,-1);
a1:= Exp(-1.414 * 3.14159 / 10);
b1:= 2*a1 * Cos(1.414*180 /10);
c2:= b1;
c3:= -a1 * a1;
c1:= 1 - c2 - c3;
filt:= c1 * (HP + Ref(HP, -1))/2 + c2*PREV + c3*Ref(PREV,-1);
stoc:= (filt-LLV(filt,20))/(HHV(filt,20)-LLV(filt,20));
c1 * (stoc + Ref(stoc, -1))/2 + c2*PREV + c3*Ref(PREV,-1);

—William Golson
MetaStock Technical Support
www.metastock.com

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WEALTH-LAB: JANUARY 2014 TRADERS’ TIPS CODE

In his article in this issue, “Predictive And Successful Indicators,” author John Ehlers presents two new indicators: the SuperSmoother filter, which is superior to moving averages for removing aliasing noise, and the MESA Stochastic oscillator, a stochastic successor that removes the effect of spectral dilation through the use of a roofing filter.

To demonstrate the effects of using the new indicators, Ehlers introduces a simple countertrend system that goes long when MESA Stochastic crosses below the oversold value and reverses the trade by taking a short position when the oscillator exceeds the overbought threshold.

To execute the trading system that Ehlers includes in his article, Wealth-Lab users need to install (or update) the latest version of our TASCIndicators library from the Extensions section of our website if they haven’t already done so, and restart Wealth-Lab.

A sample chart is shown in Figure 5.

Image 1

FIGURE 5: WEALTH-LAB. Here is a sample Wealth-Lab 6 chart illustrating application of the system’s rules on a daily chart of USD/CHF (US dollar to Swiss franc exchange rate).


Wealth-Lab 6 strategy code (C#):


using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
using TASCIndicators;

namespace WealthLab.Strategies
{
	public class Ehlers201401 : WealthScript
	{
		private StrategyParameter paramPeriod;
		
		public Ehlers201401()
		{
			paramPeriod = CreateParameter("MESAStoch.Period",20,5,100,5);
		}
		
		protected override void Execute()
		{
			int period = paramPeriod.ValueInt;
			RoofingFilter rf = RoofingFilter.Series(Close);
			MESAStochastic ms = MESAStochastic.Series(Close,period);
			
			for(int bar = period; bar < Bars.Count; bar++)
			{
				// Detect crossover/crossunder and store state in a variable
				bool maXo = CrossOver(bar, ms, 0.8);
				bool maXu = CrossUnder(bar, ms, 0.2);
					
				// The first trade
				if (Positions.Count == 0){
					if ( maXu ) 
						BuyAtMarket( bar + 1 );
					else if( maXo )
						ShortAtMarket( bar + 1 );
				}
					// Subsequent trades
				else 
				{
					Position p = LastPosition;				
					if ( p.PositionType == PositionType.Long ) 
					{
						if ( maXo ) 
						{
							SellAtMarket( bar + 1, p );
							ShortAtMarket( bar + 1 );
						}
					}
					else if ( maXu ) 
					{
						CoverAtMarket( bar + 1, p );
						BuyAtMarket( bar + 1 );
					}
				}	
			}

			HideVolume();
			ChartPane pMS = CreatePane(40,false,true);
			ChartPane pRF = CreatePane(20,true,true);
			PlotSeries(PricePane,SuperSmoother.Series(Close),Color.Red,LineStyle.Solid,1);
			PlotSeries(pRF,rf,Color.FromArgb(255,0,0,139),LineStyle.Solid,1);
			PlotSeries(pMS,ms,Color.FromArgb(255,255,0,128),LineStyle.Solid,2);
			DrawHorzLine(pMS,0.8,Color.Red,LineStyle.Dashed,1);
			DrawHorzLine(pMS,0.2,Color.DarkGreen,LineStyle.Dashed,1);
		}
	}
}

—Wealth-Lab team
MS123, LLC
www.wealth-lab.com

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AMIBROKER: JANUARY 2014 TRADERS’ TIPS CODE

In “Predictive And Successful Indicators” in this issue, author John Ehlers presents his SuperSmooth filter and uses it to create a better stochastic indicator.

