Head and Shoulder Bottom - Wealth Lab Forum

Head and Shoulder Bottom

Author: callahan1681

Creation Date: 11/13/2008 3:53 PM

Wealth Lab » Trading Strategies » Head and Shoulder Bottom

callahan1681

11/13/2008 3:53 PM

I am new to Wealth Lab. I am just learning to use C#. Could anyone provide me with
the code to back test a head and shoulder bottom. Thank you.

Eugene

11/15/2008 4:07 AM

Here's a very quickly reversed H&S Top system that comes out-of-the-box.

CODE:
Please log in to see this code.

One suggestion as I review the generated trades. A check should be added -- it could be as simple as "Price < SMA(100)" -- to actually verify we're in the middle of a downtrend or at the bottom when a H&S-B pattern is detected.

Size:

Color:

Here's a very quickly reversed H&S Top system that comes out-of-the-box.

[CODE]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class HeadAndShouldersBottom : WealthScript
	{
		
		//Parameters that control pattern detection
		private StrategyParameter spReversalPct;
		private StrategyParameter spBottomHeightPct;
		private StrategyParameter spShoulderSymmetry;
		private StrategyParameter spBarsExpire;
		
		//construct the parameter sliders
		public HeadAndShouldersBottom()
		{
			spReversalPct = CreateParameter("Reversal %", 5, 3, 10, 0.5);
			spBottomHeightPct = CreateParameter("Bottom Height %", 1, 0.5, 5, 0.5);
			spShoulderSymmetry = CreateParameter("Symmetry %", 2, 1, 5, 0.5);
			spBarsExpire = CreateParameter("Bars Expire", 40, 20, 100, 10);
		}
		
		protected override void Execute()
		{
			//variables
			int numHS = 0;
			bool foundHS = false;
			int hsBar = 0;
			int detectedPB = 0;
			double neckline;
			int tb0 = 0;
			int tb1 = 0;
			int pb0 = 0;
			int pb1 = 0;
			int pb2 = 0;
			double t0 = 0;
			double t1 = 0;
			double p0 = 0;
			double p1 = 0;
			double p2 = 0;
			
			//parameter values
			double reversal = spReversalPct.Value;
			double headHeight = spBottomHeightPct.Value;
			double symmetry = spShoulderSymmetry.Value;
			int expire = spBarsExpire.ValueInt;
			
			//DataSeries assignments
			DataSeries pkLow = Trough.Series(Low, reversal, PeakTroughMode.Percent);
			DataSeries pkBarLow = TroughBar.Series(Low, reversal, PeakTroughMode.Percent);
			DataSeries tgHigh = Peak.Series(High, reversal, PeakTroughMode.Percent);
			DataSeries tgBarHigh = PeakBar.Series(High, reversal, PeakTroughMode.Percent);
			
			//main logic
			SetBarColors(Color.Silver, Color.Silver);
			for(int bar = 20; bar < Bars.Count; bar++)
			{
				//process open trade
				for(int p = ActivePositions.Count - 1; p >= 0; p--)
				{
					Position pos = ActivePositions[p];
					HSTradeInfo info = (HSTradeInfo)pos.Tag;
					if (Close[bar] >= info.target)
						SellAtMarket(bar + 1, pos, "Target");
					else if (Close[bar] <= info.stop)
						SellAtMarket(bar + 1, pos, "Stop");
				}
				
				//are we currently processing a H&S Bottom found earlier?
				if (foundHS)
				{
					//project the neckline to the current bar
					neckline = LineExtendY(tb1, t1, tb0, t0, bar);
					if (Close[bar] > neckline)
					{
						//neckline penetration
						SetBarColor(bar, Color.Green);
						AnnotateBar("Neckline penetrated", bar, true, Color.Green);
						foundHS = false;
					
						//calculate and plot the upward target
						double diff = p1 + neckline;
						double target = neckline + diff;
						int targetBar = 0;
						if (target > 0)
						{
							//enter a position
							if (BuyAtMarket(bar + 1) != null)
							{
								HSTradeInfo tradeInfo = new HSTradeInfo();
								tradeInfo.target = target;
								tradeInfo.stop = p1;
								LastPosition.Tag = tradeInfo;
							}
							
							for(targetBar = bar; targetBar < Bars.Count - 2; targetBar++)
							{
								if (High[targetBar] > target)
									break;
							}
							DrawLine(PricePane, bar, target, targetBar, target, Color.Teal, LineStyle.Dotted, 2);
							AnnotateChart(PricePane, "Target = " + target, bar, target * 0.98, Color.Teal);
							if (Low[targetBar] < target)
							{
								SetBarColor(targetBar, Color.Red);
								AnnotateBar("Target Achieved", targetBar, false, Color.Red);
							}
						}
					
						//draw the neckline, extend 5 bars out for clarity
						neckline = LineExtendY(tb1, t1, tb0, t0, bar + 5);
						DrawLine(PricePane, tb1, t1, bar + 5, neckline, Color.Green, LineStyle.Dotted, 2);
					}
					else
					{
						if (bar - hsBar > expire)
							foundHS = false;
					}
				}
				else
				{
					//determine locations and values of most recent peaks and troughs
					p0 = pkLow[bar];
					pb0 = (int)pkBarLow[bar];
					if (pb0 == -1)
						continue;
					t0 = tgHigh[pb0];
					tb0 = (int)tgBarHigh[pb0];
					if (tb0 == -1)
						continue;
					p1 = pkLow[tb0];
					pb1 = (int)(int)pkBarLow[tb0];
					if (pb1 == -1)
						continue;
					t1 = tgHigh[pb1];
					tb1 = (int)tgBarHigh[pb1];
					if (tb1 == -1)
						continue;
					p2 = pkLow[tb1];
					pb2 = (int)pkBarLow[tb1];
					if (pb2 == -1)
						continue;
					
					//is the bottom lower than the two shoulders?
					if (p0 > p1 && p1 < p2)
					{
						double pct = ((p1 - p0) / p0) * 100;
						if (pct < headHeight)
						{
							pct = ((p1 - p2) / p2) * 100;
							if (pct < headHeight)
							{
								//check shoulder symmetry
								pct = (Math.Abs(p2 - p0) / p2) * 100;
								if (pct <= symmetry)
								{
									//H&S bottom must have a price decrease to reverse
									if (ROC.Series(Close, 100)[pb1] < 15)
									{
										//don't detect the same H&S twice
										if (pb2 != detectedPB)
										{
											//H&S found!
											foundHS = true;
											hsBar = bar;
											detectedPB = pb2;
											numHS++;
											SetBarColor(pb0, Color.Red);
											SetBarColor(pb1, Color.Red);
											SetBarColor(pb2, Color.Red);
											SetBarColor(tb0, Color.Blue);
											SetBarColor(tb1, Color.Blue);
											AnnotateBar("Shoulder", pb0, true, Color.Red);
											AnnotateBar("Head", pb1, true, Color.Red);
											AnnotateBar("Shoulder", pb2, true, Color.Red);
										}
									}
								}
							}
						}
					}
				}
			}
			DrawLabel(PricePane, "Number of H&S Bottom patterns detected: " + numHS, Color.Black);
			if (ActivePositions.Count > 0)
			{
				Position pos = ActivePositions[ActivePositions.Count - 1];
				HSTradeInfo tradeInfo = (HSTradeInfo)pos.Tag;
				DrawLabel(PricePane, "Current Target: " + tradeInfo.target.ToString("N2"), Color.Red);
			}
		}
	}
	
	//This class stores information for each H&S based trade
	internal class HSTradeInfo
	{
		internal double target;
		internal double stop;
	}
}[/CODE]