Julia s Notes from Detroit

Transcription

1 Julia s Notes from Detroit September 2007 Overview of TeleChart and Blocks... 2 Downloading and Installing Blocks version Opening Personal Chartist... 4 Add Study... 5 Sorting by Stochastics... 5 Sort by the Mini-Chart... 6 Scanning for Stochastics... 6 Testing a Strategy... 7 Time to Trade!... 8 Changing the Time Frame... 9 Creating a WatchList Industry Based Studies Strategy Testing based on Industry Rankings Industry vs. All Other Industries Strategy Testing Based on Industries Charting Financials Scanning Financials List and Market-based Studies The Dow Industrials Now vs. the Late 90 s Adding to a WorkSpace Basics of Reading a Block Diagram Creating a New Plot Creating a Strategy Condition from Scratch Creating a Code Block Using Multiple Conditions to Scan for a Bullish Engulfing Pattern Creating a Sequence Set Strategy Condition WatchList Columns and Sorting in Blocks The Rest of the Day Resources and Downloads

2 We taught two classes in Detroit over the weekend. A big thanks! to all of you that attended. The following notes cover what we did in the classes. I hope you find these notes helpful in reminding you what we did together. To download some of the things we created in class: Link to Downloads from Class Overview of TeleChart and Blocks We start by explaining the features of the two programs available from Worden. Specialized Product refined over 20 Years Sort, Scan, Organize and Analyze the US Stock Market Daily Market Commentary from Don and Peter Worden Fast Scans/Sorts for current data Charting with 14 Technical Indicators Including 3 proprietary indicators Platinum Community of Chat, Clubs and Sharing Free program, you only pay for the data service (Gold or Platinum) Data Analysis Software Ultimate Cruncher Slice and Dice Data! Easily trade graphically on the chart Strategy testing Scan for any condition (or series of conditions) being met now or at any point in the past. Charting w/ the largest library of indicators and studies ever (hundreds and growing!) Chart, scan, strategy test current and historical financial information Display and interact with data without limitations endless customization possibilities Free program, you only pay for the data services you want 2

3 We then detail the different data feeds and pricing available for both programs TeleChart Gold 25 years of daily history on US stocks and indexes plus 20-min delayed updating $ per month $ for 1 year $ for 2 years TeleChart Platinum 25 years of daily history (6-months of intraday history) on US stocks and indexes, plus realtime streaming updates $ per month $ for 1 year $1, for 2 years + exchange fees Super Combo Bundles TeleChart Gold + Blocks Strategy Trader $49.99 per month $ for 1 year Blocks Strategy Trader Massive 25yr historical daily databank Over 8,000 US Stocks, Indexes and ETFs Up to 14yrs of historical financial information Includes automatic daily updates $ per month $ for 1 year $ for 2 years Blocks Mega Minute Over 4 years of historical minute history Minute pricing for over 8,000 stocks Create strategies, rank, plot and calculate against 3 billion minutes of data Includes streaming real-time updates $ per month $ for 1 year $ for 2 years +exchange fees Blocks Fund Investor Over 18 years of history Over 19,000 mutual funds broken into 100s of WatchLists based on families and categories Includes daily updates $ per month $ for 1 year $ for 2 years TeleChart Platinum + Blocks Strategy Trader + Mega Minute Pack $1, for 1 year (plus exchange fees) If you have TeleChart Gold already Add Blocks Strategy Trader Only $19.90 per month OR $ for 1 year If you have TeleChart Platinum already Add Blocks Mega Minute Only $24.99 per month OR $ for 1 year (plus exchange fees) 3

4 Downloading and Installing Blocks version 2 We then went through the easy steps of downloading and installing the free Blocks program. 1) Point any browser to 2) Click the Blocks Download Now! graphic on the web page 3) Click the Download button that appears on 4) A dialogue box appears giving the option to save the file. Choose Save. 5) In the new dialogue box you are asked where to save the file. Click the Desktop icon on the left (usually under Recent on the left of the window) 6) Click SAVE in the lower right corner of the window 7) You will then see it download in the small install file 8) When it finishes you should see a BlocksInstall icon on your desktop. It looks like a yellow box with a CD-ROM in front of it. You can also, when it finishes downloading, choose Run. Otherwise, double click the file from your desktop. 9) This should install Blocks version 2 to your computer. When it finishes you will see a Blocks shortcut icon on your desktop. Double-click it and open the program. 10) It will automatically update all the data services you are subscribed to. Be patient, this initial download can take a while. Subsequent downloads should only take a few moments. You don t have to do anything to make it download the data. It is automatically done by the program when you open it. Opening Personal Chartist After opening the program you should see an Open Workspace dialogue box showing you the WorkSpaces pre-built for you and available in the WorkSpace Library. Choose Personal Chartist from the list. This should open the Personal Chartist. You will see a Watch List, Chart, Blocks Chat, and Google Finance Company Info Browser in this WorkSpace. Personal Chartist is a WorkSpace that was built for you and put in the library. You can choose any WatchList from the WatchList Picker in the upper-left corner of the WorkSpace by clicking the blue down arrow next to the active WatchList name. If you are a TeleChart user you should notice your Personal 4

