Thomas DeMark Sequential System

"Anybody tracking/trading on Thomas DeMark's Sequential system ? This system is catching Nifty futures tops and bottoms with remarkable accuracy. On daily chart,it cought Jan 2008 botton a day earlier,July 2008 bottom exactly on the day of the bottom.Also on hourly time frame,it cought NF top on 24th July at 11=00 bar and gave a sell signal at 4458 also cought 29 July 3.00 pm hrly bottom and gave buy signal at 4202." - Smart Trade

I did some searching and found the following regarding TD sequential.

The following is the for TD sequential AFL for Amibroker.

_SECTION_BEGIN("TD Systems");
// Parameters
ShowNumbers= ParamToggle("Show 1-8 Numbers","No|Yes", 1);
ShowTDPoints = ParamToggle("Show TD Points", "No|Yes", 1);
ShowTDST = ParamToggle("Show TD Setup Trend", "No|Yes", 1);
tdstsa = 0;
tdstba = 0;
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//********************************************** TD Points ************************************************** ******************/
function TD_Supply()
{
return ( H > Ref(H, 1) AND H > Ref(H, -1) AND H > Ref(C, -2));
}
function TD_Demand()
{
return ( L < Ref(L, 1) AND L < Ref(L, -1) AND L < Ref(C, -2));
}
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
// *********************************************** TD Sequential ************************************************** **********/
// *** Setup Buy Signal ***
//nine consecutive days closes less than the close four days earlier
Con = C < Ref( C, -4);
Buy9Bars = BarsSince(BarsSince(Con));
Buy9Signal = Buy9Bars == 9;

// *** Requirements ***
//The first day of the nine-day must be preceded by a close day immediately before it that is greater than or equal to the close four days earlier
Con = Ref(C, -9) >= Ref(C, -13);
Buy9Req = Buy9Signal AND Con;

// *** Intersection ***
// the high of either day 8 or day 9 is greater than or equal to the low three, four, five, six, or seven days earlier
Con1 = (H >= Ref(L, -3)) OR ( Ref(H, -1) >= Ref(L, -3));
Con2 = (H >= Ref(L, -4)) OR ( Ref(H, -1) >= Ref(L, -4));
Con3 = (H >= Ref(L, -5)) OR ( Ref(H, -1) >= Ref(L, -5));
Con4 = (H >= Ref(L, -6)) OR ( Ref(H, -1) >= Ref(L, -6));
Con5 = (H >= Ref(L, -7)) OR ( Ref(H, -1) >= Ref(L, -7));

Buy9Intr = Buy9Req AND (Con1 OR Con2 OR Con3 OR Con4 OR Con5);
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
// *** Setup Sell Signal ***
//nine consecutive days closes greater than the Close four days earlier.
Con = C > Ref( C, -4);
Sell9Bars = BarsSince(BarsSince(Con));
Sell9Signal = Sell9Bars == 9;

// *** Requirements ***
//The first day of the nine-day must be preceded by a Close day immediately before it that is less than the Close four days earlier
Con = Ref(C, -9) < Ref(C, -13);
Sell9Req = Sell9Signal AND Con;

// *** Intersection ***
//the low of either day 8 or day 9 is less than or equal to the high three, four, five, six, or seven days earlier
Con1 = (L <= Ref(H, -3)) OR ( Ref(L, -1) <= Ref(H, -3));
Con2 = (L <= Ref(H, -4)) OR ( Ref(L, -1) <= Ref(H, -4));
Con3 = (L <= Ref(H, -5)) OR ( Ref(L, -1) <= Ref(H, -5));
Con4 = (L <= Ref(H, -6)) OR ( Ref(L, -1) <= Ref(H, -6));
Con5 = (L <= Ref(H, -7)) OR ( Ref(L, -1) <= Ref(H, -7));

Sell9Intr = Sell9Req AND (Con1 OR Con2 OR Con3 OR Con4 OR Con5);
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
if(StrToNum(NumToStr(Buy9Intr))) Sell9Intr = False;
if(StrToNum(NumToStr(Sell9Intr))) Buy9Intr = False;
BuySignal = Flip(Buy9Intr, Sell9Intr);
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
// *** Buy Countdown ***
//With respect to a pending Buy Signal, the close must be less than the low two days earlier;
Con = C < Ref(L, -2);
Buy13Count = Sum(Con AND BuySignal, BarsSince(Buy9Intr));
Buy13Signal = Buy13Count == 13;

