Julia s Notes from Scottsdale

Transcription

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

2 I taught two classes in Scottsdale 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 I started 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 I then detailed 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 (plus exch fees) Super Combo Bundles TeleChart Gold + Blocks Strategy Trader $ per month $ for 1 year TeleChart Platinum + Blocks Strategy Trader + Mega Minute Pack $1, for 1 year (plus exch fees) If you have TeleChart Gold already Add Blocks Strategy Trader $ per month OR $ for 1 year If you have TeleChart Platinum Add Blocks Mega Minute $ per month OR $ for 1 year (plus exch fees) Blocks Strategy Trader >Massive 25 year historical daily databank >Over 8,000 US Stocks, Indexes and ETFs >Up to 14 years 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 (plus exch 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 Canadian Investor >Over 11 years of history >Toronto Stock Exchange (and Venture) >Over 11 years of historical financials >Indexes and Industry classifications >Includes daily updates $ per month $ for 1 year $ for 2 years 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 the small install file 8) When it finishes you should see a BlocksInstall icon on your desktop. When the download has finished, you can either select Run within the dialogue box or 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. Personal Chartist is a WorkSpace that was built for you and put in the library. When Personal Chartist loads, you will see a WatchList, Price Chart, Blocks Chat, Google Finance Company Info Browser, and Worden Market Talk Forum within this WorkSpace. 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 WatchLists from TeleChart can be chosen and displayed here. 4

5 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 S-T-O-C-H 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 started by adding a Stochastics of Price study to the chart using the Add Study button, which is located in the top-left corner 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. 5

6 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 plot (white line) or its name in the legend. Drag this from the chart to the WatchList 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 most recent Stochastics of Price value. You can then sort the stocks in the list by their Stochastics values. Left-click the column header once to sort the values in descending order (arrow down) or twice to sort the values in 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 will showcase small 50-bar charts of the stocks Stochastics. This makes it easy to visually scan down the list and see each stock s individual Stochastics pattern. Click on any stock in the list to view its Price and Stochastics of Price charts displayed in the main Chart area. We also created a Mini-Chart of Price. In order to create a Mini-Chart of Price, left-click the Price History in its legend, and drag to the WatchList. Within the Create Column dialogue, select Mini-Chart, name the column Price, and click OK. The new column you have created is also sortable! Check out these video bites on sorting: Sort high-action stocks to the minute or the tick Drag and Drop sorting with Mini-Charts 6

7 Scanning for Stochastics Stochastics tells us where the current Close of Price falls within a recent trading range. If we want to buy low and sell high, we might want to buy when Stochastics has a value less than twenty. On the chart, Stochastics values of less than twenty are highlighted in Red. In order to set up a scan that will identify all of the stocks in the Nasdaq 100 that currently have Stochastics values less than twenty, start by clicking on the Strategy tab next to the WatchList tab. Then, check the Scan Only option. First, make sure you have selected the Conditions Tab. To add the condition, click the green plus sign next to Strategy Conditions; this is the Add Condition button. 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 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 the 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. You should also see a progress tracker in the lower-right corner of the screen; it provides an estimate of the time it will take for the scan to complete. When the scan has finished, click the Results sub-tab under Strategy to see a list of all the stocks in the current 7

8 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 Creating a WatchList Next, we created three personalized WatchLists together. The first WatchList we created was intended to organize some of the results of our scan. To create the WatchList from the scan results, I viewed the list returned by the scan under the Results tab. I rightclicked in the column header area (next to Company Name) and selected Add Column, and from the subsequent menu, I chose Flag for New WatchList. In the Create New WatchList dialogue box that appeared, I then named the WatchList Buys and assigned it a green pin as a flagging icon. A new flag column appeared next to the Results of my scan, and I was able to double-click the flag column box next to any stock I wanted to add to Buys. To remove any stocks from my new WatchList, I double-clicked any of the pinned stocks, and I showed you how to access the new WatchList via the WatchList Picker! Next, I showed you how to create and keep a WatchList at your fingertips. First, I selected the WatchList tab. Then, I clicked the Add Watchlist Tab button and selected Add Tab for New WatchList. I then named the WatchList Sells and selected a red pin 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 8