5 WatchLists from TeleChart can be chosen and displayed here. You can click on any ticker displayed in the WatchList, and your Chart will display that ticker. If you click the Google tab (above the chart to the right of the chart tab) you will see the Google Browser has automatically navigated to the Google Finance web site for that ticker. Everything is synched together! Follow this link for a nice video on Personal Chartist: Video: Baby Steps for Getting Started with Blocks We want to add Stochastics of Price so just start typing STOCHASTICS on your keyboard. Notice that the list of studies reduces as you type. It is automatically filtering the list based on what you are typing. Choose Stochastics of Price from the list. You now should have a Stochastics of Price on your chart. You can change the settings of the Stochastics by clicking the name in the legend (brining up the QuickEdit box). If you want to learn how Stochastics is calculated, check out this short video (click link below). Understanding Stochastics Online Video Add Study We start by adding a Stochastics of Price study to the chart using the Add Study button (green plus sign in the top left of the chart). When you click the Add Study button you will see the extensive list of pre-built indicators and studies in the Study Library. Sorting by Stochastics Once the stochastics is plotted you can sort your WatchList by the last stochastics value. Left click on either the actual Stochastics line (white line) or the name in the legend. Drag this from the chart to the WatchList list of tickers and let go. This brings up a Create Column window. Keep the Type as Last Value and change the name to Stoc and click OK. You will now see the column appear and populate with each stock s last value 5

6 for their particular value for their stochastics of Price. You then can left-click the column header once or twice to sort the column in either descending (arrow down) or ascending order (arrow up). Sort by the Mini-Chart Click and drag the stochastics again from the chart to the WatchList and drop it there. Change the Type to Mini-Chart and the Name to S- Chart. This will create another column you can sort by and showcases a small 50-bar chart of the stock s stochastics. This makes it easy to visually scan down the list and see each stock s own stochastics. Click on any one of them to see their chart. Check out these video bites on sorting: stocks to the minute or the tick Sort high-action Drag and Drop sorting with Mini-Charts Scanning for Stochastics Stochastics tells us where the current close falls in the trading range. If we want to buy low and sell high we might want to buy when Stochastics has a value less than twenty. Click on the Strategy tab next to the WatchList tab. Check the Scan Only option. To add your condition, click the add condition button (green plus next to Strategy Conditions). Go to the Indicators folder and choose Stochastics. This adds the Stochastics condition to your Strategy. Left click on the strategy to QuickEdit it. Change Stochastics %K is from Greater Than to Less Than. Change the Value from 70 to 20. You can close the QuickEdit by clicking away from it or clicking the red 6

7 X in the upper right corner of the box. Note your chart. You should see marks telling you when your condition was true and when Stochastics condition stopped being true (started to be false). You can now run your Strategy (to find stocks with a Stochastics less than 20) by clicking the green funnel next to the Strategy tab. You should see it run from 0% to 100%. Once it does your Strategy is complete. Click the Results sub-tab under Strategy to see a list of all the stocks in the current WatchList that have a Stochastics less than 20! Click any of them to see their charts (and confirm their Stochastics). You can also scroll through the list by holding down the CTRL key on your keyboard as you press the SPACE BAR. If you Click the By Date sub-tab, you can move the vertical yellow Date Pointer on your chart to any date and you will see the stocks that met your Strategy on that date. It didn t just scan for the stocks that are currently meeting your Strategy; it scanned for every time a stock met your Strategy! Here is a great video on scanning for Stochastics: Extreme Stochastics for 10-days in a row Video Testing a Strategy The Strategy feature also allows you to test trading strategies. Go back to the Conditions sub-tab and uncheck the Scan Only option. You should now see four separate fields. You can now add conditions to buy, sell, sell short and to cover shorts. Click your current Stochastics Buy and change it from Less Than to Crossing Up Through. Click the Add Condition next to Sell and add another Stochastics condition from the Indicators folder. Left click the new Sell condition and change the Greater Than to Crossing Down Through and the 70 to 80. Look at your chart. You should see a BUY marker when Stochastics crosses up through the 20 and a SELL 7

