Head and Shoulders equity curve stop loss
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Hi,
I put together a quick and dirty H&S pattern detection for PRT and thought to share it here, in case it’s of use to anyone, or in case someone would like to improve or contribute. I am sure you are probably aware of the head and shoulders pattern and its uses – but if not then take a look here.
Below is the raw beginnings of a module that can be plugged into a trading system. It looks roughly for head and shoulders patterns with the equity curve when your system is onMarket. If a head and shoulders pattern is found within your equity curve, a trigger will happen (“hsDone”) and you can then perform an action (such as exit the open trade to lock in profits, or any other action).
The code should be pretty self explanatory but it’s by no means a finished product. I don’t have time to go though all the logic cases, filters and variables at the moment but thought to share in case someone would like to pick it up and contribute. Open to all ideas of improving the H&S detection algo. Will pick up on it myself when I have more time.
123456789101112131415161718192021222324252627282930313233343536373839404142// -- equity curve head and shoulders detection ----once useHSPatterStop = 1if useHSPatterStop then// Variabls ------------------------D = positionPerf // data = ie usually current trade performancehsMinWidth = 4 // minimum shoulder-head width in barsrightShoulderMinDepth = 0.5 // minimum % of left shoulder that right shoulder must retrace to for a valid setup//-----------------------------------maxD = max(maxD, D)findL = (not hsLeft) and (not hsHead) and (d >= maxD) and (d > hsLeft)restL = d > hsLeft and (barIndex < hsLeftIndex+round(hsMinWidth/2) or d > hsLeft*2)findH = hsLeft and (not hsRight) and d > hsLeft //and d > hsHeadfindH = findH and d > hsHead and barIndex > hsLeftIndex+hsMinWidthfindR = (not hsRight) and hsHead and hsLeft and (d >= hsLeft)findR = findR and ( barIndex-hsHeadIndex >= hsMinWidth )findR = findR and lowest[barIndex-hsHeadIndex](d) <= hsLeft-(hsLeft-lowest[barIndex-hsLeftIndex](d))*rightShoulderMinDepthhsDone = hsRight and d <= hsLeft - lowest[barIndex-hsLeftIndex](d)graph hsDoneif findL or restL then // We found possible left shoulderhsLeft = dhsLeftIndex = barIndexhsHead = 0hsRight = 0elsif findH and not findR then // We found possible headhsHead = dhsHeadIndex = barIndexelsif findR then // We found possible right shoulderhsRight = delsif hsDone then // Pattern completed below left shoulder low// INSERT YOUR H&S CONDITION HANDLER HEREcanExitMyTrade = 1 // for exampleendifif hsDone or (not onMarket) then // reset to clear HS patternhsLeft = 0hsHead = 0hsRight = 0endifendifAll the best,
M
Very interesting!
1 user thanked author for this post.
Why are you using Positionperf instead of High or Close of candlesticks? Since Positionperf is updated only once per bar, I presume the pattern found result should be the same.
But it’s a great idea and good share, thanks a lot Maz.
1 user thanked author for this post.
Yep, as an example. But you could always do something like:
12345if longOnMarket thenD = highelsif shortOnMarket thenD = lowendif(or simply close)
1 user thanked author for this post.
Intresting!
1 user thanked author for this post.
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