Algorithmic Trading Tips 13.

WHAT IS THE MARKET OUTLOOK?

HOW TO CREATE YOUR OWN DASHBOARD IN TRADESIGNAL FOR A QUICK, PRECISE OVERVIEW.

In order to being able to identify attractive trading opportunities as a trader, asset manager or analyst, a compact, precise overall view of the markets is needed. In this issue you will learn how to use a dashboard including a scoring system to monitor the markets using a new indicator. In addition, we will show you how to group and sort your watch lists.

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Which markets are already overheated? Are there individual market segments that have unusual movements? Which indices, currencies or commodities should be bought or sold? In short, what is the market outlook?

With Tradesignal’s new Multi Indicator Dashboard you get a clear answer to such questions – in clear, plain and color-coded form.

FIG. 1: THE MARKET OUTLOOK IN A COMPACT, CLEAR VIEW.

The multi indicator dashboard calculates four indicators in real time: RSI, MACD, bollinger bands, stochastics. By colour highlighting and sort functionality traders and asset managers receive a quick overview of the market situation.

 

Four indicators, one scoring.

The multi indicator dashboard contains four different technical indicators and a scoring and thus provides a broad base of information to the market condition. It can be used in a watch list (in real time) or scanner (as snapshot). Each indicator that lingers terrain in the positive (negative) is evaluated with a plus (minus), so that each security a total score between -4 and +4 is displayed. Before we come to speak on details, first we present a brief overview of all indicators included.

Indicator 1: RSI Classic – the most popular overbought / oversold oscillator.

The RSI belongs to the group of oscillators and describes the strength of the momentum. In contrast to trend-following indicators such as SMAs, the RSI has a lead character – it reaches its extreme value normally before the price of the underlying does. It is calculated for a certain period length (default: 14) by setting the close prices of up days in relation to those of down days. The results are reported on a scale of 0 to 100.

  • A RSI level above 70 indicates an overbought condition of the underlying.
  • A RSI level below the 30 mark signals an oversold condition.

 

It is important however that an immersion in one of these areas should not automatically be used for long or short entry. This circumstance should be regarded as the first warning sign of a potential trend change – especially when it comes to differences between the price performance of the indicator and the underlying security itself. A positive divergence in RSI arises when the price of the underlying generated new lows while the RSI has not confirmed this. Conversely, there is a negative divergence when new High Points Underlying ceases to be confirmed by a rising RSI.

In the Multi Indicator Dashboard RSI quotations above the 70 are rated negatively in the scoring. A RSI below 30 will be positively considered in scoring.

INDICATOR 2: MACD – The classic trend follower.

The Moving Average Convergence Divergence indicator (MACD) was developed by G. Appel and is one of the most used indicators since decades. As the name suggests, the computation of the MACD is based on two exponentially smoothed moving averages (default: 12 and 26). The difference of both averages ist the first line, the MACD. The second line (signal line) is formed by a 9-period-EMA of the MACD line.

MACD can be used for various analytical purposes. As a trend-following indicator that tracks the highs and lows of the underlying asset, it provides a variety of information regarding trend direction, trend strength and education possible turning points in the chart. The position of the indicator to the zero line indicates whether a positive or negative trend exists. An upward trend is given when the MACD is trading above the zero line, while a downtrend is characterized by extending below the zero line MACD. The greater the distance, the higher the strength of the trend is classified.

Concrete trading signals provided by the indicator when it comes to overlap both lines:

  • A buy signal occurs when the faster MACD line crosses from below the slower signal line upwards.
  • A sell signal occurs when the MACD line crosses the signal line from top to bottom.

 

Another use of the MACD is the divergence analysis. Due to its property as a trend follower MACD accomplished by the high and low points of the underlying. If the underlying moves in line with the MACD, the technical situation can be classified as “healthy”. However, every now and then divergences between the MACD and the price development of the underlying arise. These indicate weaknesses in the existing trend and signal an impending change in trend.

In the multi indicator dashboard the location of the MACD is crucial: MACD values above (below) the zero line are considered positive (negative). Alternatively the position of the two lines could be defined as criterion in the Equilla code.

INDICATOR 3: Bollinger Bands – trend and volatility in one.