8 marker when the Stochastics crosses down through 80. Add a second SELL condition by RIGHT-CLICKING your current SELL condition, going to OR CONDITION then TRADE STOPS and clicking Trailing Stop. Now you will sell if Stochastics crosses down through the 80 or if you violate an 8% trailing stop. You can change the percentage of your trailing stop via the QuickEdit (click the condition and change the value). This second sell condition should minimize the drawdown of your trades. Drawdown is the peak-to-trough decline during the trade period. A drawdown is from the time a retrenchment begins from the high in the trade to the valley of the retrenchment. Think of it as how much you give back during your trade. Most people like to minimize this number if only for emotional reasons. Click the Test Strategy funnel to run your strategy on your current WatchList. Once it finishes (gets to 100%) you can click the Performance Tab to see the statistics of your strategy. Congratulations, you just tested your first Strategy! Follow this link for a nice video on building strategies Video: Build your first moving average strategy Time to Trade! We looked at our results and decided it was time to start trading off the results of our first Strategy. I clicked the TD AMERITRADE Login button at the top of the WorkSpace. If you already have a TD account, use your regular account login. If you do not have one yet click the Open a New TD AMERITRADE Account link on the screen that appears OR go to to open a new account. Once I logged in, I reviewed the stocks under the Results tab. When I saw something interesting I clicked the Trade button at the top of the chart. This opened the OneTouch Trader on my chart. By default it puts a potential BUY of 100 shares at the latest price available. I changed the number of shares in the Qty field on the right. 8

9 If I want to change the limit price I can either manually enter the price on the right OR I can move (click and drag) the slider itself (the orange box between the chart and the white TDAmeritrade order information screen). As soon as I was happy with the limit level for my Buy, I clicked the lightening bolt icon on the slider to submit my buy limit order. I could also click the Place Order button in the TDAmeritrade order info screen or even change it from a limit to a market order. TD AMERITRADE, Inc. and The Blocks Company, LLC are separate, unaffiliated companies and are not responsible for each other s services and products. Brokerage services provided exclusively by TD AMERITRADE, Inc., member SIPC. This submits my trade order into my TDAmeritrade account. I just placed a real trade! I continued to look through my results and used the OneTouch Trader to place my orders. I can change my WatchList to TDAmeritrade Current Positions to review all of the stocks currently open in my TDAmeritrade account. I can also login into my optionsxpress account under the Brokers menu at the top of the screen. This allows me to trade inside my optionsxpress account. Don t forget, when you place your FIRST OneTouch tm trade in either a TDAmeritrade or optionsxpress account, you will receive $100 credit in your Worden account. You can use this credit to buy service, books, videos or any Worden product or service. Follow this link for a video on OneTouch Trading: Sell a stock directly from your chart Follow this link for a nice video: Video: Track your TD AMERITRADE positions on your chart Changing the Time Frame I then changed the time frame of my chart from 1 day to 1 hour. This made each bar show 1-hour of trading. Intraday time frames are only possible if you have a subscription to the Mega Minute Pack. If you want your data to stream real-time, be sure to click the box to the left of S in that time frame picker. I noted that my stochastic now measured where a stock closed in its 12-hour trading rage (vs. 12-day range). I went back to the Strategy Tab and clicked the Conditions sub-tab. I then changed the main time frame of the strategy (at the top of the conditions window) to 1 Hour. I ran the Strategy again on the new hourly Time Frame. Once it got from 0% to 100% I clicked the Performance Tab and checked out how the strategy worked on the last 4.5 years of hourly data. You can test your Strategies in any time frame by setting your Data to Test and the time frame of your conditions. 9

10 I went back to the Strategy Tab and clicked the Results and reviewed all the stocks in my list that have met my buy condition but have yet to meet my sell conditions. When I saw something I thought looked good, I used OneTouch Trader to place a trade on them. I repeated all of the steps (changing the chart, condition and Data to Test) for many time frames. I tried Weekly (which is a true weekly Monday to Friday time frame) and 15 minute time frames. Each time I ran the Strategy again and looked at the Performance Summery and the Results (and traded some of the stocks that showed up in the results.) Creating a WatchList Next, we created a personalized WatchList. First, I clicked the Add Watchlist Tab button and selected Add Tab for New WatchList. I then named the WatchList Our Picks and selected a green fedora from the image drop-down menu. I confirmed that I would like to add a flag column for the WatchList and began to manually add symbols to the list. I made stock selections by typing either ticker symbols or company names in the Add Symbols to WatchList dialog box. I ended up with five manual stock selections; each had a green fedora in the Flag column adjacent to Company Name. I then looked at the WatchList Main List. Each stock that belonged to Our Picks was marked with a green fedora. I added stocks to the Our Picks WatchList by double-clicking the Flag field next to the stocks I wanted to add. I then sorted the Nasdaq 100 by members of Our Picks by left-clicking the Flag column header. Each member of Our Picks was instantly moved to the top of the list. Last, I confirmed that my newest additions to Our Picks were included in the list by clicking the green fedora sub-tab under WatchList. Here is a link to a video on creating your own WatchLists: What's New in the July 6 build Industry Based Studies I switched back to the WatchList tab (from the Strategy tab) and changed the time frame of my chart to 1 day. Next we spent some time with a few of the industry-based studies 10