Ready-to-use AmiBroker code for the indicator is shown below. Note that SuperSmooth filter and high-pass filter have been written as reusable, general-purpose functions so users can easily include them in their own systems and/or indicators. To display the indicators on a chart, simply input or paste the code into the formula editor and press apply indicator. To backtest a trading system, choose backtest from Tools menu in the formula editor.

A sample chart is shown in Figure 6.

Image 1

FIGURE 6: AMIBROKER. Here is a sample price chart of DG with a SuperSmoothed stochastic indicator.


PI = 3.1415926; 
SQ2 = sqrt( 2 ); 

function SuperSmoother( array, periods ) 
{ 
    a1 = exp( -SQ2 * PI / periods ); 
    b1 = 2 * a1 * cos( SQ2 * PI / periods ); 
    c2 = b1; 
    c3 = -a1 * a1; 
    c1 = 1 - c2 - c3; 

    Filt = Nz( array ); 

    for ( i = 2; i < BarCount; i++ ) 
    { 
         Filt[ i ] = c1 * ( array[ i ] + array[ i - 1 ] ) / 2 + 
                     c2 * Filt[ i - 1 ] + 
                     c3 * Filt[ i - 2]; 
    } 

    return Filt; 
} 

function HighpassFilter( array, periods ) 
{ 
    alpha1 = ( cos( SQ2 * PI / periods ) + sin ( SQ2 * PI / periods ) - 1 ) /  cos( SQ2 * PI / periods ); 

    HP = Nz( array ); 

    C1 = ( 1 - alpha1 / 2 ) ^ 2; 
    C2 = 2 * ( 1 - alpha1 ); 
    C3 = - ( ( 1 - alpha1 ) ^ 2 ); 

    for ( i = 2; i < BarCount; i++ ) 
    { 
        HP[ i ] =  C1 * ( array[ i ] - 2 * array[i-1] + array[i-2] ) + 
                   C2 * HP[ i - 1] + 
                   C3 * HP[ i - 2]; 
    } 

    return HP; 
} 

ss = SuperSmoother( HighpassFilter( Close, 48 ), 10 ); 

Length = 20; 


HighestC = HHV( ss, Length ); 
LowestC = LLV( ss, Length ); 

Stoc = ( ss - LowestC ) / ( HighestC - LowestC ); 

MyStochastic = 100 * SuperSmoother( Stoc, 10 ); 

Plot( MyStochastic, "MyStochastic", colorRed, styleThick ); 
PlotGrid( 20, colorBlue ); 
PlotGrid( 80, colorBlue ); 

Buy = Cross( 20, MyStochastic ); 
Sell = Cross( MyStochastic, 80 ); 

Buy = ExRem( Buy, Sell ); 
Sell = ExRem( Sell, Buy ); 
PlotShapes( Buy * shapeUpArrow, colorGreen, 0, 20, 8 ); 
PlotShapes( Sell * shapeDownArrow, colorRed, 0, 80, 8 );

—Tomasz Janeczko, AmiBroker.com
www.amibroker.com

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NEUROSHELL TRADER: JANUARY 2014 TRADERS’ TIPS CODE

John Ehlers’ SuperSmoother filter, roofing filter, and MESA Stochastic indicator presented in his article in this issue, “Predictive And Successful Indicators,” can be easily implemented in NeuroShell Trader using NeuroShell Trader’s ability to call external dynamic linked libraries. Dynamic linked libraries can be written in C, C++, Power Basic, or Delphi.

After moving the EasyLanguage code provided in Ehlers’ article to your preferred compiler and creating a DLL, you can insert the resulting indicators as follows:

  1. Select “New Indicator...” from the Insert menu.
  2. Choose the External Program & Library Calls category.
  3. Select the appropriate External DLL Call indicator.
  4. Setup the parameters to match your DLL.
  5. Select the Finished button.