Unlike envelopes that visualize the fluctuations of a security by a fixed percentage above and below a moving average, the famous bollinger bands show the actual volatility. The indicator consist of a central line – by default a 20-period SMA – as well as a lower and upper band using two times the standard deviation, which ensures that statistically 95% of all price data lie between the two bands .
Due to the dynamic nature they account for changes in the volatility of a security quickly and are both a trend-following indicator (in strong trend phases) as well as a reversal signal generator (in sideways phases). A strong narrowing of the bands also provides a valuable tool for identifying impending price breakouts.

In the multi indicator dashboard a closing price above the upper bollinger band (period setting: 50) is displayed as a warning signal (red) and counted using a minus point. A clear break below the lower bollinger band is seen as a positive event (green) and consequently rated with a plus point. Of course the period settings can be changed in the properties window.

INDICATOR 4: Slow stochastics – classic among the oscillators.

In addition to the RSI the stochastics by George C. Lane is one of the most well-known oscillators at all. The basic idea: In an upward movement the daily prices mostly close near the highs, while in downtrends they close near the periods’s low. A trend reversal is often characterized, when the closing prices tend more and more in the opposite direction to the prevailing trend until finally the trend is broken. In short, the stochastics measures the distance of the current closing price from the lowest price of a specific period and then sets it in relation to the high-low-range of the same period. Therefore it only should be used in range markets. The stochastic oscillator consists of two exponential moving averages, called the% K line and the% D line and moves in a range from 0 to 100.

Analogous to the RSI the stochastic oscillator identifies potential overbought and oversold zones. The former is achieved when the stochastic rises above 80 and then falls below this mark. A move below 20 characterizes an oversold market condition. The real signal in each case represents a crossing of two lines. However, it must be made clear that an extreme reading by itself is not necessarily to be considered bearish or bullish – as we all know the underlying can stay overbought for an extended period of time or remain oversold, when a strong trend exists.

In the multi indicator dashboard a slow stochastics above (below) the 80-mark (20-mark) is considered negative (positive) in the scoring one.

 

EQUILLA CODE FOR TRADESIGNAL.

The observation and analysis of the proposed indicators for a large pool of securities and markets can be best carried out using the multi indicator dashboard. To use the dashboard immediately on your Tradesignal workstation, we provide you with the Equilla code. You can copy and paste the code into the Equilla editor, save it as an indicator and then insert it in your watch list or scanner by drag and drop.

How to do, watch our Video

The source code contains conditions which ensure in the presence of the aforementioned indicators values for a red or green staining of the respective fields in the watch list. In addition, all indicators respectively flow with -1, 0 or +1 point in the overall scoring.

Meta:

Synopsis(​​ "Use this dashboard in a Watch List or in a Market Scanner. It displays conditions of 4 indicators (RSI, MACD, Slow Stochastics, Bollinger Bands) simultaneously. If the​​ indicator is in a buy condition, the cell is colored green. If it is in a sell condition the cell is colored red. The conditions are as shown below under the 'conditions' section."​​ ),

SubChart(​​ False​​ ),

ShortCode(​​ "SBDB"​​ );

 ​​ ​​ ​​ ​​ ​​​​ 

Input:​​ 

P_RSI(14),P_MACD_fast(12),P_MACD_slow(26),P_MACD_trigger(9),P_BB(20),P_SS(3),

 ​​ ​​ ​​​​ greenColor(​​ ColorDarkGreen​​ ),redColor(​​ DarkRed​​ ),​​ FlatColor(​​ transparent​​ ),lookback(1),realtime(true),

Period(​​ NumericSimple​​ );

 

Variables:

Draw_all(true),

color,

result,

farbe,

summe,

rsivalue,

triggervalue,

bblower,

bbupper,

slow_k,

diff,

displace;

if​​ realtime​​ then​​ displace=0​​ else​​ displace=1;

summe=0;

 

rsiValue​​ =​​ RSIClassic(​​ close,​​ P_RSI );

color​​ =​​ Iff( rsiValue[displace]​​ >​​ 70,​​ redColor,​​ Iff( rsiValue[displace]​​ <​​ 30,​​ greenColor,​​ FlatColor ) );

summe​​ =​​ Iff( rsiValue[displace]​​ >​​ 70,​​ summe-1,​​ Iff( rsiValue[displace]​​ <​​ 30,​​ summe+1,​​ summe ) );

if​​ Draw_all​​ then Draw( rsiValue[displace],​​ "RSIC",​​ Default,​​ Default,​​ Default,​​ color );

