Howard Arrington's Q&A Article #1296: Chick Goslin's Method

Question:

I trade a three line trading style. If you have read either of Chick Goslin's two books, you will know what I mean by that. His latest book Trading Day by Day has been a big hit.

Anyway, I have been challenged with how to come up with the Signal code. It is very straightforward and simple. But I cannot get the alerts right. So I wanted to lay it out for you and have you give me an idea of the best approach for the alerts. I have been trading this method for successfully for 10 years.

The three lines are as follows:

LL (long line in this case 49 period exponential moving average),
ML (middle line --slow line(16) of a 3-10-16 Simple MACD), and
SL (short line --3-10 (fast line) of the 3-10-16 Simple MACD). On the Chart you will see them easily. (refer to chart EW63)

What I am interested in is highlighting when the Lines first go Concurrent. Concurrent is defined by the LL, ML, SL all in the same direction. So I am interested in Highlighting (via alerts) when this condition is FIRST met.

I was trying to do a four state DYO like I had done for showmes in tradestation ---but it was too difficult. I started looking at your Templates for Ideas and your Aroon template gave me the idea that it could be done via alerts.

I am also interested in highlighting when the market goes Concurrent again after the first signal. In other words a Primary Concurrent signal alert and then a secondary Alert for every signal after (if it can be done---maybe easier to just set alerts for the condition and not differentiate---one advantage to your software is the faster simple macd slowline--other software lags a bit).

Obviously, any Concurrent Signal in the opposite direction serves to reset everything (or at least it did with the showme in tradestation).

Here are the conditions:

LL up, ML up, SL UP on this bar plot alert via arrow under the bar
LL down, ML down, SL down on this bar plot alert via arrow above the bar

Now again, I am interested in this first state change bar and only that bar. I am also interested when this state is met again in the same direction on any following bars. Let me show you an example.

Refer to EW64 [ed: image not included in the article]. At the bar labeled (1) you have the Concurrent up condition met by that bar--LL, ML, SL all up for the first time (this is the first bar that has met the condition). At the bar labeled (2), we have the Concurrent down condition met for the first time --LL, ML, SL all down for the first time. At (3), we have a concurrent up condition met on that bar. Now shortly there after we have the Concurrent condition met at (4). Note (4) is the SECOND concurrent condition WITHOUT have a concurrent down signal met---this is a secondary signal that I was referring to and would like highlighted differently with a different color arrow if possible. At (5) we have a bar that is a Primary concurrent down. At point (6) and (7) we have Secondary Concurrent Signals were the LL, ML, SL are all down on those bars but the Primary concurrent signals have already been given at point (5).

Now, I know there has to be a way to at least set an alert and treat every signal bar (and only that bar) were the LL, ML, SL are all up or down. Setting Alerts for the Macd's two lines is a lot easier than setting them with the XMA (at least for me). Like I said earlier I would like to differentiate between the Primary concurrent and secondary signals. However, with the faster Macd of Ensign and with the difficulty I am having doing it. I just thought that I would ask your advice on the easiest way to incorporate this in an Alert.

I was trying a DYO and that that was damn near impossible for me. The Alerts seem to be the way to go. I just do not know if I can get it to plot the Conditions separately with Concurrent Primary and Secondary signals with different alerts. Or if it is just easier to just plot concurrent as an Arrow and treat them all the same and just have an arrow on the bar when this condition of LL, ML, SL being in the same direction is met.

I played with this for long enough now and have been frustrated. Thought the easiest thing to do would be to ask you. Someone online said that you could do it in a flash ---if I could lay it out. Can the alert function be used to set Two Concurrent Signals --primary and secondary? Or is it more simple just to do the Condition Concurrent and every time we have that state of LL, ML, SL all up or down on that bar put the arrow and just treat them all the same.

Here is what the Showmes for Tradestation looked like (ty1) [ed: image not included in the article]. Notice the Dots on the bars. The Red dot on the far Left of the chart was a primary Concurrent signal. Notice how thereafter when the Condition was met we have a Secondary Concurrent plotted as Purple. I am trying to duplicate this. I know the Alerts can be used. I think it may just be easier NOT to differentiate between Primary and Secondary and just treat them all the same. Notice on the far right you have a Black dot --that is the primary long signal. The showmes where actually pretty complicated. There are four state changes. It had to be done that way because the ML was very slow compared to Ensign. But at least with this picture you get some idea. Ensign should prove a little simpler with your alert functions.

Take your time replying I know you are busy ----any input would be greatly appreciated.

Answer:

The implementation using a DYO is a bit more complex than most because of your wish to have secondary occurrences marked differently than the initial concurrent conditions. The following chart and 2 DYOs show my implementation. You can learn from then and adapt them if you want something slightly different. The chart has the ExpAve and MACD studies, which are then referenced by the first DYO.

This DYO reads the rising falling property of the 3 study lines. Line D marks when all three are Rising (True) with a small green dot. Line F marks when all three are Falling (False) with a small red dot. You can uncheck the Show markers for these dots if you do not want the visual for them showing to indicate the continued concurrence of the 3 study lines.

Line G will then override the first Green dot with a bigger green Arrow marker. This would mark both Initial and Secondary situations. Line H will override the first Red dot with a bigger red Arrow marker. To change the visual of the Secondary situations, we need to employ another DYO as shown below.

The flags in [4] and [6] were written by the 1st DYO, and just serve as a way to pass the flags for the Big Arrows to this 2nd DYO. The clever part is Line C and D which see how recent the prior Red or Green big arrow was. If the big Green Arrow was most recent, then Line E will be True, otherwise Line E will be False to indicate the Red arrow was most recent. Line F will test to see if Line E is doing a Green Arrow and the most recent was also a Green Arrow, and when this is True, then the current Green arrow from [4] is overdrawn with a small black arrow to make the visual show a hollow arrow. Line G and H accomplish the same effect for the current Red arrow in [6] following a recent Red Arrow to hollow the current arrow out. So you get a nice visual that the Primary first occurrences show solid big arrows and the Secondary occurrences show hollowed out arrows.

Enjoy. This was a nice exercise for me.

Template: 1296-Concurrence

Sincerely, Howard Arrington

Ensign Q&A Knowledge Base: 1296-Concurrence

Ensign Q&A Knowledge Base:
1296-Concurrence