9 Symbols to WatchList dialog box. I ended up with several manual stock selections; each had a red pin in the Flag column adjacent to Company Name. I then looked at the WatchList Main List. Each stock that belonged to Sells was marked with a red pin. I added stocks to the Sells WatchList by double-clicking the Flag field next to the stocks I wanted to add. I then sorted the Nasdaq 100 by members of Sells by left- clicking the Flag column header. Each member of Sells was instantly moved to the top of the list. Last, I confirmed that my newest additions to the list were included in by clicking the red pin sub-tab under WatchList. The last WatchList we created together was composed of a list of stocks I received in an from a friend. I started by selecting the Wat chlist Picker and choosing the Add New WatchList button. I then named the WatchList My Buddy s Picks and selected the Buddy image as its flagging icon. I noted that a new blank WatchList had been created. I opened my application, copied the list of stocks from my friend, and within the white space of the new blank WatchList right-clicked and pasted the list in. Each member of the list was flagged with the Buddy image. I also showed that lists of stocks from Blocks can be copied and pasted into other applications as well. When I switched back to the WatchList Main List, I noted the that there were now three flag columns one for the members of Buys, one for the members of Sells, and one for the members of My Buddy s Picks. It was easy to see which of the stocks in the Nasdaq 100 belonged to any of my personally created WatchLists! Here is a link to a video on creating your own WatchLists: What's New in th e July 6 build Time to Trade! We looked at the stocks in our Buys list and decided it was time to start trading. I clicked the TD AMERITRADE Login button at the top of the WorkSpace. If you already have a TD account, use your regular 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. 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. 9

10 Once I logged in, I reviewed the stocks within Buys. 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. 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. This submits my trade order into my TDAmeritrade account. I just placed a real trade! I continued to look through my list 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: Track your TD AMER ITRADE positions on your chart Testing a Strategy In addition to scanning for stocks that are meeting specified criteria, the Strategy Tab also allows you to back-test trading strategies. Go back to the Conditions sub-tab and uncheck the Scan Only option. You should now see four separate fields, which allow you to add conditions to Buy, Sell, Sell Short and to Cover Short. Based on the conditions you enter within these fields, Blocks will identify all historical trades that would have taken place and 10

11 produces a corresponding Performance Summary with key statistics to the strategy. We created a Stochastics-based strategy test together. To replicate it, left-click the Stochastics condition currently located in the Buy field. Within the QuickEdit menu, change Stochastics %K is from Less Than to Crossing Up Through. Click the Add Condition button next to Sell and add another Stochastics condition from the Indicators folder. Left click the new Sell condition and change the Stochastics %K is field from Greater Than to Crossing Down Through and the Value from 70 to 80. Look at your chart; you should see a Buy marker when Stochastics crosses up through 20 and a Sell marker when Stochastics crosses down through 80. During class, I added two more Sell Conditions. The first was a Trailing Stop, to limit the maximum Price retracements during trades; the second was a Stop Loss to limit losses if a trade immediately turned down after being opened. To add the Trailing Stop condition, RIGHT-CLICK your current SELL condition, choose OR CONDITION, then select TRADE STOPS and Trailing Stop. Repeat the process described but select Stop Loss as the end result in order to add the Stop Loss condition to your Strategy. Now you will still see Buy markers each time Stochastics crosses up through 20, and you will see Sell markers if either Stochastics crosses down through 80 OR if a trade violates an 8% trailing stop (price retraces more than 8% from the intra-trade high) OR if a trade violates a 4% stop loss. You can change the percentage of your trailing stop or stop loss via the conditions QuickEdit menus. Left-click one of the conditions to view its QuickEdit. 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 11

12 Video: Build your first moving average strategy The Summary sub-tab under Performance provides average statistics for all of the trades that turned out to be Winners, all of the trades that turned out to be Losers, and all of the trades in Total. We also looked at the By Symbol and All Trades sub-tabs. The By Symbol tab displays similar statistical information; however the data is displayed as averages specific to the individual symbols making up the WatchList. The All Trades tab shows detailed information for each trade that would have taken place, given the conditions of the Strategy. 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 range (versus its 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. I went back to the Strategy Tab and clicked the Results and reviewed all the stocks in the list that had met the Buy condition but had not yet met the 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 Summary and the Results (and traded some of the stocks that showed up in the results.) 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 12

