Breakout_Range2 by Mark Vakkur

In "Catching DJIA Breakouts" in this issue, I discuss the strategy of buyingmarkets that are breaking out to new highs, and present the results ofbuying breakouts in the Dow Jones Industrial Average (DJIA).

In EasyLanguage, you can create a Boolean variable or a ShowMe studyto simply test whether the two conditions of a breakout are met. However, I thought it more useful to have the function return the numberof bars since the last time a new high was achieved. The only time a numberother than zero is returned is when it is a true breakout (the functionwill return a zero either when no new high is achieved or when a new highhas been achieved, but it has not been a breakout of look_bak length orgreater).

The EasyLanguage code for this function, which I have called Breakout_Range2, follows:

Type : Function, Name : Breakout_Range2

{********************1/26/2000 Mark Vakkur, M.D.
if this bar is the highest bar of the last look_bak bars
AND this has not occurred in look_bak bars, returns
the number of bars, otherwise returns 0. **************}

Inputs:
price( numericseries),
look_bak(numeric);

Vars: bar_count(0),
max_price(h); {number of bars since last high}

If CurrentBar = 1
then Begin bar_count = 1;
{bar_count counts the number of bars since
a new high was made}End
Else Begin
If price > Highest(high, look_bak)[1]
{if this bar is the highest high of
the look_bak period} then Begin
if bar_count >= look_bak then Begin
Breakout_Range2=bar_count;
bar_count = 0;
End
Else {highest high but NOT since look_bak bars}
Begin bar_count = 0;
Breakout_Range2 = 0;
End;
End { of highestbar check }

Else {this isn't the highest high }
Begin bar_count = bar_count + 1;

Breakout_Range2 = 0;
End;
End;

If this seems too complicated, don't worry. Simply cut and paste the code into TradeStation and then create the following system based on this function:

Type : Signal, Name : Breakout_Range2

Input:
look_bak(4),
n_bars(4);
If Breakout_Range2(h, look_bak) <> 0 then
{this would only occur if a new high price occured after n_bars of no such new high}
Buy ;
If BarsSinceEntry >= n_bars then ExitLong;

Note that all of the work of the breakout system went into the breakout function. This is perhaps the best way to develop your ideas: first create a function, then use the function to create indicators, ShowMe studies, and systems. If later you change the function, all the studies on whichit is based will be changed automatically, freeing you from the labor requiredto change each study.

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