Point and figure charts automated trading system
Here is a system that trades automatically point and figure charts.
The way it works :
All closing prices are sorted into boxes at the end of each bar – e.g. with a box size of 20 points, a close of 8247 will be in the box from 8240 to 8260.
The parameter “LowerBorderBox” is the lower end of this box. The upper end is LowerBorderBox + Boxsize.
When uptrend = 1 and downtrend = 0, there is an upward trend with long positions (XXXXX in P & F notation). When downtrend = 1, positions will be short (OOOOOO in P & F notation).
All boxes start at a value of 0 and their position is therefore fixed. For a box size of 20, we have boxes starting at a lower value of 0, 20, 40, 60, and so on. Or 8200, 8220, 8240, 8260…
The variable “UptrendHigh” defines the lower price of the highest box (X) of a current uptrend. The variable “DowntrenLow” defines the lower price of the lowest box (O) of a current downtrend.
The variable “turnafternn” sets after how many boxes in the opposite direction of the current trend, the trend direction is switched, e.g. from uptrend = 1 to downtrend = 1. Then, a buy or sellshort signal occurs.
For results identical to the point & figure charts built in ProRealTime, you have to set this threshold value to one unit higher than in the built-in charts. So, when we say that the P&F trend switches direction after 3 new boxes in the opposite direction in the built-in charts, we have to set turnafternn to a value of 4 in the automated trading system. I don’t know exactly why this is the case, but it appears that there is a difference in the definition of what a move of one box is. When we respect this difference, the point & figure charts are identical for the trading system and the built-in charts.
The results of point and figure trading are very much dependent on the box size. There is no single optimum value of the box size. As in Renko trading, results depend a lot on chance.
defparam cumulateorders = false
ONCE uptrend = 1
ONCE downtrend = 1
n = 1
Boxsize = 20
turnafternn = 4
LowerBorderBox = round((close / Boxsize) - 0.5) * Boxsize
ONCE DowntrendLow = LowerBorderBox
ONCE UptrendHigh = LowerBorderBox
If LowerBorderBox > LowerBorderBox[1] then
If uptrend = 1 then
downtrend = 0
ONCE DowntrendLow = LowerBorderBox
If LowerBorderBox > UptrendHigh then
UptrendHigh = LowerBorderBox
endif
endif
If downtrend = 1 and LowerBorderBox >= DowntrendLow + (turnafternn * Boxsize) then
UptrendHigh = LowerBorderBox
uptrend = 1
downtrend = 0
endif
elsif LowerBorderBox < LowerBorderBox[1] then
If downtrend = 1 then
uptrend = 0
ONCE UptrendHigh = LowerBorderBox
If LowerBorderBox < DowntrendLow then
DowntrendLow = LowerBorderBox
endif
endif
If uptrend = 1 and LowerBorderBox <= UptrendHigh - (turnafternn * Boxsize) then
DowntrendLow = LowerBorderBox
uptrend = 0
downtrend = 1
endif
endif
If uptrend = 1 and uptrend[1] = 0 then
buy n contracts at market
endif
If downtrend = 1 and downtrend[1] = 0 then
sellshort n contracts at market
endif
set stop ploss 350
Comments
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Thank you. This is mainly to show the concept, but I would not trade with this system as it is. Maybe someone can find additional criteria how to improve the performance, and, above all, the reliability and constancy of a point and figure trading system. The problem with such systems (point & figure, as well as Renko) is the fixed box size and box position over the whole chart. You can get good results with a box size of 35, for example, but losses for a box size of 36. Box size 37 may be good again. Let not fool yourselves by the optical appearance of point & figure charts (or Renko) !
Hi Verdi, I like very much the point and figure tool and would like to work with your trading system but I tried it on shares (L'Oreal - OR) but it did not take position; I changed of course the buy code lines; but nothing happened; Do you have any idea and would you truy yourself on L'OREAL? Best, Chris