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Part 2: Designing A Trading System In Metastock
By: David Jenyns
In Part 1 of Designing a Trading System in MetaStock, I had discussed the major
components you needed to be able to track to create a mechanical entry system.
These were measures of price, liquidity, trend, and volatility. The question now
is, how do we code this into MetaStock?
First, let me offer you the most valuable piece of knowledge I have acquired
over the years about MetaStock formula writing. This one secret will turn you
into a MetaStock master. Do you think I know all of MetaStock`s hundreds of
pre-programmed formula and propriety indicators? Well, I`m good, but I`m not
that good.
When coding in MetaStock, the key to getting it “right” is to write what it is
you are trying to achieve “down in English”. Once you`ve done this, it is easy
to convert it into a MetaStock formula.
Let`s look at an example. Our first entry condition is a measure of price. As
mentioned in Part 1, you want to set a price minimum to remove speculative
stocks. Please note that the values you select will depend on the exchange you
are trading. Some markets tend to be more expensive than others. For this
example, we are looking to design a long-term trend following system to trade on
the Australian Stock Exchange.
In Australia anything under $1 could be classed as a speculative stock. So how
do you stipulate that the stocks you want must be greater than $1? First, “write
it in English”: You want stocks with a 21-day average closing price that is
greater than $1. Now, you can convert this into a MetaStock formula.
Using the formula reference section in the MetaStock Programming Study Guide,
you can check the syntax of a moving average. Once you have this information,
it`s simply a matter of plugging in the correct numbers. Then, by using the
“greater than” symbol, you can stipulate the price to be greater than $1. The
MetaStock code will look like this:
Mov(c,21,s) > 1
Let`s move onto the next component, liquidity. This is a measure of how much
money a stock trades. It is important to identify stocks that have enough money
moving through them so that you`re never caught with a stock you can`t get out
of. For this example, let`s say we require the 21-day average of volume
multiplied by the closing price to be greater than $200,000. In MetaStock
language this would be:
Mov(v,21,s)*C > 200000
In the next article I`ll go through the last two components needed to design a
mechanical entry system in MetaStock. With this information, you will be well on
your way to starting an effective, and profitable, trading system in MetaStock.
About the Author:
David Jenyns, leading expert in designing profitable trading systems, MetaStock
website offers a huge free collection of trading related tips and tricks.
http://www.meta-formula.com/subscribe
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