 

result​​ =​​ MACD(​​ Close,​​ P_MACD_Fast,​​ P_MACD_Slow );

triggerValue​​ =​​ XAverage( result,​​ P_MACD_trigger );

color​​ =​​ Iff(( result[displace]​​ >​​ 0​​ ),​​ greenColor,​​ Iff( result[displace]​​ <​​ 0​​ ,​​ redColor,​​ FlatColor ) );

summe​​ =​​ Iff((result[displace]​​ >​​ 0​​ ),​​ summe+1,​​ Iff(result[displace]​​ <​​ 0​​ ,​​ summe-1,​​ summe​​ ) );

if​​ Draw_all​​ then Draw( result[displace],​​ "MACD",​​ Default,​​ Default,​​ Default,​​ color );

 

bblower​​ =​​ BollingerBand(​​ close,​​ P_BB, -2​​ );

bbupper​​ =​​ BollingerBand(​​ close,​​ P_BB,​​ 2​​ );

color​​ =​​ Iff(​​ close​​ <​​ bblower[displace],​​ greenColor,​​ Iff(​​ close​​ >​​ bbupper[displace],​​ redColor,​​ FlatColor ) );

summe​​ =​​ Iff(​​ close​​ <​​ bblower[displace],​​ summe+1,​​ Iff(​​ close​​ >​​ bbupper[displace],​​ summe-1,​​ summe ) );

if​​ Draw_all​​ then Draw( bblower[displace],​​ "BB_low",​​ Default,​​ Default,​​ Default,​​ color );

if​​ Draw_all​​ then Draw(​​ bbupper[displace],​​ "BB_upper",​​ Default,​​ Default,​​ Default,​​ color );

 

 

slow_k​​ =​​ SlowK( P_SS );

color​​ =​​ Iff( slow_k[displace]​​ <​​ 20,​​ greenColor,​​ Iff( slow_k[displace]​​ >​​ 80,​​ redColor,​​ FlatColor ) );

summe​​ =​​ Iff( slow_k[displace]​​ <​​ 20,​​ summe+1,​​ Iff(​​ slow_k[displace]​​ >​​ 80,​​ summe-1,​​ summe ) );

if​​ Draw_all​​ then Draw( slow_k[displace],​​ "Stoch K",​​ Default,​​ Default,​​ Default,​​ color );

 

 

if​​ summe​​ >3​​ then​​ farbe=ColorForestgreen;

if​​ summe​​ >2​​ and​​ summe​​ <=3​​ then​​ farbe=green;

if​​ summe​​ >0​​ and​​ summe​​ <=2​​ then​​ farbe=ColorGreen;

if​​ summe​​ =0​​ then​​ farbe=white;

if​​ summe​​ <0​​ and​​ summe​​ >=-2​​ then​​ farbe=ColorFireBrick;

if​​ summe​​ <-2​​ then​​ farbe=ColorMaroon;​​ 

 

​​ if​​ Draw_all​​ then Draw( summe,​​ "Sum",​​ Default,​​ Default,​​ Default,​​ farbe );

 

diff=summe-summe[lookback];

 

if​​ diff​​ >3​​ then​​ farbe=ColorForestgreen;

if​​ diff​​ >2​​ and​​ diff​​ <=3​​ then​​ farbe=green;

if​​ diff​​ >0​​ and​​ diff​​ <=2​​ then​​ farbe=ColorGreen;

if​​ diff​​ =0​​ then​​ farbe=white;

if​​ diff​​ <0​​ and​​ diff​​ >=-2​​ then​​ farbe=ColorFireBrick;

if​​ diff​​ <-2​​ then​​ farbe=ColorMaroon;​​ 

 

if​​ Draw_all​​ then Draw(​​ diff,​​ "Difference",​​ Default,​​ Default,​​ Default,​​ farbe );

 

FIG. 2: EQUILLA CODE FOR MULTI INDICATOR DASHBOARD.

The code shown can be inserted into the Equilla editor, saved as an indicator used immediately in Tradesignal.

 

THE DASHBOARD IN PRACTICE.

