I started with the idea that I would take the PDI-MDI crossover of anoptimized number as my basic buy and sell trigger.However, this number did not have to be zero and did not have to bethe same for entering long and entering short.After a lot of trial an error I decide -1, -3, or -5 would be my enterlong number and -5, -13, or -21 would be my enter short number. This makes sense since the market is biased to the up side, so enteringa little under zero would get us in a little earlier.Also down moves tend to be fast an extreme and this would only letus in short for larger, faster down moves which is what I wanted.Finally I wanted some way to reduce the number of false signals andI wanted to do that with directional movement indicatorsonly so this test would be completely uncorrelated with my other tests.
For long positions, I notice that most up moves started when adx waslow and that adx climbed during the move to a max andthen started to fall at the end of the move. Therefore, I thought anadx max and min for a buy signal would help reduce falsesignals. After some experimenting, I set the min at 8 and the max at21. I also noticed that most good buy points occurred when MDI and ADX were close together so I decided that the differencebetween the two should be small.After more experimenting, I decided on the following for my open longsignal:
Alert(Cross(Fml("Tema PDI - MDI"),opt1),13) AND
MDI(13) - ADX(13) <= 4 AND
MDI(13) - ADX(13) >= -2 AND
ADX(13) >= 8 AND
ADX(13) <= 21
To close my open long position I wanted the PDI-MDI to be less than opt1.
When a stock starts to drop, the MDI starts to rise, so I wanted theMDI to be greater than a certain number to close a position.Finally, since markets are biased upwards, I also wanted the 55 dayvariable moving average to be dropping before I closed the position.Therefore, the close long became:
Fml("Tema PDI - MDI") < opt1 AND
MDI(13) > 21 AND
LLV(Mov(L,55,VAR),5) = LLV(Mov(L,55,VAR),13)
To open a short position, I wanted the PDI-MDI to cross below a fairlyhigh negative number.
I wanted confirmation in thatthe adx was still fairly high when that happened. The answer was:
Alert(Cross(opt2,Fml("Tema PDI - MDI")),8) AND
ADX(13) > 34
To close the short position, I only wanted PDI-MDI to be greater thana certain positive number.
I don't like a lot of confirmations for closing shorts. With the biasbeing up, you need to close shorts fast.
My close Short and optimization became:
Fml("Tema PDI - MDI") > 13
Opt1: Min = -1 Max = -5 Step = 2
Opt2: Min = -21 Max = -5 Step = 8
That's it. Any comments or questions?