Spreadsheet Code

In the followmg QUATTRO code, the GENERAL DESCRIPTION precedes a row or column that is fixed A6 Date (YYMMDD) (i.e., it does not get copied down).B6 High price C6 Low price Moving average, exponential, and N-day D6 Closing price breakout share the same page, as do the C3 Test period, swing "o, or box size swing breakout and point-and-figure sjstem 5 Point-and-figure number of reversal boxes The price data is not repeated to save space. AN data starts in row 7

To verify that the correct code was entered into the spreaddieet. Figure 5-8 shows a sample of the opening lines of the spreadsheet using sample data. The columns E, F, G, and H have been repeated for eadi of the moving average, exponential smoothing, and N-day breakout sjstems. In Figure 5-9, this approadi has been taken for the swing breakout and point-and-figure sjstems using the same data.

TECHNIQUES USING TWO TRENDLINES

This section is resU-icted to applications of trendlines; however, do not assume that trendlines conatitute the only timing methods. Any secondarj sjstem that analyzes a shorter time period than the primarj sjstem can be considered as a timing device. Tjpically a 3-day moving average could act as a timing technique for a 10-day average; however, the delajs of 1, 2, 3, or more dajs, discussed earlier, are also for timing. A 5-day delay would not be a sensible choice to be used with a 3-day moving average, because the two periods would be incompatible. Plotting of lag and lead moving average values is another possible timing method. In this section, the use of more than one moving average will be examined (any tjpe of trend approadi would apply) to create a sjstem.

In using two averages, the slower one, requiring a longer calculation period, will determine the longterai trend The faster average will be used for timing The long-term moving average generates a signal compatible with the long-term trend, regardless of recent pattems. A trader would be more comfortable knowing that tiiere is a recent shortterm surge of prices in the direction of the new position at the moment of entry To implement this idea, select two moving averages, one noticeably faster than the other, and apply either of the two following rules:

1. Buy when the faster moving average crosses the slower moving average going up. Sell when the faster

moving average crosses the slower moving average going down.

2. Buy when the current price crosses above both moving averages, and close out long positions when prices cross below either moving average. Sell when the current price crosses below both moving averages, and close out short positions when prices cross above either moving average (Figure 5-10).

The first set of rules results in constant trading, gomg from long to short and back again as the longterm trend is violated by the faster trend. The second set of rules allows for a neufral position when the current position is closed out and the long-term trend is not penetrated. One problem with this second approach is that the faster moving average may cause whipsaws by being too close to the current price. This can be solved in the same way as the single moving average by placing a band around one or both of the trendlines. There are other variations of these rules that can be listed, but they are not materially different from these two.

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