Dynamic trading systems can be easily created in NeuroShell Trader by combining the MESA Stochastic indicator with NeuroShell Trader’s genetic optimizer to find optimal lengths. Similar filter and cycle-based strategies can also be created using indicators found in John Ehlers’ Cybernetic and MESA91 NeuroShell Trader add-ons. Users of NeuroShell Trader can go to the STOCKS & COMMODITIES section of the NeuroShell Trader free technical support website to download a copy of this or any previous Traders’ Tips.

A sample chart is shown in Figure 7.

Image 1

FIGURE 7: NEUROSHELL TRADER. This NeuroShell Trader chart displays John Ehlers’ SuperSmoother filter, roofing filter, and MESA Stochastic indicator.

—Marge Sherald, Ward Systems Group, Inc.
301 662-7950, sales@wardsystems.com
www.neuroshell.com

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AIQ: JANUARY 2014 TRADERS’ TIPS CODE

This Traders’ Tip is based on Ajay Pankhania’s September 2013 article in STOCKS & COMMODITIES, “Muscle Up Those Averages.”

The AIQ code for the moving averages and the MACD indicator discussed in the article is provided at www.TradersEdgeSystems.com/traderstips.htm.

This code may be useful to beginning AIQ Expert Design Studio users since it illustrates how to code multiple versions of the simple and the exponential moving averages as well as the MACD indicator. In addition, I have coded the simple moving average crossover system and the MACD crossover system.

The code and EDS file can be downloaded from www.TradersEdgeSystems.com/traderstips.htm.

—Richard Denning
info@TradersEdgeSystems.com
for AIQ Systems

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TRADERSSTUDIO: JANUARY 2014 TRADERS’ TIPS CODE

The TradersStudio code based on John Ehlers’ article in this issue, “Predictive And Successful Indicators,” is provided at the following websites:

The following code files are provided in the download:

Image 1

FIGURE 8: TRADERSSTUDIO, FUTURES CONTRACT. Here is a sample chart of the S&P 500 futures contract with the three indicators described by John Ehlers in his article in this issue, SuperSmoothing, roofing, and MESA Stochastic.

In Figure 8, I show a chart of the S&P 500 futures contract using Pinnacle Data, symbol “SP,” with the three indicators discussed by Ehlers in his article. In the main panel, we see the SuperSmoother filter using the close as the price input. In the second panel, we see the MESA Stochastic indicator, and in the bottom panel, we see the roofing filter. In Figure 9, I show the equity curve and underwater equity curve for the example system I wrote trading one contract, long only.

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FIGURE 9: TRADERSSTUDIO, EQUITY CURVE. Here are equity and underwater curves for the example system I wrote trading one contract of the SP long-only.

'PREDICTIVE INDICATORS FOR EFFECTIVE TRADING STRATEGIES
'Author: John Ehlers, TASC January 2014
'Coded by: Richard Denning 11/02/2013
'www.TradersEdgeSystems.com

'SuperSmoother filter
' 2013 John F. Ehlers
Function SUPSMO(Price As BarArray)
Dim a1, b1, c1, c2, c3, Filt As BarArray
a1 = Exp(-1.414*3.14159 / 10)
b1 = 2*a1*Cos(DegToRad(1.414*180 / 10))
c2 = b1
c3 = -a1*a1
c1 = 1 - c2 - c3
Filt = c1*(Price + Price[1]) / 2 + c2*Filt[1] + c3*Filt[2]
SUPSMO = Filt
End Function
'----------------------------------------------------------
'Roofing filter
' 2013 John F. Ehlers
Function ROOF(Price As BarArray)
Dim alpha1
Dim HP As BarArray
'Highpass filter cyclic components whose periods are shorter than 48 bars
  alpha1 = (Cos(DegToRad(.707*360 / 48) + Sin(DegToRad(.707*360 / 48) - 1))) /Cos(DegToRad(.707*360 / 48))
  HP = (1 - alpha1 / 2)*(1 - alpha1 /2)*(Price - 2*Price[1] + Price[2]) + 2*(1 - alpha1)*HP[1] - (1 - alpha1)*(1 - alpha1)*HP[2]
'Smooth with a Super Smoother Filter
  'assert(false)
  ROOF = SUPSMO(HP)
  End Function
'----------------------------------------------------------
'MesaStochastic Indicator
' 2013 John F. Ehlers
Function MESASTOC(Price as bararray,stoLen)
  Dim count  
  Dim HighestC As BarArray
  Dim LowestC As BarArray
  Dim stoc As BarArray
  Dim filtSmoPrice As BarArray
  Dim myStochastic As BarArray