11 available in the study library. I clicked the Add Study button and then the Industry Analysis folder. There I clicked and added the Symbol Rank vs. Industry study to the chart. I clicked the QuickEdit for the plot and noted it was using a 50-bar period (50-days on a daily chart) and comparing the stock s 50-day percentage performance to the 50-day performance of the stock s sub industry. You can change these setting to cover any time period and from Sub to Main industries if you like. The plot showed us how the stock s price performance ranked versus all the other stocks in its sub industry. A rank of 90 means the stock s 50-day percentage performance was higher than 90% of the other stocks in the industry. A rank of 20 means the stock s 50- day performance was higher than only 20% of the stocks in the same industry (80% of the stocks performed better than that stock). We scrolled through many stocks (using CTRL and SPACE bar) and noted not only where they ranked in their industry now but how their ranking changed over time. If we found some interesting stocks we placed trades on them using trade slider. I then changed the time frame of the chart to weekly, hourly and 10 minutes so we could see how the stocks ranked against all of the other stocks in their industry in these time frames. Strategy Testing based on Industry Rankings The next logical thing to do was to scan for stocks with certain rankings. I clicked on the Strategy tab to bring it up. I clicked the Conditions tab to bring up our conditions. I then right-clicked the Strategy tab and chose to clear the Strategy conditions. A confirmation screen appeared asking if I wanted to save my previous Strategy, I chose NO. I checked the Scan Only option and clicked the Add Condition button next to Scan Conditions. In the Industry Analysis folder I chose Symbol Rank vs. Industry. Using QuickEdit I changed the condition s test value to 90. It already was using 50 days and the sub industry. I went to the Settings tab and changed the test period to 3 months. I then clicked the Run Strategy button. Once it went from 0 to 100, I looked at the results. This gave me a list of all of the stocks in the WatchList that right now have a rank of 90 or higher for their Symbol Rank vs. Industry. I found all of the best performing stocks in their industry! Don t be afraid to change the time frame of the condition and the data to test for the strategy to find stocks at a certain ranking in other time frames. Follow this link for a great video on industry-based strategies Video: 5 Stocks Leading the Charge 11

12 Industry vs. All Other Industries I then clicked the Add Study button and from the Industry Analysis folder added the Industry Rank vs. All Industries plot. I used QuickEdit to change the period to 50 and the Industry to Main (to match our other plot). This plot instantly showed us how the stock s industry ranked against all the other industries in the market. We clicked on the WatchList tab and scrolled through many stocks. Instantly, using these two plots we could tell how the stock ranked in its industry and how its industry ranked against all the other industries. Instant context for the price performance of the stock! I then went back to the Strategy tab and then went to our conditions. I right-clicked the Rank vs. Industry condition, went to AND condition then to Industry Analysis folder and added the Industry vs. All Industries condition. This changed our strategy so it would look for when two conditions were both true. I used QuickEdit to change the new condition. I set the Number to 80. I then ran the strategy and went to the results once it finished. We then reviewed the new results. All of the stocks were ranked 90 or higher in their industry AND they were in an industry that ranked 80 or higher vs. all the other industries. We were looking at the best performing stocks in the best performing industries! Strategy Testing Based on Industries Lastly we created a strategy based industries. I set the strategy as follows. You can download this strategy from the same place you downloaded these notes. It is called Industry Strategy Test. Buy Symbol Rank vs. Industry (period 50, sub industry, greater than 90) AND Industry Rank vs. All Industries (period 50, sub industry, greater than 75) Sell Symbol Rank vs. Industry (period 50, sub industry, less than 90) OR Industry Rank vs. All Industries (period 50, sub industry, less than 75) Under setting we have a test period of 1 year 12

