Can new instrument be created which is a price differential between 2 stocks?

Author: paulpaul777

Creation Date: 1/4/2011 12:18 AM

Wealth Lab » WealthScript (.NET) » Can new instrument be created which is a price differential between 2 stocks?

paulpaul777

1/4/2011 12:18 AM

Can I create a "new asset" in the DataSet, which itself is an adjusted price differential between two stocks (and back test etc)? thanks for help

Aside from coding the price differential as a DataSeries, it seems that you can use the Index Manager (Index-Lab) tool for creating the "new asset". Please see "Index Lab" in the Wealth-Lab User Guide.

paulpaul777

1/4/2011 2:26 AM

thanks Eugene - I'll have a look at that.

paulpaul777

1/4/2011 2:09 PM

Eugene, in the above comment coding as a dataseries, do you mean calculating the price differential externally, eg in Excel, and then importing the resultant values as an ASCII file? sorry for dumb questions!

Eugene

1/4/2011 2:52 PM

No, I mean calculating the difference in WLD6 directly by loading the 2nd symbol's data via the GetExternalSymbol method and referring to its Close (High etc) series.

As an illustration of the concept, take a look at DataSeries > Accessing Secondary Symbols in the WealthScript Programming Guide (Help menu).

paulpaul777

1/8/2011 1:43 PM

Eugene, is it possible for me to spend 15-20 mins with someone on Skype to help me through the set up of a particular trade. I'm sure it would save me days of exploration.

Eugene

1/8/2011 2:43 PM

Please count me out w.r.t any instant messaging, tutoring, mentoring, or remote assistance sessions. But you're always welcome to ask your questions on the forums.

paulpaul777

1/8/2011 7:26 PM

OK fair enough Eugene. I want to trade the spread between two stocks, where I set up a market neutral position (buy one, sell the other) when the (maybe adjusted by a factor) SAM for the spread moves outside the BBs (either upper or lower) for the spread. Can you give me some guidance on how to set this up? I'm not a programmer, and I am probably just struggling with my own naivety of the architecture of WL.

Eugene

1/9/2011 1:04 AM

Hope these examples help you clarify the technique of market-neutral system creation:

ActiveTrader 2010-10 | Market-neutral VIX-based pair strategy
Pairs Trading

Let me know if something isn't clear.

paulpaul777

#10

1/9/2011 3:11 AM

thanks Eugene. I also found this which is WL4 code - is there an easy way to convert this to WL6 because it looks close to what I want...

paulpaul777

#11

1/9/2011 3:14 AM

FYI, this is the link to where I found it =
http://wl4.wealth-lab.com/cgi-bin/WealthLab.DLL/editsystem?id=36764

Eugene

#12

1/9/2011 3:25 AM

Check out the site FAQ.

paulpaul777

#13

1/9/2011 3:56 AM

got it, thanks Eugene

paulpaul777

#14

1/9/2011 4:01 AM

Tried the WealthScript Translator - just came up with a bunch of errors.

Eugene

#15

1/9/2011 4:29 AM

I wouldn't say it's a very informative description.

Eugene

#16

1/9/2011 11:54 AM

Here's a quick manual translation of that Convergence Pairs trader 1.02 chartscript (untested):

CODE:
Please log in to see this code.

Size:

Color:

Here's a quick manual translation of that [LINK=http://wl4.wealth-lab.com/cgi-bin/WealthLab.DLL/editsystem?id=36764]Convergence Pairs trader 1.02[/LINK] chartscript (untested):
[CODE]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
		protected override void Execute()
		{
			string PairSymbol = "MAR";
			if( Bars.Symbol == PairSymbol )
				Abort();

int PairHigher = 0;
			bool InPair = false;
			
			double DiffUpperEMA = 0.5;
			ChartPane DfPane = CreatePane( 60, true, true );
			HideVolume();

Bars pairSymbol = GetExternalSymbol( PairSymbol,true );
			PlotSymbol( PricePane, pairSymbol, Color.Blue, Color.Red );

DataSeries Pair = GetExternalSeries( PairSymbol, Close );
			DataSeries DifferentialNet = Close - Pair;

DataSeries Differential = DataSeries.Abs(DifferentialNet);
			DataSeries DFUpper = BBandUpper.Series(Differential,10,2);
			PlotSeries(DfPane,DFUpper,Color.Red, WealthLab.LineStyle.Solid,2);

DataSeries dfsma = SMA.Series(Differential,10);
			PlotSeries(DfPane,dfsma,Color.Red, WealthLab.LineStyle.Solid,2);
			PlotSeries( DfPane,Differential, Color.Blue,WealthLab.LineStyle.Solid,2);

for(int bar = 20; bar < Bars.Count; bar++)
			{
				if(DifferentialNet[bar] < 0 )
					PairHigher = 1;
				else
					PairHigher = -1;
				
				if (!InPair && !IsLastPositionActive)
				{
					if(Differential[bar] > DFUpper[bar]) {
						if( PairHigher == 1 )
						{
							SetContext(PairSymbol,true);
							ShortAtMarket(bar+1,"1");
							RestoreContext();
							BuyAtMarket(bar+1,"1");
						}
						else
						{
							SetContext(PairSymbol,true);
							BuyAtMarket(bar+1,"1");
							RestoreContext();
							ShortAtMarket(bar+1,"1");
						}
						InPair = true;
					}
				}
				else if( InPair && Differential[bar] < dfsma[bar] )
				{
					for (int p = ActivePositions.Count - 1; p > -1; p-- )
					{
						Position pos = ActivePositions[p];						
						ExitAtMarket( bar+1, pos );
						InPair = false;
					}
				}
			}
		}
	}
}[/CODE]

paulpaul777

#17

1/9/2011 2:25 PM

Thank you Eugene - very grateful. Are there any resources in the WL community that you're aware of that can help me with building code - eg as a consultant for a fee?

Eugene

#18

1/9/2011 2:41 PM

You're welcome. As to your question - we're only preparing to launch a MarketPlace feature to meet the two parties together.

paulpaul777

#19

1/9/2011 2:48 PM

Eugene, I'm trying to copy & paste that script into WLS and it all compresses to one line - is there a trick?

Eugene

#20

1/9/2011 3:14 PM

Yes, the trick is called -- don't use Internet Explorer (seriously). Firefox and Chrome shouldn't have any trouble but IE has.

Here's a workaround to this inconvenience: paste to and copy from Wordpad before pasting to WL6.