'Highpass filter cyclic components whose periods are shorter than 48 bars 
' then smooted with a super smother filter
  filtSmoPrice = ROOF(Price)
  HighestC = filtSmoPrice
  LowestC = filtSmoPrice
  For count = 0 To stoLen - 1 
    If filtSmoPrice[count] > HighestC Then HighestC = filtSmoPrice[count]
    If filtSmoPrice[count] < LowestC Then LowestC = filtSmoPrice[count]
  Next
  stoc = (filtSmoPrice - LowestC) / (HighestC - LowestC)
'Smooth with a Super Smoother Filter
  myStochastic = SUPSMO(stoc)
MESASTOC = myStochastic
End Function
'----------------------------------------------------------
'Indicator plot for SuperSmoother Filter
Sub EHLERS_SUPSMO_IND()
Plot1(SUPSMO(Close))
End Sub
'-----------------------------------------------------------
'Indicator plot for Roofing Filter
Sub EHLERS_ROOF_IND()
plot1(ROOF(Close))
plot2(0)
End Sub
'------------------------------------------------------------
'MesaStochastic Indicator Plot
' 2013 John F. Ehlers
Sub EHLERS_MESASTOC_IND(stoLen)
  Plot1(MesaStoc(Close,stoLen))
  Plot2(.8)
  Plot3(.2)
End Sub
'-----------------------------------------------------------
'Example of how one micht use Ehler's MesaStochastic Indicator in a system (long only)
Sub EHLERS_MESASTOC_SYS(stoLen,upperVal,lowerVal,trndLen)
  'default parameter values: stoLen=20,upperVal=0.8,lowerVal=0.2,trndLen=25
  Dim smoFiltSto
  Dim smoFiltClose As BarArray
  smoFiltSto = MESASTOC(Close,stoLen)
  smoFiltClose = SUPSMO(Close)
  'buy and exit rules (long only system)
    If CrossesOver(smoFiltSto , lowerVal) And smoFiltClose > smoFiltClose[trndLen] Then Buy("LE",1,0,Market,Day)
    If CrossesOver(smoFiltSto, upperVal) Then ExitLong("LXob","",1,0,Market,Day)
End Sub

'------------------------------------------------------------

—Richard Denning
info@TradersEdgeSystems.com
for TradersStudio

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NINJATRADER: JANUARY 2014 TRADERS’ TIPS CODE

The MESA Stochastic, as discussed in “Predictive And Successful Indicators” in this issue by John Ehlers, has been implemented as an indicator available for download at www.ninjatrader.com/SC/January2014SC.zip.

Once it has been downloaded, from within the NinjaTrader Control Center window, select the menu File → Utilities → Import NinjaScript and select the downloaded file. This file is for NinjaTrader version 7 or greater.

You can review the strategy source code by selecting the menu Tools → Edit NinjaScript → Indicator from within the NinjaTrader Control Center window and selecting the “MESA Stochastic” file.

NinjaScript uses compiled DLLs that run native, not interpreted, which provides you with the highest performance possible.

A sample chart implementing the strategy is shown in Figure 10.

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FIGURE 10: NINJATRADER. This screenshot shows the MESA Stochastic applied to a 15-minute chart of the S&P 500 index CFD.

—Raymond Deux & Cal Hueber
NinjaTrader, LLC
www.ninjatrader.com

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UPDATA: JANUARY 2014 TRADERS’ TIPS CODE

This tip is based on “Predictive And Successful Indicators” by John Ehlers in this issue. In the article, Ehlers seeks to develop a filter with the optimum smoothing and minimal lag effect, and which mitigates the fractal distortion of the underlying data. A stochastic measure is applied to the resultant series to create an oscillator such that values 0.2 and 0.8 become extremes from which entry signals may be generated. (See Figure 11.)

Image 1

FIGURE 11: UPDATA. This chart shows the stochastic indicator-based system with 0.8/0.2 crossing entries, as applied to Dollar General, in daily resolution data.

