Part 2: Designing a Trading System in MetaStock

info · Joined: 07 Feb 2005 Posts: 23

In Part 1 of Designing a Trading System in
MetaStock, I had discussed the major components
you needed to be able to track to create a
mechanical entry system. These were measures of
price, liquidity, trend, and volatility. The question now
is, how do we code this into MetaStock?

First, let me offer you the most valuable piece of
knowledge I have acquired over the years about
MetaStock formula writing. This one secret will turn
you into a MetaStock master. Do you think I know all
of MetaStock`s hundreds of pre-programmed formula
and propriety indicators? Well, I`m good, but I`m not
that good.

When coding in MetaStock, the key to getting it ??right??
is to write what it is you are trying to achieve ??down in
English??. Once you`ve done this, it is easy to convert
it into a MetaStock formula.

Let`s look at an example. Our first entry condition is a
measure of price. As mentioned in Part 1, you want to
set a price minimum to remove speculative stocks.
Please note that the values you select will depend on
the exchange you are trading. Some markets tend to
be more expensive than others. For this example, we
are looking to design a long-term trend following
system to trade on the Australian Stock Exchange.

In Australia anything under $1 could be classed as a
speculative stock. So how do you stipulate that the
stocks you want must be greater than $1? First, ??write
it in English??: You want stocks with a 21-day average
closing price that is greater than $1. Now, you can
convert this into a MetaStock formula.

Using the formula reference section in the MetaStock
Programming Study Guide, you can check the syntax
of a moving average. Once you have this information,
it`s simply a matter of plugging in the correct
numbers. Then, by using the ??greater than?? symbol,
you can stipulate the price to be greater than $1. The
MetaStock code will look like this:

Mov(c,21,s) > 1

Let`s move onto the next component, liquidity. This is
a measure of how much money a stock trades. It is
important to identify stocks that have enough money
moving through them so that you`re never caught
with a stock you can`t get out of. For this example,
let`s say we require the 21-day average of volume
multiplied by the closing price to be greater than
$200,000. In MetaStock language this would be:

Mov(v,21,s)*C > 200000

In the next article I`ll go through the last two
components needed to design a mechanical entry
system in MetaStock. With this information, you will
be well on your way to starting an effective, and
profitable, trading system in MetaStock.

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David Jenyns is recognized as the leading expert when it
comes to MetaStock and designing profitable trading systems.

His MetaStock website offers a huge free collection of trading
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