The idea behind this new script is to calculate the TMO for 3 different sources:
The stock itself
A market index symbol such as SPX or /NQ
The relative strength ratio of the stock divided by the index symbol
Then, by comparing the TMO output of each of these sources, we can identify points in time where the stock’s momentum first begins to outperform the overall market early on, while it’s still trading inside a base or pullback pattern.
The remarkable thing to me is that this strategy can be broadly profitable on most stocks just using the built-in divergence signals between the 3 TMOs, and no additional filters like MAs or other trend filters.
The other remarkable feature is that this seems to be a timeless source of edge: if many people start using these signals, it will likely create new divergences to take advantage of.
The set comes with a scan, column, 2 indicators, and a strategy for backtesting, and by default it compares the currently-charted stock to the SPX through the lens of the TMO.
This suite of tools is available for free to anyone who has previously purchased the Relative Strength indicator set, and from now on it will also be included for new customers as well.
How to Program Custom Trading Strategies in ThinkOrSwim
I’ve had several questions about ThinkOrSwim strategies, so I wanted to do a post on how to program custom trading strategies in ThinkOrSwim. Since I’ve been programming a lot of strategies lately myself, yesterday I decided to do a video for the official ThinkOrSwim.net YouTube channel where I go through the process of creating and testing a new, built-from-scratch strategy in ThinkOrSwim. It shows where to go to create and edit strategies, how to add and reference indicators, how to add user-customizable inputs, and then how to implement the strategy and backtest it on a specific chart.
It’s really important to quantify and monitor your trading edge, whether you’re trading discretionary setups or mechanical systems. ThinkOrSwim allows you to test strategies in mechanical form, which can later be applied to either discretionary or automated trading systems. You can take the edges you identify quantitatively with ThinkOrSwim, and apply them to a discretionary trading strategy that takes advantage of even more precise entries and exits than what an automated system might provide. And I think, one way or another, whether edges are manually identified over time through trial and error and detailed journaling, or automatically identified with systemized backtesting, quantitative edges are an essential part of all types of trading.
So with that in mind, here’s my most recent video on how to program custom trading strategies in ThinkOrSwim and run backtests on them:
I’ve recently posted several strategy scripts to the website that identify quantifiable edges for my fellow traders. These ThinkOrSwim trading strategies can be traded standalone, or tweaked further and customized to fit an individual’s trading style. They can either be used to setup automated trading systems in other platforms, or traded manually within ThinkOrSwim and improved with price action trading principles. My most recent strategies are all listed under the strategies category on the site, and here’s a quick reference list:
Most of these strategies come straight out of Larry Connors and Cesar Alvarez’s book “Short Term Trading Strategies that Work,” and are specifically for trading the SPY, SPX, or ES futures. But these ThinkOrSwim trading strategies may also provide edges on other instruments, and you can test them on whatever symbols you like to trade, to see if they can be applied profitably there as well.
I hope these strategies are as intriguing to you as they were to me, and hopefully they will provide you a more quantifiable way to determine your edge in the market as well.
Josiah is a stock & crypto trader, ThinkScript programmer, real estate investor, and budding mountaineer. He's also rumored to be an in-shower opera singer. Josiah started Easycators in 2015 and lives with his family in Nashville, TN. Twitter | YouTube
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