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The trading or investing logic is simple.... buy new highs (strength) and sell new lows (weakness). The default entry or decision level for long positions is a close above 20 days highest high. No targets are given as profits are unknown and is whatever the market gives. Losses are predefined in advance before taking a trade. Caveat: this indicator works best with indices and highly liquid stocks. It is not recommended for stocks with poor liquidity.
Download formula file (right click with mouse) kpl_swing.afl and save in C:/Program files/Amibroker/Formulas/Custom folder. Save the file with name kpl_swing.afl Start Amibroker and click on View/ Charts. Open the Custom folder and you should see the "kpl_swing" indicator file. Double click the file and the indicator will automatically load in a seperate pane/window Default value of N is 20. You can change this via the Parameters dialog box. Higher values of N will give fewer but far more reliable trades and vice versa.
Explanation:
Timeframe: works across all time frames (15min, daily, weekly etc). Smaller timeframes can generate high number of trades and whipsaws in rangebound markets. Entry trade: Initiate a long trade when indicator generates a BUY signal (arrow) Stoploss: user defined; keep atleast 5% or recent swing low or support level. You can use the same code in Scanner mode to generate Buy/ Sell signals.
The kplswing indicator has no target because you can never know with certainity if a stock will give 100, 200 or 500% return in a year. But by staying in a trade as long as possible, you vastly improve the chances of atleast capturing a significant percentage of the big move. Initial stoploss: 10% from entry price or recent swing low (long positions) or low of signal bar (tight, can lead to whipsaws). Exit strategy:
Exit if stock closes below initial stoploss (entry level) or Indicator gives a sell or Stock loses more than 5% in a single day or Stock loses more than 10% from the most recent high (long positions). Exit after 20 / 30 days as long as initial stoploss is not broken.
Above example is for delivery trades. You can modify the logic for different timeframes and for the short side.