13 industry-based studies 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 One Touch trading. I then added an Industry Rank vs. All Industries chart using the Add Study button. This plot gave us more information and context. We could instantly see how the active stock s industry has performed relative to all of the other industries in the market. Reading both charts in combination with one another allowed us to identify some of the best performing stocks in the best performing industry groups! I created sortable columns for both plots values by dragging the names of the plots from the legend to the white space of the WatchList area. These columns made it very easy for me to see how each stock had performed over the past 50 bars as well as how its industry had performed. Strategy Testing based on Industry Rankings The next logical thing to do was to scan for stocks with specific 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 we previously created. 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 then right-clicked the condition and 13

14 selected AND then added the Industry Rank vs. All Industries condition from the Industry Analysis folder. Using QuickEdit, I changed the condition s test value to 80. 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 AND a rank of 80 or higher for their Industry Rank vs. All Industries. I found all of the best performing stocks in the best performing industry groups! 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 Strategy Testing Based on Industries Lastly we created a strategy based on 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 Settings, set the test period to 1 year Here was the idea: we buy any stock that becomes one of the best performing stocks in the best performing industries and we sell that stock if its rank EITHER falls below 90 vs. its industry OR if its industry rank 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. 14

15 Interacting with Mutual Fund Data Next, we looked at an example Workspace that showed several ways to display and manipulate mutual fund data. In order to open the Workspace, I used the Open Workspace button on the toolbar then selected the My Computer library from the dialogue that appeared. I then navigated to the file named Mutual Fund Fiesta, which has been included as an attachment along with these notes. We saw several plots within the Workspace, including the NAV History for the selected Fidelity Fund, a Fund Rank vs. Family plot, a Fund Rank vs. Category plot, an Index of all the Fidelity Select funds, and a Relative Strength Line comparing the active fund to the S&P500. We also noted that several mutual funds related web browsers were tabbed behind the charts and discussed the colorized Percent Change columns within the WatchList tool. 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, I 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 P/E Ratio 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 over 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. We created Last Value columns for each of the plots and gave the columns corresponding names this was an easy way to keep the benefit of historical context to also see current values for each financial statistic. 15

16 I then plotted a 52 week Stochastics of the Percent Shares Held by Institutions. Using the Add Study button, I selected Stochastics (not Stochastics of Price). I then applied the calculation to Percent Shares Held by Institutions. I changed the Timeframe Picker on my chart to display Weekly Pricing data and using the Stochastics QuickEdit set the period to 52. I could tell from the Stochastics values whether the Percentage of Shares Held by Institutions was relatively high or low compared to the values over the previous 52 weeks! Follow the link below for a video on charting Financials: Will Microsoft follow earnings to a new high? Video Scanning Financials I then created a couple of Strategies using the financial data. I selected the Strategy tab. I then clicked the Add Condition button next to Buy, and selected the Criteria Raw History % Change condition from the Hemscott Financials folder. I repeated that process within the Sell area. Here are the specifics of 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 Earnings 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 16

17 Customizing Your 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 Chan ge Video: Tools, Tools Eve rywhere: how to organize your workspace 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 allowed me to change the list of stocks of which the average was calculated. 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. 17

18 This plot showed the percentage of stocks currently in the list trading above their moving average ( of a chosen period). It was a great way to get a sense of the action for the entire list. Are more stocks getting above their moving averages as time progresses 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 250 Day 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. I then changed the time frame of the chart to 1 Hour using the Time Frame Picker. Then, each bar of Price History represented 1 Hour of trading. I plotted the sister plot to Count% New Lows, which is called Count% New Highs. I changed two parameters within its QuickEdit. First, I changed New High Period from 250 to 100. Then, I changed Period Time Frame from 1 Day to 1 Hour. The plot recalculated based on these new parameters, and the result was a plot that represented the number of stocks in the list each hour that had made a new 100 Hour high. 18

