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TRADERSSTUDIO: SWAMICHARTS

The TradersStudio code for John Ehlers & Ric Way’s article in this issue, “Introducing SwamiCharts,” is provided at the websites noted below. The download includes the following code files:

• Function: “RSI_SWAMI_3” computes the indicator values for the RSI Swami indicator
• Indicator plot: “RSI_SWAMI_3_IND” displays the RSI Swami indicator
• System: “RSI_SWAMI_3” is a system of my design that uses the ideas from the article in this issue on SwamiCharts by John Ehlers & Ric Way.

I did not attempt to replicate the SwamiCharts that are displayed in the article mainly because I am not a discretionary trader but rather focus completely on mechanical systems. I wanted to take the concept of multiple parameter sets for an indicator and see how this concept could be used in a system.

My first attempt was to combine seven different lengths of the RSI and then use all lengths to generate trading signals. Using the S&P contract, I decided to trade one contract each time that one of the seven RSI subsystems fired a signal. Thus, without applying compounding, the system could be long or short anywhere from zero to seven contracts at any point in time. I determined the entry and exit levels for each of the following RSI lengths: 2, 3, 5, 8, 13, 21, 34 (a Fibonacci series) by running optimizations for each length separately. The indicator plot simply shows the net signal from the system. For example, if all seven subsystems are long, then the indicator will read “7.” If three are long and one is short and the rest are flat, then the indicator will read “2.”

I ran a quick test in the Tradeplan module using the compounding/sizing method called TS_PercentMargin (provided with the software) with parameters of 4% of margin and 100 contracts maximum. In Figure 7, I show the resulting logarithmic equity curve trading the S&P futures contract, and in Figure 8, I show the resulting underwater equity curve in percentages. In Figure 9, I show the yearly returns from 2000 through 2011. The average annual compounded return for the test is 20.8% with a maximum drawdown of 50.3% in 2008. The system did quickly recover from this deep drawdown.

FIGURE 7: TRADERSSTUDIO, THEORETICAL SYSTEM RESULTS. Here is the logarithmic equity curve for the theoretical RSI_Swami_3 system trading the S&P futures contract for the period 1/1/2000 to 12/31/2011.

FIGURE 8: TRADERSSTUDIO, UNDERWATER EQUITY. Here is an underwater equity curve for the RSI_Swami_3 system trading the S&P futures contract for the period 1/1/2000 to 12/31/2011.

FIGURE 9: TRADERSSTUDIO, RETURNS. Here are theoretical yearly returns for the RSI_Swami_3 system trading the S&P futures contract for the period 1/1/2000 to 12/31/2011.

This system is for illustrative purposes only and is not meant to be a finished system for live trading.

The TradersStudio code files are available from the following websites:

• www.TradersEdgeSystems.com/traderstips.htm
• www.TradersStudio.com → Traders Resources → Traders Tips

'INTRODUCING SWAMI CHARTS
'Authors: John Ehlers and Ric Way, TASC March 2012
'Coded by: Richard Denning 1/15/2012
'www.TradersEdgeSystems.com

Function RSI_SWAMI_3_FUN()
Dim myRSI2,myRSI3,myRSI5,myRSI8,myRSI13,myRSI21,myRSI34
Dim entryLvlA,entryLvlB,exitLvlA,exitLvlB,exitLvlC
Dim sig2 As BarArray
Dim sig3 As BarArray
Dim sig5 As BarArray
Dim sig8 As BarArray
Dim sig13 As BarArray
Dim sig21 As BarArray
Dim sig34 As BarArray

entryLvlA = 10
entryLvlB = 20
exitLvlA = 0
exitLvlB = 5
exitLvlC = 10

myRSI2 = rsi(C,2,0) 
myRSI3 = rsi(C,3,0) 
myRSI5 = rsi(C,5,0) 
myRSI8 = rsi(C,8,0) 
myRSI13 = rsi(C,13,0) 
myRSI21 = rsi(C,21,0)
myRSI34 = rsi(C,34,0) 

If myRSI2 < 50 - entryLvlA Then sig2 = 1
If myRSI2 > 50 + entryLvlA Then sig2 = -1

If myRSI3 < 50 - entryLvlA Then sig3 = 1
If myRSI3 > 50 + entryLvlA Then sig3 = -1

If myRSI5 < 50 - entryLvlA Then sig5 = 1
If myRSI5 > 50 + entryLvlA Then sig5 = -1

If myRSI8 < 50 - entryLvlA Then sig8 = 1
If myRSI8 > 50 + entryLvlA Then sig8 = -1

If myRSI13 < 50 - entryLvlA Then sig13 = 1
If myRSI13 > 50 + entryLvlA Then sig13 = -1

If myRSI21 < 50 - entryLvlA Then sig21 = 1
If myRSI21 > 50 + entryLvlA Then sig21 = -1

If myRSI34 < 50 - entryLvlB Then sig34 = 1
If myRSI34 > 50 + entryLvlB Then sig34 = -1

RSI_SWAMI_3_FUN = sig2 + sig3 + sig5 + sig8 + sig13 + sig21 + sig34

End Function
'---------------------------------------------------------------------

'indicator plot:

Sub RSI_SWAMI_3_IND()
plot1(RSI_SWAMI_3_FUN())
plot2(7)
plot3(-7)
End Sub
'---------------------------------------------------------------------