13 Here was the idea we buy when the stock becomes one of the best performing stocks in the best performing industries and we sell if it EITHER falls below 90 vs. its industry OR if its industry falls below 75 vs. all other industries. After the strategy ran we went to the Performance Summary and noted how our idea performed over the last year for the stocks in the WatchList. You can change the condition settings with their Quick Edit and test not only Best of the Best but Best of the Worst or Worst of the Best or even Worst of the Worst to see how they faired. Don t forget to try different time frames as well. Charting Financials Next we explored using financials for charting historical financial data. I clicked the Add Study button and added the following plots. I used the type-in feature of the library to quickly find these plots. For example, when I wanted to add Earnings, clicked Add Study and typed Earnings to quickly find the study and add it. Here are the ones we added in class: Earning ($Millions) 1-Yr Sales ($Millions) 1-Yr Percent Shares Held by Institutions We then scrolled through and looked at a bunch of stocks. With these plots we could quickly see the stock s earnings history. It was easy to see if the stock s earnings were increasing or decreasing at any point in time. We got the same information on sales from the sales plot. The Percent Shares Held by Institutions plot made it easy to tell if the institutions were increasing our decreasing their holdings in the stock. Instead of looking at financials in a static table we could instantly see it graphically on the chart. We not only saw their current financials, we could see how those financial numbers changed over time. I then added, with Add Study, the Hemscott Criteria Rank vs. Industry plot. Using QuickEdit I changed the criteria to P/E ratio. This plot showed us how the stock s P/E 13

14 ratio ranked against all of the other stock s in its industry. Stocks with a high ranking had high P/E ratios compared to other stocks in their industry. Follow the link below for a video on charting Financials Will Microsoft follow earnings to a new high? Video Scanning Financials I then used Strategy on the financial data. Here are the conditions I used. You can download this strategy from the same place you downloaded these notes. It is called Earnings Test. Buy Criteria Raw History Change (Earnings ($Millions)1-Yr, Greater Than, 5%, # Bars True: 1, Bars to test: 3, Time Frame: 1 Month) Sell Criteria Raw History Change (Earnings ($Millions)1-Yr, Less Than, 0%, # Bars True: 1, Bars to test: 3, Time Frame: 1 Month) Test Period (under the settings sub-tab): 10 years Here was the idea we buy when the stock has a 5% increase in its annual earnings over a three month period and we sell when it has drop in its earning over a three month period. We looked at the Performance Summary to see how this idea worked on the stocks in the WatchList over the last 10 years. Follow this links to see videos using financial-based strategy: Video: Which Stocks are Institutions Trying to Sneak Into? The Most Undervalues Stocks in Each Industry Video List and Market-based Studies Next we explored some of the powerful list/market based studies available in the library in Blocks. All of the studies from this segment were from the Market Indicators folder near the top of the list after you press the Add Study button. I first added Watchlist Average (unweighted) which plotted an un-weighted average of any selected WatchList. Via Quick-Edit (left-clicking the plot or the name in the legend) I clicked the button to the right of the WatchList name. This instantly changed the WatchList used. 14

15 I closed that study and added Percentage of Stocks Above Moving Average. Quick- Edit let me choose the WatchList, time frame and MA type and period. This plot showed the percentage of stocks currently in the list trading above the chosen moving average. It was a great way to get a sense of the action for the entire list. Are more stocks getting above their moving average or are more failing to get above their average? I closed that study and added Count% New Lows. It could be changed, but we left the settings as they defaulted. This showed me when an abnormally large number of stocks in the NASDAQ 100 list all hit new lows in the same day. We compared the spikes in the indicator to the QQQQ chart and noted how spikes often happened when lows formed in the QQQQs. We expect this as many stocks bounce off lows and often a list will gain strength after a list-wide selling climax. Follow this link for a video on a list-based study: Video: This is not your grandfather's advance decline line The Dow Industrials Now vs. the Late 90 s Lastly we did something really neat. Instead of limiting our list-based studies that just use pricing data we used finacials on a whole list to analyze the current Dow bull market. We jumped (CTRL-J) to the Dow Industrial chart (DJ-30). We scrolled back to the 2000 high and zoomed out to catch the entire late 90 s bull market. 15

16 I noted how the Dow from 95 till the 2000 high has a very similar pattern to what is happing right now. It s making highs its never made before. I then added (from the Hemscott folder in Add Study) the Hemscott Criteria Watchlist Index. We kept the defaults of using the P/E on the Dow at the 75 th percentile. I noted how the PE for the 75 th percentile had doubled from 1995 to I then moved the chart forward in time to today so we could compare it to the last big Dow Rally. Unlike the rally that ended in 2000, this current rally in the Dow has P/E Ratios getting lower despite the rally of price. 16