19 We looked at several instances in recent history when this plot did a great job of spotting market tops. By looking for trends of increasing participation in rising Price, followed by decreasing participation, we were able to spot several such tops. Keep in mind that we did this analysis using the NASDAQ 100 component WatchList and QQQQ, its corresponding ETF. You could do similar analysis using other component WatchLists and their ETFs as well. 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 to only use pricing data we used financials 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. 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 it s 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

20 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. Basics of Reading a Block Diagram I started by explaining that everything within Blocks that processes data has a Block Diagram. We then opened our first Block Diagram so we could learn what they were and how to read them. I clicked 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 saw that the Prices block had two inputs. When given a symbol and a time- Block went to the data frame, the Prices feed and retrieved all of the historical 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 producing a series of dates and numbers for the Numeric Plot. These dates and numbers are the values of a 50- period exponential moving average the Price History plot. I then used the Add Study button to add a MACD of Price to the chart. I of 20

21 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 left-clicked and dragged from the BarChart Price History link out into a blank area in the diagram, released the mouse and chose Select Block & Connect. This brought up a list of all the Blocks that could 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. 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. 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 rightclicked 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 21

22 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- it clicked the Maximum Block and replaced 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. I used the Add Study button to bring down a Rate of Change (Net) of Price study from the library. I double-clicked the plot to bring up its Block Diagram. I explained how the historical 10 period Rates of Change were calculated. I explained that it is possible to feed the Rate of Change block with a variety of other types of data besides Price data. In order to illustrate this, I removed the Prices block from the diagram and dragged the input of the Rate of Change block to the MACD plotted in the bar chart area. Making this change to the diagram created a new Rate of change plot. Now, instead of viewing the Rate of Change of Price, we viewed the Rate of Change of the MACD. We can create Rates of change for any plot in a similar way! Creating a New Plot The third step in learning Block Diagrams is to build a few plots from scratch. I closed all the panes on the chart but the pane containing price. I right-clicked on the chart, chose Create New then Plot in New Pane. I gave it the name Daily Volatility. I connected the Numeric Plot to a Ratio Block. I connected the Input1 of the 22

23 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 was finished we saw a green plot in the new pane showing the daily ratio between the Price History s high and low. I edited the new plot s Block Diagram again and took the output of the Ratio Block and added and connected it to a Moving Average Exponential Block. I connected the output of this Block to the Numeric Plot. This resulted 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 i n New Pane button on 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). In the properties of the Sales Minus Cap plot I changed the style from Line to Bar. I closed the Block Diagram/Properties window. The Sales Minus Cap plot is now a bar chart of the difference between the Sales and the Capitalization of the selected stock. I right-clicked the scale display (far right of the pane) in the pane for Sales Minus Cap and choose Scaling Method then More Properties. This brings up the properties of the scale display for the plot. I changed the Scale Mode from AutoScale to CenteredAuto (with zero being the number in the Center Value property). This forces the plot scale to 23

24 use zero as the center of the scale in the pane. I could instantly see whether the values were positive or negative. In order to see which stocks in the WatchList had positive values and which had negative values, I created a sortable column of Sales Minus Cap values for the stocks in the WatchList. I dragged from the name of the plot in its legend to the white space next to the company names in the WatchList. I sorted for positive values by left-clicking the column header. Creating a Strategy Condition from Scratch In the same way we used the Block Diagrams to make plots from scratch, we made Strategy conditions from scratch. We built a strategy condition together that was ultimately used as a Buy condition and a Sell condition in a strategy test. Our Buy condition was when Sales minus Cap was crossing up through zero. Our Sell condition was when Sales minus Cap was crossing down through zero. 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 and 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 right-clicked the Sales Minus Cap plot we built together and chose Copy Logic. I then opened the block diagram for our new condition and pasted the plot logic by right-clicking and selecting Paste. I connected the Test Symbol to the Sales and Capitalization blocks and modified the plot block diagram so that it could function as a strategy condition. Here s what strategy condition diagram looked like. In order to be able to use this same condition for both our Buy and Sell conditions, we enabled the Crossing Up Through Value block to be Quick Edit Replaced. In order to do that, I right-clicked the Crossing Up Through Value block and selected Enable QuickEdit Replace. I then double-clicked the block. I changed the replacement list from the entire library of blocks to a manual list of blocks that I specified. In order to add 24

