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June 2011 Stocks and Commodities Traders Tips


Entering the Price Zone :

AIQ Version:

Original article by Walid Khalil and David Steckler
AIQ Code by Richard Denning

The AIQ code for Walid Khalil and David Steckler’s article, “Entering The Price Zone”, is shown below. I coded both the Price Zone Oscillator (PZO) and Volume Zone Oscillator Indicator (VZO) (from the prior month’s article by the same authors) along with the system that uses the PZO or VZO indicator. There is an input at the top of the code called “usePZO”. When this input is set equal to “1” then the indicator and system use the PZO. If set to any other value, then the indicator and system use the VZO oscillator. I had to use my own interpretation of what the divergence sell/cover rules of their system mean since the exact code for this part of the system is not given in the article. Also note that the non-trending case is provided with this code but tests of the rule “BuyNoTrnd” showed that trading only when the market is trending was the better choice. As a result, my tests below were of only the trending portion of the system as I had done in last month’s tests.
I ran a back test using the Portfolio Manager module from 1/1/98 to 4/8/11 using the NASDAQ 100 list of stocks. In Figure 1, I show the test results of simulating trading the NASDAQ 100 list of stocks, using the following parameters for capitalization:

1) Maximum positions per day = 3
2) Maximum total positions allowed = 10
3) Choose candidates using ADX values in descending order
4) Size each position at 10% of total account equity recomputed every day
For the test period, the average annual return was 11.3% with a maximum drawdown of 67.7% on 02/07/03.

In last month’s issue, I ran a similar test using the VZO indicator and the results were slightly better than using the PZO indicator with this system.

The short side test was unsuccessful as the system lost all its capital during the early years of the test. These results are not shown in any figures. I tried adding an index trend filter but this did not save the short side from total loss.

Captions:
Figure 1 – PZO system equity curve trading longs only using the NASDAQ 100 list of stocks compared to the SPX index for the test period 1/1/98 to 4/8/11.

EDS Code for Entering the Price Zone:
EnterPriceZone.EDS
(right click and choose Save As)



Traders Studio Version :

Original article by Walid Khalil and David Steckler
Traders Studio Code by Richard Denning

The TradersStudio code for the PZO and VZO indicator and related system from Walid Khalil and David Steckler’s articles, “Entering The Price Zone”, from the June 2011 issue and “In The Volume Zone”, from the May 2011 issue is shown below. One of the inputs to the PZO system is called “usePZO”. When this input is set equal to “1” then the indicator and system use the PZO. If set to any other value, then the indicator and system use the VZO oscillator. Since my tests showed that trading the short side of the system resulted in net losses, I also have provided an input called “allowShorts” that will disable shorting if set to anything other than “1”. In the tests I ran I set “allowShorts” = 0 so that shorting was disabled. The system code provided was based on the Tradestation code provided in the article and as noted in the article, the divergence exit is not coded.

I ran a back test using the Tradeplan module from 1/1/92 to 4/15/11 using the “NASDAQ 100 like” list of stocks which contained 74 stocks. I used a Tradeplan that divided the capital into 74 equal pieces so that all signals could be taken. In Figure 1, I show the Tradeplan equity curve and in Figure 2, I show the Tradeplan underwater equity curve. For the test period, the compound annual return was 5.04% with a maximum drawdown of 24.52% on 03/11/03.

Captions:
Figure 1: Tradeplan equity curve using equal equity sizing, trading all signals from 74 “NASDAQ 100 like” stocks.

Figure 2: Tradeplan underwater equity curve using equal equity sizing, trading all signals from 74 “NASDAQ 100 like” stocks.

Traders Studio Code for Entering the Price Zone:
PZO_SYS.zip
(right click and choose Save As)

 

 

 

 

 

 

 

 

 

 

 

 

 

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