'INTRODUCING SWAMI CHARTS
'Authors: John Ehlers and Ric Way, TASC March 2012
'System author: Richard Denning 1/15/2012
'Coded by: Richard Denning 1/15/2012
'www.TradersEdgeSystems.com

'trading system (not part of article):

Sub RSI_SWAMI_3()
Dim myRSI2,myRSI3,myRSI5,myRSI8,myRSI13,myRSI21,myRSI34
Dim entryLvlA,entryLvlB,exitLvlA,exitLvlB,exitLvlC

entryLvlA = 10  'when rsi is < 40 (longs) or > 60 (shorts)
entryLvlB = 20  'when rsi is < 30 (longs) or > 70 (shorts)
exitLvlA = 0    'see exit formula-has not effect when = 0
exitLvlB = 5    'see exit formula-allows exits when before reversing level is reached
exitLvlC = 10   'see exit formula-allows exits when before reversing level is reached

'use Fibonacci series for multiple lengths on the RSI incidator
myRSI2 = rsi(C,2,0) 
myRSI3 = rsi(C,3,0) 
myRSI5 = rsi(C,5,0) 
myRSI8 = rsi(C,8,0) 
myRSI13 = rsi(C,13,0) 
myRSI21 = rsi(C,21,0)
myRSI34 = rsi(C,34,0) 

tradesallowed = SameDirectDiffSignals
exitsallowed = SameDirectDiffSignals

'for each length that has a new signal, trade one contract
'when not applying sizing, maximum contracts will be 7 

If myRSI2 < 50 - entryLvlA Then Buy("LE2",1,0,Market,Day)
If exitLvlA > 0 And myRSI2 > 50 + entryLvlA - exitLvlA Then ExitLong("LX2","LE2",1,0,Market,Day)
If myRSI2 > 50 + entryLvlA Then Sell("SE2",1,0,Market,Day)
If exitLvlA > 0 And myRSI2 < 50 - entryLvlA + exitLvlA Then ExitShort("SX2","SE2",1,0,Market,Day)

If myRSI3 < 50 - entryLvlA Then Buy("LE3",1,0,Market,Day)
If exitLvlA > 0 And myRSI3 > 50 + entryLvlA - exitLvlA Then ExitLong("LX3","LE3",1,0,Market,Day)
If myRSI3 > 50 + entryLvlA Then Sell("SE3",1,0,Market,Day)
If exitLvlA > 0 And myRSI3 < 50 - entryLvlA + exitLvlA Then ExitShort("SX3","SE3",1,0,Market,Day)

If myRSI5 < 50 - entryLvlA Then Buy("LE5",1,0,Market,Day)
If exitLvlA > 0 And myRSI5 > 50 + entryLvlA - exitLvlA Then ExitLong("LX5","LE5",1,0,Market,Day)
If myRSI5 > 50 + entryLvlA Then Sell("SE5",1,0,Market,Day)
If exitLvlA > 0 And myRSI5 < 50 - entryLvlA + exitLvlA Then ExitShort("SX5","SE5",1,0,Market,Day)

If myRSI8 < 50 - entryLvlA Then Buy("LE8",1,0,Market,Day)
If exitLvlB > 0 And myRSI8 > 50 + entryLvlA - exitLvlB Then ExitLong("LX8","LE8",1,0,Market,Day)
If myRSI8 > 50 + entryLvlA Then Sell("SE8",1,0,Market,Day)
If exitLvlB > 0 And myRSI8 < 50 - entryLvlA + exitLvlB Then ExitShort("SX8","SE8",1,0,Market,Day)

If myRSI13 < 50 - entryLvlA Then Buy("LE13",1,0,Market,Day)
If exitLvlC > 0 And myRSI13 > 50 + entryLvlA - exitLvlC Then ExitLong("LX13","LE13",1,0,Market,Day)
If myRSI13 > 50 + entryLvlA Then Sell("SE13",1,0,Market,Day)
If exitLvlC > 0 And myRSI13 < 50 - entryLvlA + exitLvlC Then ExitShort("SX13","SE13",1,0,Market,Day)

If myRSI21 < 50 - entryLvlA Then Buy("LE21",1,0,Market,Day)
If exitLvlC > 0 And myRSI21 > 50 + entryLvlA - exitLvlC Then ExitLong("LX21","LE21",1,0,Market,Day)
If myRSI13 > 50 + entryLvlA Then Sell("SE21",1,0,Market,Day)
If exitLvlC > 0 And myRSI13 < 50 - entryLvlA + exitLvlC Then ExitShort("SX21","SE21",1,0,Market,Day)

If myRSI34 < 50 - entryLvlB Then Buy("LE34",1,0,Market,Day)
If exitLvlA > 0 And myRSI34 > 50 + entryLvlB - exitLvlA Then ExitLong("LX34","LE34",1,0,Market,Day)
If myRSI34 > 50 + entryLvlB Then Sell("SE34",1,0,Market,Day)
If exitLvlA > 0 And myRSI34 < 50 - entryLvlB + exitLvlA Then ExitShort("SX34","SE34",1,0,Market,Day)
End Sub
'----------------------------------------------------------------------------------------

—Richard Denning
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