The Updata code based on this article is in the Updata Library and may be downloaded by clicking the custom menu and system library. The code is also shown below and can be pasted into the Updata custom editor and saved.



'John F. Ehlers,PhD
'Stocks & Commodities Magazine,January 2014 

DISPLAYSTYLE 3LINES
INDICATORTYPE CHART  
COLOUR RGB(200,0,0)
COLOUR2 RGB(0,0,200)   
COLOUR3 RGB(0,0,200)
PARAMETER "Length" #LENGTH=20
PARAMETER "Upper" @UPPER=0.8
PARAMETER "Lower" @LOWER=0.2
NAME "MESA Stochastic Indicator" "" 
@ALPHA1=0 
@HP=0
@A1=0
@B1=0
@C1=0
@C2=0
@C3=0
@FILTER=0
@STOCHASTIC=0
@MESASTOCH=0 
FOR #CURDATE=0 TO #LASTDATE
    @ALPHA1=1+(SIN(0.707*2*CONST_PI/48)-1)/COS(0.707*2*CONST_PI/48) 
    @HP=(1-@ALPHA1/2)*(1-@ALPHA1/2)*(CLOSE-2*CLOSE(1)+CLOSE(2))+2*(1-@ALPHA1)*HIST(@HP,1)-(1-@ALPHA1)*(1-@ALPHA1)*HIST(@HP,2)
    @A1=EXP(-1.414*CONST_PI/10)
    @B1=2*@A1*COS(1.414*CONST_PI/10) 
    @C2=@B1
    @C3=-@A1*@A1
    @C1=1-@C2-@C3
    @FILTER=@C1*0.5*(@HP+HIST(@HP,1))+@C2*HIST(@FILTER,1)+@C3*HIST(@FILTER,2)  
    @STOCHASTIC=(@FILTER-PLOW(@FILTER,#LENGTH))/(PHIGH(@FILTER,#LENGTH)-PLOW(@FILTER,#LENGTH)) 
    @MESASTOCH=@C1*0.5*(@STOCHASTIC+HIST(@STOCHASTIC,1))+@C2*HIST(@STOCHASTIC,1)+@C3*HIST(@STOCHASTIC,2)  
    'OPTIONAL ENTRY RULES
    IF HASX(@MESASTOCH,@UPPER,DOWN)
       SELL CLOSE
       SHORT CLOSE 
    ELSEIF HASX(@MESASTOCH,@LOWER,UP)   
       COVER CLOSE
       BUY CLOSE
    ENDIF
    @PLOT=@MESASTOCH
    @PLOT2=@UPPER
    @PLOT3=@LOWER
NEXT

—Updata support team
support@updata.co.uk
www.updata.co.uk

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TRADECISION: JANUARY 2014 TRADERS’ TIPS CODE

In “Predictive And Successful Indicators” in this issue, author John Ehlers investigates predictive indicators for more effective trading strategies. We are providing code for the three indicators discussed in the article: the SuperSmoother filter, the roofing filter, and the MESA Stochastic indicator.


SuperSmoother filter code:
var
a1:=0;
b1:=0;
c1:=0;
c2:=0;
c3:=0;
Filt:=0;
end_var
if HISTORYSIZE < 2 then return 0;

a1:=Exp(-1.414 * 3.14159 / 10);
b1:=2 * a1 * Cos(1.414 * 180 / 10);
c2:=b1;
c3:=-a1 * a1;
c1:=1 - c2 - c3;
Filt:=c1 * (Close + Close\1\) / 2 + c2 * Filt\1\ + c3 * Filt\2\;

return Filt;