Before using the dashboards a watch list has to be created first. The easiest way is to use the toolbar on the right side. In the “securities” section any preinstalled or custom watch list as well as individual securities can be opened as a watch list. Highlight the desired securities and select “open in watch list” by using the right mouse button. In the next step, click on “indicators” in the toolbox, select the previously stored indicator “multi indicator dashboard” and insert it by drag and drop into the watch list.

The following figure shows a watch list with different asset classes and all initially presented indicators.

FIG. 3: WATCH LIST WITH MULTI INDICATOR DASHBOARD.

The dashboard delivers a compact, precise overview of the market condition.

The dashboard shows you all the current values for the RSI, MACD, bollinger bands and the slow stochastics. As already explained, important indicators values are highlighted, so you can make a quick picture of the overall market. In the column “SBDB: Sum” the aggregate score of all indicators for the respective security appears. A column to the right under “SBDB: Difference” shows the changes in this scoring compared to a comparison period. In this way, whether the state of a specific market improves or deteriorates can be seen directly by looking at this column.

The choice of the comparison period can be set in the properties window using the parameter “lookback”. In our example, the column shows the difference between the current score and the score 10 days ago. As you can see, indices like All Ordinaries, Hang Seng or DAX improved by 2 points lately.

By the way, in the properties window all parameters of the four indicators as well as the colours can be adjusted individually. If one or more of the indicators or column of the dashboard should be hidden, just deactivate them in the lower half of the input area shown on figure 4.

FIG. 4: PROPERTIES WINDOW OF THE MULTI INDICATOR DASHBOARD.

The parameters, the activation and deactivation of individual indicators and the retrospective period can be controlled conveniently via the “properties” section in the toolbar.

Grouping and sorting function for more order in the watch list.

An important function within the watch list is the grouping option. Click into the watch list with the right mouse button and select “set group”. Here you can create your own groups and rename or sort certain securities in an existing group. In this way, dozens securities may be grouped, for example by asset classes, regions or industries. If you want to add more securities or whole course lists from “own production” in the watch list in retrospect, this is possible through the “securities” in the right toolbox by drag and drop. The name of the watch list is thereby added to the table, so you always keep track even with large lists of securities.

Once your watch list is completed, the multi indicator dashboard develops its full strength: If you want to create a list of all securities based on their RSI values, just click on the column name of the indicator (in this case, “RSIC SBDB”) and you can identify which markets or securities are overbought or oversold. Also, by sorting by the total scoring or its change you can immediately separate the wheat from the chaff.

Tradesignal informs you at any time about the weather situation on the markets.

The multi indicator dashboard will give you all information about the weather situation on the markets in a jiffy. By color highlighting and sort features to determine quickly which market segments form particularly positive or negative signals and how their indicator scores changed lately. Of course, the dashboard can be customized to your individual time level.

That`s it for today – take care, take profit.
David Pieper

DISCLAIMER.

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Distribution allowed under a Creative Commons Attribution-Noncommercial license
 http://creativecommons.org/licenses/by-nc/3.0/

Tradesignal® is a registered trademark of Tradesignal GmbH. Unauthorized use or misuse is specifically prohibited. All other protected brands and trademarks mentioned in this document conform, without restriction, to the provisions of applicable trademark law and the copyrights of the respective registered owners.

Tradesignal Ltd. obtains information from sources it considers reliable, but does not guarantee the accuracy or completeness of its information contained therein. Tradesignal Ltd. and its affiliates make no representation or warranty, either express or implied, with respect to the information or analysis supplied herein, including without limitation the implied warranties of fitness for a particular purpose and merchantability, and each specifically disclaims any such warranty. In no event shall Tradesignal Ltd. or its affiliates be liable to for any decision made or action taken in reliance upon the information contained herein, lost profits or any indirect, consequential, special or incidental damages, whether in contract, tort or otherwise, even if advised of the possibility of such damages. This material does not constitute an offer or a solicitation of an offer or a recommendation to buy or sell securities. All expressions of opinion are subject to change without notice.

This code is provided free of charge and “as is”, without warranty of any kind, express or implied, including but not limited to the warranties of fitness for a particular purpose and noninfringement. In no event, shall Tradesignal Ltd. be liable for any claim, damages or other liability, whether in an action of contract, tort or otherwise, arising from, or of or in connection with this code or the use of this code.

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