(mt) Metastock Part 3: Relative Strength Comparison (rsc) The
Key Success Tool In Trading By Stock M

In Part 2, of Designing a Trading System in MetaStock I covered
how to code the first two of the four major components of a
mechanical entry system I had explained the coding of price and
liquidity In this article, I will cover the steps for coding
the remaining two components, trend and volatility, into
MetaStock In the end, you will have the complete codes for a
mechanical entry system
Let`s begin with trend identification Remember, `the trend is
your friend` when trading You always want to trade with the
trend, not against it Think of it this way, if you were
swimming in the sea, and got yourself caught in a rip tide, is
it easier to swim with the current or against it? It is the same
with trading with a trend
There are many ways to identify trends, and it`s not
particularly important which method you use You just need to
use one One of my preferred methods for identifying trending
stocks is to find stocks that are trading at their current
highs You can do this by stipulating that the highest high
price must have been achieved in the last `x` number of days
Once again, the variables you use will depend on the time frame
you are trading But for this example, you want the highest high
price in the last 240 days to have occurred in the last 20 days
Using the formula reference section in the MetaStock Programming
Study Guide, you can find the syntax of the highest high
function, and then plug in the details Then, using the `less
than` symbol, you can specify the number of days must be less
than 20 In MetaStock language that would be:
HHVBars(H,240) < 20
The final component to our entry system is the volatility
measure The aim of including this formula is to identify stocks
that move enough for us to make a profit, yet aren`t so erratic
that they keep you up at night There are a few ways to measure
volatility However, my favourite is the ATR method The ATR
indicates how much a stock will move, on average, over a certain
period
For example, a one-dollar stock might move five cents on average
over the last 20 days You can divide this value by the price of
the stock and you will have the average percentage movement of a
stock With these values, you can stipulate a minimum and
maximum daily volatility value
For example: You may want the ATR, divided by the average
closing price, over the last 21 days, to be greater than 15%
Therefore, the average minimum volatility must be greater than
15%
Additionally, you may want the ATR divided by the closing price,
over the last 21 days, to be less than 6% This sets the average
maximum volatility at less than 6% In MetaStock language that
would be:
ATR(21)/Mov(C,21,S)*100 > 15 and ATR(21)/Mov(C,21,S)*100 < 6
Putting all our code together, you see what your entry system
looks like:
C>1 and Mov(v,21,s)*C > 200000 and HHVBars(H,240) < 20 and
ATR(21)/Mov(C,21,S)*100 > 15 and ATR(21)/Mov(C,21,S)*100 < 6
You now have now a workable entry system Not only did you
construct a robust system, but it also adheres to the KISS
principal (Keep It Simple Simon) This system can be cut and
pasted into the Explorer within MetaStock However, the entry is
only the beginning of a successful trading system In later
parts of this series, you`ll find the rest of the components
that you need to design a profitable trading system
David Jenyns, leading expert in designing profitable trading
systems, MetaStock website offers a huge free collection of
trading related tips and tricks http://wwwmeta-form
ulacom/subscribe

Tags | frame, identification, liquidity, metastock, preferred, rip, symbol, tide