17 Adding to a WorkSpace Next we decided to customize our WorkSpace by adding more to it. I started by taking advantage of my second screen. I clicked the Add New Frame button (box with a plus at the top of the screen just to the left of the TD Ameritrade login/out button). This created a new frame. I moved it to the other monitor and expanded it to fill the screen. I clicked the Start button to bring up the list of items I can add to my WorkSpace. I then proceeded to add all kinds of different charts, browsers, etc to the WorkSpace. Each time I added something I dragged and docked it where I wanted it. To drag a new object I grabbed and dragged it from its top tool bar. To dock it relative to another object, I dragged and held it over the object and used the docking hot spots to put it either above, below, to the left, to the right or tabbed on top of the other window. We saw how you can create a fully synched WorkSpace that instantly displays whatever information we want in the WorkSpace. Follow these links for videos on adding things to your workspace: Video: Table It: A Unique look at Rate of Change Video: Tools, Tools Everywhere: how to organize your workspace Basics of Reading a Block Diagram We then opened our first Block Diagram so we could learn what they were and how to read them. I click the QuickEdit for Price History and noted the MORE link. Clicking it brought up the properties and Block Diagram for the Price History plot. I can also bring this up by double-clicking the Price History plot to display its Block Diagram. We first noted the properties of the plot (upper right corner of the Block Diagram). There we changed the style of the plot to Candles from HLC Bar. We then turned our attention to the actual Block Diagram. We saw that the Prices block had two inputs. When given a symbol and a time-frame, the Prices Block went to the data feed and retrieved all of the historical 17

18 Prices for the symbol and time-frame. This series of dates and numbers fed into the Numeric Plot. This resulted in the green Price History plot on the chart. I then double-clicked the purple MovAvg 50 plot bringing up its Block Diagram. I explained that the green Price History plot fed an Exponential Moving Average Block. This block was also fed the number 50 into its Period input. The Exponential Moving Average Block transforms the dates and numbers it s being fed into a 50-period exponential moving average. The block is spitting out a series of dates and numbers to the Numeric Plot. These dates and numbers are the values of a 50-period exponential moving average of the Price History plot. I then used the Add Study button to add a MACD of Price to the chart. I clicked the MACD plot to display its Block Diagram. Together we walked through its Block Diagram and read how the plot was being calculated. We learned that the MACD plot was the difference of two moving averages with different periods. It was all in the diagram! I then talked about changing the block diagrams of plots downloaded from the library. I double-click the MovAvg 50 plot bringing up its Block Diagram. I leftclicked and drag from the BarChart Price History link out into a blank area in the diagram, released the mouse and choose Select Block & Connect. This bought up a list of all the Blocks that can be connected to the BarChart Price History 2 link. In the name field I typed BAR HIGH. I selected the Bar High block on the list and clicked the OK button. 18

19 This added a Bar High Block to the diagram. I then connect the Bar High output directly to the Numeric Plot to show how the plot became a plot of each bar s high. I opened the Block Diagram again and drew from the Bar High output and connected a Maximum Block. I connected the output of the Maximum Block directly to the Numeric Plot. The plot now showed the Maximum high for the period (feeding the Maximum plot). Lastly, I connected the output of the Maximum plot to the input of the Exponential Moving Average Block. I connected the output of the Exponential Moving Average Block to the Numeric Plot (Figure 16). I changed the Name and Legend in the properties box (top-right corner of the Block Diagram) to MA of Max Highs. This resulted in the plot called MA of Max Highs plotting a 50-bar exponential moving average of the maximum highs. I then right-clicked the new MA of Max Highs plot and chose copy. Next, I right-clicked on the chart and then clicked Paste in the chart. This pasted a duplicate of the plot (there are now two MA of Max Highs plots). I clicked the pasted plot to bring up its Block Diagram. I changed the Name and Legend to MA of Min Lows. I right-clicked the Bar High Block and chose the Replace option. From the list I selected Bar Low and clicked OK. This replaced the Bar High Block with a Bar Low Block. I right-clicked the Maximum Block and replaced it with a Minimum Block. I now see two plots in the price pane. One is the moving average of the maximum highs, the other the moving average of the minimum lows. The second step in learning Block Diagrams is to make changes to some of the plots from the library like I did with the MovAvg plot. Never be afraid of making changes to plots from the library. You can always delete your modified plots and bring the original down again from the library. There is no way to change or damage the studies that come from the library. 19

