Reverse Relative Strength using Donchian Channels For ThinkOrSwim

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hockeycoachdoug

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I recently watched a new webinar from TOP Trade Tools about their new AMP advisory service. The basic gist is they are using a scanner looking for a strategy signal. In this case they are using their proprietary HFT Hedge Fund Trender Strategy to first get all the buy or sell signals, then they are filtering the scan symbols to see if they are in an area of high energy meaning plenty of juice in the tank. I want to try to identify their TOP Swing Energy indicator. When the signal occurs in a high swing energy area it is more likely a better, more powerful signal. Here is an example See chart here

I want to identify what the filter signal is similar to in the open code market. I assumed it was a function of ADX probably, but I asked on the webinar and he was vague but said it had "cyclic factors" so I am clueless. Any help is appreciated.

Here is another slide from the webinar showing a winning and losing trade See chart here
Unfortunately, he doesn't show the filter on the same chart, just says it was high or low energy when the signal occured. The logic seems sound, and a filtering indicator like this would be useful for any trading system that gives buy/sell signals. Any and all help is appreciated. You can sign up to watch the webinar Here
They run the webinar numerous times.
 
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Solution
@hockeycoachdoug Sure, I don't mind sharing. Of course, I couldn't resist making it look nice first -


Code:
input donchianlength = 10;
input averagelength = 3;
input averagetype = averagetype.SIMPLE;

def hh = highest(high,donchianlength);
def ll = lowest(low,donchianlength);
plot RS = movingaverage(averagetype,100*(hh-close)/(hh-ll),averagelength);
     RS.setpaintingstrategy(paintingstrategy.histogram);
     RS.assignvaluecolor(if rs > 75 then color.uptick else if rs > 25 then color.yellow else color.downtick);
     RS.setlineweight(3);

plot high_strength = 75;
     high_strength.setdefaultcolor(color.gray)...

Pensar

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@hockeycoachdoug My two cents' worth, take it with a grain of salt as it is only based on what I read about Top Trade Tools, their website, and your provided description and pictures. I haven't bought this indicator or any other from them - this is my best guess only.
I believe that it might be a "reverse relative strength" indicator using their version of donchian channels. Given that their buy points are usually near the low donchian channel in a uptrend, the indicator probably plots in reverse, i.e., when price is within 25% of the donchian low it turns bright green, and within 25% of the donchian high it turns red.

 

hockeycoachdoug

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@Pensar. Can I ask what that idea might look like from a TOS code perspective. I like your chart shown. I assume the lower indicator represents the price in relation to the Doncian Channel. Is that correct? If yes, would you be willing to share what you have so far. Thanks in advance.
 

Pensar

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@hockeycoachdoug Sure, I don't mind sharing. Of course, I couldn't resist making it look nice first -


Code:
input donchianlength = 10;
input averagelength = 3;
input averagetype = averagetype.SIMPLE;

def hh = highest(high,donchianlength);
def ll = lowest(low,donchianlength);
plot RS = movingaverage(averagetype,100*(hh-close)/(hh-ll),averagelength);
     RS.setpaintingstrategy(paintingstrategy.histogram);
     RS.assignvaluecolor(if rs > 75 then color.uptick else if rs > 25 then color.yellow else color.downtick);
     RS.setlineweight(3);

plot high_strength = 75;
     high_strength.setdefaultcolor(color.gray);
     high_strength.setpaintingstrategy(paintingstrategy.horizontal);
     high_strength.setstyle(curve.short_dash);
plot low_strength = 25;
     low_strength.setdefaultcolor(color.gray);
     low_strength.setpaintingstrategy(paintingstrategy.horizontal);
     low_strength.setstyle(curve.short_dash);
 
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Solution

hockeycoachdoug

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2019 Donor
VIP
@Pensar- I think this is pretty close, but I have a couple more questions/requests if I may. I watched another playing of the webinar and caught this slide that shows the setting he is using for the Swing Energy indicator. You can See chart here
The settings show ("b", 10, 50, 75, Green, Yellow, Red). He said there are 2 versions of this indicator- a "Buy" and a "Sell" version. I'm sure that is what the "b" is in the setting. I think the 10 is the Doncian channel length, and 50, 75 are the plotting limits to change colors.

According to the author, You should have a high fully charged value, meaning high green bars for a fully charged buy. This would require running only the "buy" version. You would also have a high fully charged value, meaning high green bars for a fully charged sell also. Is this something you can help me with? Thanks in advance.
 

Pensar

Well-known member
VIP
Lifetime
@Pensar- I think this is pretty close, but I have a couple more questions/requests if I may. I watched another playing of the webinar and caught this slide that shows the setting he is using for the Swing Energy indicator. You can See chart here
The settings show ("b", 10, 50, 75, Green, Yellow, Red). He said there are 2 versions of this indicator- a "Buy" and a "Sell" version. I'm sure that is what the "b" is in the setting. I think the 10 is the Doncian channel length, and 50, 75 are the plotting limits to change colors.

According to the author, You should have a high fully charged value, meaning high green bars for a fully charged buy. This would require running only the "buy" version. You would also have a high fully charged value, meaning high green bars for a fully charged sell also. Is this something you can help me with? Thanks in advance.

@hockeycoachdoug Now that's a great clue. Of course, this code will not be an exact match, given that they very likely use a modified version of the donchian channel.
Code:
declare lower;

input direction = {default "buy", "sell"};
input short_donchian = 10;
input long_donchian = 50;
input high_value = 75;
input low_value = 25;
input averagelength = 2;
input averagetype = averagetype.SIMPLE;

def hh = highest(high,long_donchian);
def ll = lowest(low,short_donchian);
def strength;
switch (direction) {
case sell: strength = movingaverage(averagetype,100*(close-ll)/(hh-ll),averagelength);
default: strength = movingaverage(averagetype,100*(hh-close)/(hh-ll),averagelength); }

plot RS = strength;
     RS.setpaintingstrategy(paintingstrategy.histogram);
     RS.assignvaluecolor(if rs > 75 then color.uptick else if rs > 25 then color.yellow else color.downtick);
     RS.setlineweight(3);

plot high_strength = high_value;
     high_strength.setdefaultcolor(color.gray);
     high_strength.setpaintingstrategy(paintingstrategy.horizontal);
     high_strength.setstyle(curve.short_dash);
plot low_strength = low_value;
     low_strength.setdefaultcolor(color.gray);
     low_strength.setpaintingstrategy(paintingstrategy.horizontal);
     low_strength.setstyle(curve.short_dash);
I think this is the the closest I can reverse-engineer it without actually seeing the other indicator's code. In all honesty, though, if their little code differences are the only key to profitable v.s. unprofitable, there's bigger problems to worry about. A quote I read once, "Those who can trade do and those who can't trade sell indicators", or something like that. Really makes one think about another saying, "there's a market for everything".

Eye-Candy of both directions -


Merry Christmas to you!
 
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