25 blocks to the manual list for QuickEdit replacement, I clicked Add and added all of the following to the list: Crossing Up Through Value, Crossing Down Through Value, Greater Than Value, Less Than Value, and Equals Value. After clicking OK, the strategy condition s QuickEdit menu included a drop-down that easily allowed us to replace Crossing Up Through Value with Crossing Down Through Value. We avoided having to create a second diagram by using the Enable QuickEdit Replace feature! 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 used the QuickEdit to choose Crossing Down Through Value. I created an entire Strategy 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- code block. clicking in an empty area in any Block Diagram and choosing create 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 Valuable Value Pointers! You can maximize your workflow by having Value Pointers do work for you. In order to add a Value Pointer to a pane, right-click the scale of the pane and select Add Tool, then Value Pointer. Without customization, a Value Pointer can be dragged with the mouse to any location along the scale of the pane in which is resides. I showed you how to use the Block Diagram of the Value Pointer to automate the number displayed by the pointer no matter what stock you re looking at. First, open the Block Diagram by right-clicking the Pointer; select Properties. As an example, I showed how to create a diagram that would cause the Value Pointer to always point to the most recent 50-bar Maximum High. Working backward from the PointerValue input, connect the input to a Last Value in Series Block. Then connect that to a Maximum Block, and change the period from 25

26 10 to 50 by double-clicking to access the properties of the Period Block. Now connect the other input for Maximum to the High Da ta Feed. Connect the Time Frame input to the Time Frame Picker from the bar chart, and connect the Symbol input to the WatchList. The diagram should look like this: I then changed the Block Diagram so that the number displayed by the Value Pointer would no longer be the most recent 50-bar Maximum High. Instead, we connected the Value Pointer to the Date Pointer, so that the number displayed by the Value Pointer would be the value associated with the 50-bar Maximum High for any date we select with the Date Pointer. In order to connect the pointers, I replaced the Last Value In Series Block from the diagram above with a Value for Date Block. I dragged the Date input from the new Block to the Date Pointer from the chart. We created a date-sensitive Value Pointer Block Diagram! WatchList Columns and Sorting in Blocks You have the ability to create columns of data which can be sorted. Here is the example I used to demonstrate the feature. Right-click 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. 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 sort the values in 26

27 ascending or descending order. If you right-click the column header, you can choose to QuickEdit the Column and change the time-period of the data (to say 2-week or 1-month). 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 Download link for these notes. I call it Price Percent Change Column. To color the background of the cells in your column, make these additions to the preceding Block Diagram. 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. We also created columns that would identify the stocks in our list whose prices were at 52 week highs and lows. To create the 52 week high column, right-click to the right of the Company name column; go to Add, then to T/F Column. Within the Block Diagram for the column, connect the Column Symbol to a High Data Feed Block. Change the Time Frame of that block from 1 Day to 1 Week. Connect the High Block to an At New High Block. Change the Period from 250 to 52. Then connect the At New High Block to a Last T/F Value in Series Block, and finally connect that to the Column Data input. Now, within the properties portion of the Block Diagram, change the True Text from True to 27

28 New High. Change the False Text from False to one single blank space (using your SPACEBAR). Within the column, the stocks whose prices are currently at 52 week highs will read New High. The stocks whose prices are not at new highs will be blank. We colored the backgrounds of the column so that the stocks that were labeled New High would be back-lit in green. To create the coloring, connect the output of Last True False Value in Series to a T/F Color Block. Keep the True color green, and change the False color to white. Connect the output of the T/F Color Block to the Back Color input. Repeat the above process, replacing the High Data Feed Block with a Low Data Feed Block and the At New High Block with an At New Low Block, which will result in True and False readings within the newly created column. Within the properties window of the Block Diagram, Change the True Text from True to New Low and the False Text from False to a blank space. Now, the stocks whose prices are at 52 week lows will read New Low and those whose prices are not at new lows will be blank. Within the Block Diagram, also replace the True Color with red and the keep the False Color white 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. 28

29 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. 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, a n d t h i s m u s t o 29