20 I used the Add Study button to bring down a WatchList Average (un-weighted) study from the library. I double-clicked the yellow plot to bring up its Block Diagram. I explained how the NASDAQ 100 Component Stocks Block feeds the List Average Block. The List Average Block then sends each of the symbols fed into a Price Block and a Percent Change Block (which comes back into the List Average Block). Once all the symbols are run through this loop, the List Average Block averages the price percent changes every day for the entire list of symbols fed into it. The output of the List Average Block is a series of dates and numbers with the average price percent change of the stocks in the list for every date. I connected the output of the List Average block directly to the Numeric Plot (Figure 18). After closing the Block Diagram the yellow plot showed the historical average percent changes for the list of stocks. By reconnecting the Output of the List Average Block to the CumulatorPercent Block and the Numeric Plot, the unwieghted cumulative average is restored. I also showed how I can take the input of the List Average Block (the one connected to the Nasdaq 100 Component Stocks) and drag it to the WatchList Picker of the Watch List tool. This changes the symbol list source for the plot to whatever WatchList I was displaying in the Watch List tool. Leaving the new WatchList average plot on the chart I then went to the Add Study button and added a Stochastics of Price study to the chart. I double-clicked the white stochastics plot and make a change to its Block Diagram. I right-clicked and removed the Prices Block and dragged the input for the Stochastics Block (which was connected to the Prices Block) and connected it to the yellow WatchList Average (unweighted) plot on the chart. This changed the Stochastics plot from a stochastic of price to a stochastic of the WatchList Average plot. I then added a P/E Ratio Study to the chart, I went back to the Block Diagram of the Stochastics plot and dragged the input for the Stochastics plot to the P/E Ratio plot making the stochastics of the P/E instead of a stochastic of price or the unweighted WatchList Average. 20

21 Creating a New Plot The third step in learning Block Diagrams is to build a few plots from scratch. I close all the panes on the chart but the pane containing price. I right-click on the chart, choose Create New then Plot in New Pane. I give it the name Daily Volatility. I connect the Numeric Plot to a Ratio Block. I connect the Input1 of the Ratio Block to a Bar High Block. I connect the Bar High input to the Price History from the chart. I connect the input2 from the Ratio Block to a Bar Low Block. I connect the input of the Bar Low Block to Price history as well. Once the Block Diagram is finished we see green plot in the new pane showing the daily ratio between the Price History s high and low. I edit the new plot s Block Diagram again and take the output of the Ratio Block and add and connect it to a Moving Average Exponential Block. I connect the output of this Block to the Numeric Plot. This results in the new Daily Volatility plot showing the exponential moving average of the ratio of highs and lows for the Price History plot. I then created a second new plot from scratch. I clicked the Create a New Plot in New Pane button the chart (the first button to the LEFT of the time frame picker on the chart-looks like a box with a star in it). I named the new plot Sales Minus Cap. I connected the Numeric Plot to a Difference Block. I connected a Sales Block to the Input1 of the Difference Block. I connected a Capitalization Block to the Input2 of the Difference Block. I connected both inputs for Sales and Cap to the WatchList in the WorkSpace (to get a symbol). 21

22 In the properties of the Sales Less Cap plot I changed the style from Line to Bar. I closed the Block Diagram/Properties window. The Sales Less Cap plot is now a bar chart of the difference between the sales and the Capitalization of the selected stock. I right-click the scale display (far right of the pane) in the pane for Sales Less Cap and choose Scaling Method then More Properties. This brings up the properties of the scale display for the plot. I change the Scale Mode from AutoScale to CenteredAuto (with zero being the number in the Center Value property). This forces the plot scale to use zero as the center of the scale in the pane. Creating a Strategy Condition from Scratch In the same way we used the Block Diagrams to make plots from scratch; we can make System conditions from scratch. We built two conditions from scratch based on the idea of our study above. We want to buy when the sales becomes greater than the capitalization. We want to sell when the sales becomes less than the capitalization. I right-clicked on the Strategy tab and chose the Clear Conditions option. I then went to the settings tab and made the test period 10 years, I changed our WatchList to Standard and Poors 500. I clicked the add condition button next to Buy, went to add condition and chose New Condition. This put a condition labeled Condition under Buy; I double-clicked it to open its Block Diagram. I built the diagram illustrated here (using the Sales, Capitalization and Crossing Up Through Blocks.) I changed its name to Sales Becomes Greater than Capitalization. I closed the Block Diagram, right-clicked and copied the new condition. I clicked the add condition button next to Sell, went to Add Condition then Paste. I opened our new pasted condition and changed the name to Sales Becomes Less Than Cap. I replaced (rightclicked) the Crossing Up Through Block with a Crossing Down Through Block. I created two new conditions from scratch. Run the Strategy and check out its winning percentage! I made this Strategy downloadable from the same place you downloaded these notes. It is called Sales vs Cap. Creating a Code Block During class I showed that you can create your own code blocks by right-clicking in an empty area in any Block Diagram and choosing create code block. You can create a code block in either VB or C#. Follow these links to watch videos on creating code Blocks: Video: VB.net Code Block to Color down Mondays VB.net exercise to access QuickEdit from your codeblock Video 22

