long upper shadow trading strategy

Application of the K-line phantasma part in trading scheme

Summary

The K melody itself has little value, it is just a container of the Price data. Start from the lowest Tick data stream, it is divided into segments according to the time period. The commencement price in each cycle is the opening price, and the stopping point price is the shutdown price. The highest price and lowest price are midmost.

Each container stores data such as intoxicated and low, volume, time etcetera. This is the stock of the K-line. In this article, we testament use the upper and lower shadow part of the K-tune to develop a trading strategy.

What is the shadow part of the K line

The "overshadow part" is the dashed line of the K line, called the upper and lower shadower partially of the main set out of k line, which represents the divergence between the current highest or lowest price and the closing price operating theater the opening price. The reason why the shadow is produced is because of the power competition betwixt the two sides.

Trading is the like a buying and selling power confrontation. If the bulls win the short-selling power, they will form a positive k crinkle with no shadow part. When the short-selling pull wins the optimistic power, IT testament form a negative k line with no shadow part. If the bullish power run out after assaultive the pessimistic power, It will form a upper shadow line. If the pessimistic power flunk after attacking the bullish flack, it will signifier a lower shadow telephone circuit.

Under median circumstances, the yearner the upper shadow product line, the greater the resistance, the bullish is about to change from strong to weak, and the future price may fall back operating theater accrue; The thirster the lower shadow line, the greater the support will be, the short position will be changed from strong to weak, and the future price may rebound OR ascension. Therefore, the classic K-line theory tells us that in the various K-line diagrams, if there is a long top or lower berth shadow business line, it is the time when the market is about to turn, which is as wel an important reference for judgment the trend of the market.

Long upper shadow personal credit line

We know that most of the K-line has around upper and lower shadow lines, most of which have little meaning in judging the market trend. Therefore, when design the strategy, it is not enough just using the upper and lour shadow lines as trading signal, we essential add certain filtering conditions, reduces the absolute frequency of opening and closing position, and increases the attractive rate operating theater profit-loss ratio of the strategy itself. Then we can judge the length of the speed shadow dividing line, or evaluate the ratio of the upper fantas line to the main part k line to filter the signal. The mindful upper dark line is also titled the "shot star". Relatively speaking, the long upper shadow line is Sir Thomas More certain than the ordinary upper shadow line. A typical example is that when the market has undergone a long-term bullish market, the price has risen sharply so fallen sharply, and a long shade off line of credit has been formed.

This situation indicates that the current market may have a reversal of the upward trend at any prison term, entering a down trend. In the main, the chance of the appearance of the upper shadow line is low. Once the upper shadow line is thirster than the main part k production line plus the lower shadow personal line of credit, it means that the market's strongest rising first moment is completely tattered, and the chance of the market sledding down is greatly increased. However, when using the long dwarf origin to judge the market, there needs to atomic number 4 a premise, that is, the securities industry has experienced a large increment before, and increased a large decline in Energy.

Long lower dark line

On the contrary, we can also try the length of the lower shadow line, or judge the ratio of the lower shadow line to the main division k line to trickle the trading signal. The appearance of the long lower shadow line indicates that the optimistic power is super powerful, not just blocking the flak of the selling power, merely also recovering the "lost battlefield". Therefore, the hanker lower shadow line is more certain than the ordinary get down darkness line. A typical example is that afterwards the market has undergone a large decline, the price continues to squat down but rebounds sharply, and a long shadow line is wrought.

This situation indicates that the current grocery store may ending the downward trend and enter an upwards swerve. In general, the probability of the appearance of the long shadow line is flat-growing. Once the lower shadow line is longer than the main part k strain plus the upper shadow descent, it indicates that the market's strongest expectation of rising is all destroyed, and the probability of the market going improving is extremely magnified. However, when using the long shadow line to estimate the market, it is also necessary to have a premiss, that is, the market has practiced a large increase before, and accumulated a large increase in energy.

Scheme system of logic

Supported the K-line theory above, we can try to develop a scheme for long upper and lower shadow lines. In front developing the scheme, let's figure out the logic of this strategy, A follows:

Step 1: Account the upper shadow line length Leading
Step 2: Calculate the main portion k line length MIDDLE
Step 3: Calculate the lour shadow line length DOWN
Opening Provident set back: The length of the lower shadow line is greater than the BN multiplication of the sum of the main set off k line plus the upper shadow melodic phras
Opening Short position: The length of the superior shadow line is greater than the BN times of the amount of the main part k line plus the lower fantas line
Closing Long set down: The length of the upper shadow line is greater than the SN multiplication of the main part k line plus the lower shadow bank line
Closing Short position: The length of the lower shadow line is greater than the Tin multiplication of the of import part k line plus the upper shadow line

Note of hand: BN and SN are coefficients, because relatively oral presentation, futures usually rises slowly and falls sharply, indeed we give different coefficients when we are purchasing long Oregon marketing short.

Scheme code

Based happening the supra strategy logic, we can implement it on FMZ Quant platform. Give: fmz.com dangt; Login dangt; Dashboard dangt; Strategy Library dangt; New Strategy dangt; Cluck on the send away-down menu in the upper right niche to select My spoken language, start writing the strategy, and pay attention to the comments in the code below.

          UP: HIGH - IFELSE(ISUP, CLOSE, OPEN);  // upper shadow line
MIDDLE: IFELSE(ISUP, CLOSE, OPEN) - IFELSE(ISUP, OPEN, CLOSE);  // main part k line
DOWN: IFELSE(ISUP, OPEN, Enveloping) - Humiliated;  // Lower fantas line of reasoning          DOWN dangt; (MIDDLE + UP) * BN, BK;  // orifice long situatio
UP dangt; (MIDDLE + DOWN) * SN, SP;  // hatchway abruptly position
UP dangt; (MIDDLE + DOWN) * SN, SK;  // closing long position
DOWN dangt; (MIDDLE + Upwards) * BN, BP;  // closing short position
AUTOFILTER;

Cause the strategy

Click copy strategy source code without configuration, direct online backtest at : https://www.fmz.com/strategy/165130

Conclusion

Simple K line is intuitive, and has a wealth of information. It is the most common basic data and tools in trading. The long upper and lower phantasm lines hindquarters measure the power changes of buying and selling, and the principle behind IT is precise simple. The quantification of it is very friendly for beginners. However, the vogue of the K-line of business in actual market is non incisively the same as the theory, which means that we are following a big chance rather than certainty in the trading business.