Roofing filter code:
var
a1:=0;
b1:=0;
c1:=0;
c2:=0;
c3:=0;
alpha1:=0;
HP:=0;
Filt:=0;
end_var

if HISTORYSIZE < 2 then return 0;

alpha1:=(Cos(0.707 * 360 / 48) + Sin(0.707 * 360 / 48) - 1) / Cos(0.707 * 360 / 48);
HP:=(1 - alpha1 / 2) * (1 - alpha1 / 2) * (Close - 2 * Close\1\ + Close\2\) + 2 * (1 - alpha1) * HP\1\ - (1 - alpha1) * (1 - alpha1) * HP\2\;

a1:=Exp(-1.414 * 3.14159 / 10);
b1:=2 * a1 * Cos(1.414 * 180 / 10);
c2:=b1;
c3:=-a1 * a1;
c1:=1 - c2 - c3;
Filt:=c1 * (HP + HP\1\) / 2 + c2 * Filt\1\ + c3 * Filt\2\;

return Filt;


MESA Stochastic indicator code:
input
Length:"Enter the length:", 20;
end_in
var
a1:=0;
b1:=0;
c1:=0;
c2:=0;
c3:=0;
alpha1:=0;
HP:=0;
Filt:=0;
HighestC:=0;
LowestC:=0;
count:=0;
Stoc:=0;
MESAStochastic:=0;
end_var

if HISTORYSIZE < 2 then return 0;

alpha1:=(Cos(0.707 * 360 / 48) + Sin(0.707 * 360 / 48) - 1) / Cos(0.707 * 360 / 48);
HP:=(1 - alpha1 / 2) * (1 - alpha1 / 2) * (Close - 2 * Close\1\ + Close\2\) + 2 * (1 - alpha1) * HP\1\ - (1 - alpha1) * (1 - alpha1) * HP\2\;

a1:=Exp(-1.414 * 3.14159 / 10);
b1:=2 * a1 * Cos(1.414 * 180 / 10);
c2:=b1;
c3:=-a1 * a1;
c1:=1 - c2 - c3;
Filt:=c1 * (HP + HP\1\) / 2 + c2 * Filt\1\ + c3 * Filt\2\;

HighestC:=Filt;
LowestC:=Filt;
for count:=0 to Length - 1 do begin
	if Filt\count\ >HighestC then
		HighestC:=Filt\count\;
	if Filt\count\ < LowestC then
		LowestC:=Filt\count\;
end;

Stoc:=(Filt - LowestC) / (HighestC - LowestC);
MESAStochastic:=c1 * (Stoc + Stoc\1\) / 2 + c2 * MESAStochastic\1\ + c3 * MESAStochastic\2\;
return MESAStochastic;

A sample chart plotting the indicators is shown in Figure 12.

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FIGURE 12: TRADECISION. Here is a sample chart of Google with the roofing filter and John Ehlers’ MESA Stochastic indicator plotted.

—Tradecision support
Tradecision.com

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MICROSOFT EXCEL: JANUARY 2014 TRADERS’ TIPS CODE

John Ehlers’ formulations given in his article in this issue, “Predictive And Successful Indicators,” are straightforward to set up in Excel. The chart shown in Figure 13 approximates Ehlers’ Figure 8 in his article.

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FIGURE 13: EXCEL, SAMPLE SIGNALS. Here is a sample chart of Dollar General with predictive trade signals and one-bar delayed trades.

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FIGURE 14: EXCEL, InputPriceData tab. The InputPriceData tab shows details of the last trade price bar in the second row. This data is inserted into the price history.

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FIGURE 15: EXCEL, INTRADAY PRICE BAR TIME STAMP. When the last intraday bar (input data offset = zero) is on the chart, it will be displayed as “Last:” with a time stamp.

Since this indicator is built on bar closes, transactions cannot logically take place any sooner than the next bar. For trade simulation in this spreadsheet, I enter or exit trades using the open of the next bar after a signal.

This Traders’ Tip also introduces a new feature of my Excel templates: an intraday price bar for use with daily price history downloads from Yahoo! Finance.

If bar 1 is an intraday bar, it will have a time stamp to the right.

The intraday bar warning only appears when the bar is on the chart (data window offset = zero).

The spreadsheet file for this Traders’ Tip can be downloaded here. To successfully download it, follow these steps:

—Ron McAllister
Excel and VBA programmer
rpmac_xltt@sprynet.com

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Originally published in the January 2014 issue of
Technical Analysis of Stocks & Commodities magazine.
All rights reserved. © Copyright 2013, Technical Analysis, Inc.