WealthLab.Rules.Candlesticks: EngulfingLines

Author: Yury

Creation Date: 11/22/2012 1:29 AM

Wealth Lab » WealthScript (.NET) » WealthLab.Rules.Candlesticks: EngulfingLines

Yury

11/22/2012 1:29 AM

CODE:
Please log in to see this code.

Why methods BullishEngulfingLines and BearishEngulfingLines sometimes miss engulfings? Or am I the engulfings encoded wrong?

Size:

Color:

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

namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
						
		protected override void Execute()
		{
			bool conditionBullishEngulfing;
			bool signalBullishEngulfingLines;
			bool conditionBearishEngulfing;
			bool signalBearishEngulfingLines;
			
			bool[] bullishEngulfingLines;
			CandlePattern.BullishEngulfingLines(this, "Bull Eng.", true, out bullishEngulfingLines);
			bool[] bearishEngulfingLines;
			CandlePattern.BearishEngulfingLines(this, "Bear Eng.", true, out bearishEngulfingLines);
			
			for(int bar = 25; bar < Bars.Count; bar++)
			{
				//Find themselves bullish engulfing
				conditionBullishEngulfing = Bars.Open[bar-1] > Bars.Close[bar-1]; // first conditions
				conditionBullishEngulfing &= Bars.Open[bar] < Bars.Close[bar];    // of BullishEngulfing
				conditionBullishEngulfing &= Bars.Open[bar] < Bars.Close[bar-1];  // second conditions
				conditionBullishEngulfing &= Bars.Close[bar] > Bars.Open[bar-1];  // of BullishEngulfing
				if(conditionBullishEngulfing) AnnotateBar("BlE", bar, true, Color.Green);
				
				//Find bullish engulfing through the method of BullishEngulfingLines
				signalBullishEngulfingLines = bullishEngulfingLines[bar];
				
				//Find themselves bearish engulfing
				conditionBearishEngulfing = Bars.Open[bar-1] < Bars.Close[bar-1];
				conditionBearishEngulfing &= Bars.Open[bar] > Bars.Close[bar]; // first conditions of BearishEngulfing
				conditionBearishEngulfing &= Bars.Open[bar] > Bars.Close[bar-1];
				conditionBearishEngulfing &= Bars.Close[bar] < Bars.Open[bar-1]; // second conditions of BearishEngulfing
				if(conditionBearishEngulfing) AnnotateBar("BrE", bar, false, Color.Red);
				
				//Find bearish engulfing through the method of BearishEngulfingLines
				signalBearishEngulfingLines = bearishEngulfingLines[bar];

}
		}
	}
}[/CODE]

Why methods BullishEngulfingLines and BearishEngulfingLines sometimes miss engulfings? Or am I the engulfings encoded wrong?

Cone

11/22/2012 3:34 AM

For sure if you use different rules, you'll get different results. The WealthScript Programming Guide > WealthLab.Rules Classes > Candlesticks > Bullish > BullishEngulfingLines definition: (2-bar pattern, stable at bar 25) A small black line (first day) is engulfed by a large white line (second day). This pattern is strongly bullish if it occurs after a significant downtrend (i.e., it acts as a reversal pattern).

"Small" and "Large" are relative to a 10-day ATR. It's not sufficient to simply "engulf". In my notes for the construction of this candle rule, I wrote that: Steve Nison only specified a reference for a Long "White" Line: The real body should be at least 3x the real body of the previous bar. However, since we've been using ATR, it seems reasonable to assume a "long line" is at least 2x the ATR. Also reflected in the TwoLongLines() rule.

So, in our rule, the engulfing bar must be at least 2 times the 10-day ATR of the previous bar.

--------
Edit:
In checking the code, I found that _atr is defined as 0.5 * ATR.Series(_bars, 10); Consequently (and somewhat unfortunately) a "long line" need only match the ATR value at the previous bar, at a minimum.