23 Using Multiple Conditions to Scan for a Bullish Engulfing Pattern Next, we created a scan to find stocks that have completed a Bullish Engulfing Candlestick Pattern. First, we changed the style of the Price Chart from HLC Bar to Candle using the QuickEdit menu for Price History. Then, we defined the three essential Price characteristics for our pattern. First, Price must be in a downtrend. Second, yesterday s candle must have been a down day (Close was below Open). Third, the body of today s candle must engulf the entirety of yesterday s candle (today s Open must be below yesterday s Low AND today s Close must be above yesterday s High). In addition to the Price criteria, we also specified that all of this activity had to take place on high Volume. We entered these conditions to create a Strategy Test within the Strategy Tab. You can download this strategy from the attachments for these notes. Creating a Sequence Set Strategy Condition We also reviewed the ability to create Buy or scanning conditions based on a series of events. Instead of using AND or OR to tie conditions together, you can use AND THEN logic when you right-click and add another condition. You can right-click any sequence (float your mouse over the entire sequence until the whole sequence becomes highlighted) and choose Properties. You can set the Minimum # bars between to any number to set a minimum number of bars allowed from one event in the sequence to another. Changing the Span in Bars property limits the number of bars you will allow for the sequence to consummate before you abandon it. 23

24 You can download and try some of the sequences I ve created. At the end of these notes is a link to a post I made for your class that includes attachments you can download. We created a scan for stocks that have completed a Double Bottom Pattern together in class. In order for the pattern to be complete, four total events must take place. Event 1: Price must make a new low on high Volume. Event 2: Price must make an intermediate high. Event 3: Price must make a new low that is similar in value to the previous low, and this must occur on less Volume than the previous low. Event 4: Price must make a new high that surpasses the intermediate high. 4 1a 2 3a 1b 3b Here is what the Strategy Conditions looked like. Have fun creating scans for chart patterns on your own! 24

25 WatchList Columns and Sorting in Blocks You have the ability to create columns of data which can be sorted. Here is an example to demonstrate the feature. Rightclick to the right of the Company Name column go to Add then to Numeric Column. This will open a new Block Diagram. Connect the following Blocks to create a column that reveals the percent change of the closes of price for the stock. If you right-click the column you can sort your WatchList by this data. If you right-click the column you can change the Block Diagram or even make a diagram to dictate the color scheme used for both the background and foreground of the column. You can download my version of this column for your use. It will be available via the Resource link provided at the end of these notes. I call it Price Percent Change Column. To color the background of the cells in your column, make these additions to the Block Diagram above. Connect the Column Symbol to a Close Block. Connect Close to a Rate of Change Percent Block. Connect the Rate of Change Percent Block to a Last Value in Series Block. Connect this to the Column Data Block. You can then close the Block Diagram. You should see a new Column to the right of Company Name. It will have the 1-period Rate of Change Percent for the stock. If you left-click on this new column head you can QuickEdit the Column and change the time-period of the data (to say 2- week or 1-month). You can also change the period for the percent change measurement. Connect the output of Last Value in Series to a Greater Than Block. Connect the Greater Than Block to a T/F Color Block, and connect that to the Back Color Block. Now if it is true that the Price Percent Change values in the column are greater than zero, the background will appear green. If the values are not greater than zero, the background will be red. 25

26 The Rest of the Day We then spent the rest of the day playing around with different strategy tests, plots, time frames and we kept on trading. Thank you for coming to our class, and we hope these notes help you remember some of the fun things we did. Resources and Downloads Sales for ordering: (800) Technical Support is available via telephone, live chat and . Their hours are 9AM - 9PM EST through the week, and 9AM - 3PM Saturday by ing support@worden.com or calling To view or download the current Blocks User Manual follow the link below: Link to Blocks User Manual You can ask me or any trainer a question in the Ask A Trainer forum. Click the link below to go to that forum. Just login to the web site using your account information and click the New Topic button. Click HERE to go to ASK A TRAINER If you are not familiar with our message boards, be sure to follow the link below and watch the short video on how to get the most from our forums. Click HERE for the forum online video To watch all of the video bites on blocks: Blocks Video Bites Center To download a copy of Don Worden s RSMA Strategy PDF Link to Download RSMA Julia Oldenstadt Trainer Worden Brothers, Inc 26