1. A data file with the price history to use. The file must have appropriate format and length.
2. The performance parameters and risk/reward objectives to apply.
The software setup includes sample historical daily and intraday data files in compatible format. These files are located in the DATA subdirectory of the program.
Sample search and scan workspaces are also
included in the MYWORK subdirectory. You may open the workspaces and view the parameters specified in them. Results are also included. in RESULTS subdirectory. The format specifications are listed in the help file of
the program.
The following two steps are required in order to run a search for price patterns
1. Create a T/S file
This file contains the profit target and stop-loss values to be applied to the
search. Each line in a T/S file corresponds to a pair of profit target and stop-loss values used in the back-testing of price patterns for determining historical performance. The values in a T/S file may stand for
percentages of the entry price or points added to the entry price and the choice between the two options is made on the search workspace. Sample files can be found in the TRS subdirectory.
2 Create a search workspace
On the workspace you specify the T/S file to use, the historical data file and the trade input and search parameters.
The following two steps are required to set-up a price pattern scan:
1. Create a T/S file
This file contains the profit target and stop-loss values to be applied to the scan. Each line in a T/S file corresponds to a pair of profit target and stop-loss values used in the
back-testing of price patterns for determining historical performance. The values in a T/S file may stand for percentages of the entry price or points added to the entry price and the choice between the two options is
made on the scan workspace. In the case of exits on the close of the next bar, the values of the T/S file are not taken into account and can be set to anything. Sample files can be found in the TRS subdirectory.
2 Create a scan workspace
On the workspace you specify the T/S file to use, the historical data file and the trade input and scan parameters. Note: in the case that next close (NC) is selected as the exit
parameter on a scan workspace, a dummy T/S file must be specified with just one pair of target/stop values but these will not be used by the program.
The following two steps are required to set-up p-Indicator calculations
1. Create a T/S file
This file contains the profit target and stop-loss values to be applied to the calculations. Each line in a T/S
file corresponds to a pair of profit target and stop-loss values used in the back-testing of price patterns for determining historical performance. The values in a T/S file may stand for percentages of the entry price
or points added to the entry price and the choice between the two options is made on the workspace. In the case of exits on the close of the next bar, the values of the T/S file are not taken into account and can be set
to anything. Sample files can be found in the TRS subdirectory.
2 Create a p-Indicator workspace
On the workspace you specify the T/S file to use, the historical data file and the trade input parameters.
Note: in the case that next close (NC) is selected as the exit parameter, a dummy T/S file must be specified with just one pair of target/stop values but these will not be used by the program.
When
creating a search, scan or p-Indicator workspace you may introduce multiple search, scan or p-Indicator lines each with different data file(s), T/S file and parameters.
FAQ:
Why is the pattern code generation disabled in the demo version?
For basic evaluation purposes, the search performance parameters and the backtesting parameters of each pattern along with the forward
testing capability of the software are in our opinion and experience sufficient for getting an idea of the capabilities of this program. Since there are many alternative and even competing ways of grouping patterns into
trading systems using Boolean and other operators and indicators, and in addition there are many possible objectives traders may have in terms of performance, we do not claim to provide complete trading systems but only
the building blocks that one can discover after careful use of the program and appropriate analysis.
FAQ: What is the difference between the search and the scan functions ?
The search function
discovers all price patterns that satisfy the performance criteria specified on the search workspace, such as a minimum number of trades, a minimum percent profitability (success rate), a minimum profit factor and a
maximum number of consecutive losers. The results of this function can be used for grouping patterns into trading systems and storing them in System Tracking for signal generation or for generating code for use with
popular trading platforms.
The scan function determines if there are patterns formed as of the close of the last bar in the data file that satisfy the performance criteria specified on the scan workspace. This
function is especially useful for scanning a universe of securities, like for example the S&P 500 stocks, or a number of futures contracts. A scan is equivalent to a search with the Search Depth parameter set equal
to 1 bar. The scan function can be used to discover new price patterns on a daily basis to add to the database or System Tracking.
Using the search function to discover trading systems together with the scan
function on a daily basis for determining the presence of new patterns is the recommended use of the program. As an example, one can use the search function to discover a number of patterns in S&P 500 index mini
futures and then add a trading system to System Tracking.. Then, on a daily basis, the updated historical data file can be used in a scan workspace to get the signals from price patterns and compare that to the System
Tracking output to determine whether there are some new patterns that were not detected at the time of the search due to not satisfying the performance criteria, or to even identify any long-short signal conflicts.
Note:
The best way to become familiar with a program is by actually working with it. There are many ways to use a trading program depending on user's experience and objectives and this also applies in the case of Price Action Lab.
