ActiveTrader 2011-02 | PnF Double Top [Rev.A] by Cone

Rev.A - Removed condition for WealthLab.ChartStyles.Community to avoid compile error for customers that do not have that library installed.

This strategy was featured in the February 2011 issue of Active Trader magazine. 

System Concept:

Uses Point & Figure double-top breakouts to enter trades in the direction of a bullish dominant trend.  A number of exits are incorporated to define/reduce risk as well as to capture profit.

Entry rules:
Enable long trades when the dominant trend is up. 

  1. Buy when a double-top signal breaks the high of a consolidation pattern (a pattern that is entered by a column of O's, trades more or less sideways, and then reverses to the upside). 
  2. If stopped out, re-enter a continuing trend on a double-top buy signal.

Exit rules:

  1. Exit on any double-bottom sell signal.
  2. When entering from a consolidation pattern, the low of the pattern minus one box is the initial stop-loss level.
  3. When re-entering a trend, the initial stop-loss is placed at the double-bottom sell level. 
  4. When an X column completes four times the reversal amount (4 x 3 = 12), apply a closing-basis trailing stop at the center box of the current column. If the number of boxes is even, use the center box minus one box.

Special system notes:

  • The article stated to "allocate 2 percent of account equity per signal".  Specifically, set the Position Sizing control to 2% Max Risk sizing. 

Strategy Parameters:

Log Method Point & Figure (PnF) method to treat Box Size parameter as a linear movement (0) or percent movement (1)
Box Size The minimum movement required to draw another box in a PnF chart.
Reversal Boxes The number of boxes of price movement required to reverse the trend in a PnF chart.  Note that the script is hard-coded such that only the Closing value of a bar affects the PnF chart signals.

Important Notes!   

  1. PnF settings for the Strategy are controlled by the slider values, not by the Point and Figure ChartStyle dialog settings, which are independent and may differ. 
     
  2. You can select any Chart Style to run Point and Figure strategies, however, the Strategy feedback is most pleasing using Candle or OHLC. A routine identifies the bars that contribute to adding PnF boxes: 
    • blue bars: prices that contribute to adding X's
    • fuchsia bars: price events that add O's
    • light grey bars: bars ignored by the PnF Strategy
       
  3. The light blue background indicates that the current primary trend is bullish.  Using the Point & Figure ChartStyle, you can observe the primary (and intermediate) trendlines by selecting "45° Trendlines" in the ChartStyle Settings.
      
  4. When switching between Chart Styles, you must re-run the script by striking F5 or clicking "Go" to repaint the chart.
Author: Cone
Category: Trend Following
Creation Date: 7/29/2017
Licence: Freeware
Availability: Globally
Instructions for Script Download
  1. In Wealth-Lab client software, open the Strategy Explorer (Ctrl+O)
  2. Click the "Download..." button
  3. Click "Begin Download"