/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
// *** Sell Countdown ***
//with respect to a pending Sell Signal, the Close must be greater than the High two trading days earlier.
Con = C > Ref(H, -2);
Sell13Count = Sum(Con AND NOT BuySignal, BarsSince(Sell9Intr));
Sell13Signal = Sell13Count == 13;
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//*********************************************** TD Sequential Plotting area *************************************************/
Plot(C, "", IIf(O>=C, colorRed, colorGreen), styleBar);
PlotShapes(IIf(Buy9Intr OR Sell9Intr, shapeDigit9, shapeNone),colorBlue, 0, H, 20);
if(ShowNumbers)
PlotShapes(IIf(Buy9Bars==1, shapeDigit1,
IIf(Buy9Bars==2, shapeDigit2,
IIf(Buy9Bars==3, shapeDigit3,
IIf(Buy9Bars==4, shapeDigit4,
IIf(Buy9Bars==5, shapeDigit5,
IIf(Buy9Bars==6, shapeDigit6,
IIf(Buy9Bars==7, shapeDigit7,
IIf(Buy9Bars==8, shapeDigit8,
IIf(Buy9Bars >9, shapeStar,shapeNone))))))))),colorGreen, 0, H, H*.001);
if(ShowNumbers)
PlotShapes(
IIf(Sell9Bars==1, shapeDigit1,
IIf(Sell9Bars==2, shapeDigit2,
IIf(Sell9Bars==3, shapeDigit3,
IIf(Sell9Bars==4, shapeDigit4,
IIf(Sell9Bars==5, shapeDigit5,
IIf(Sell9Bars==6, shapeDigit6,
IIf(Sell9Bars==7, shapeDigit7,
IIf(Sell9Bars==8, shapeDigit8,
IIf(sell9bars>9, shapeStar,shapeNone))))))))),colorRed, 0, H, H*.001);

Sell = Sell13Signal AND NOT BuySignal;
Buy = Buy13Signal AND BuySignal;
Sell = ExRem(Sell, Buy);
Buy = ExRem(Buy, Sell);
PlotShapes(Sell*shapeDownArrow, colorYellow, 0, H, -H*.001);
PlotShapes(Buy*shapeUpArrow, colorBrightGreen, 0, L, -L*.001);

if(StrToNum(NumToStr(BuySignal)))
bgColor = ColorRGB(0,66, 2);
else
bgColor = ColorRGB(66,2, 0);
SetChartBkGradientFill( colorBlack, bgColor);
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//*********************************************** TD Points Plotting area *************************************************/
if(ShowTDPoints)
{
PlotShapes(TD_Supply()*shapeSmallCircle, colorRed, 0, H, H*.001);
PlotShapes(TD_Demand()*shapeSmallCircle, colorGreen, 0, L, -L*.001);
///////////////////////////////////////////////////////////////////////////
y0 = StrToNum(NumToStr(ValueWhen(TD_Demand(), L)));
x = LineArray(0, y0, (BarCount-1), y0);
Plot(x, "", colorGold, styleDashed);
y0 = StrToNum(NumToStr(ValueWhen(TD_Supply(), H)));
x = LineArray(0, y0, (BarCount-1), y0);
Plot(x, "", colorGold, styleDashed);
}
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//*********************************************** TDST Plotting area *************************************************/
// ---------------->>>> Code from Dave <<<----------------------
//
if(ShowTDST)
{
tdstba =Cum(0);
tdstb = Null;
HHV9 = HHV(H,9);
for (i = 0; i < 10; i++) tdstba[i] = Null;

for( i = 10; i < BarCount; i++ )
{
if (Buy9Bars[i] == 9)
{
HHV_b = HHV9[i];
if (HHV_b > C[i-9])
tdstb = HHV_b;
else tdstb = C[i-9];

for (j = 0; j < 9; j++ )
tdstba[i-j] = tdstb;
}
else tdstba[i] = tdstb;
}

tdstsa =Cum(0);
tdsts = Null;
LLV9 = LLV(L,9);
for (i = 0; i < 10; i++) tdstsa[i] = Null;

for( i = 10; i < BarCount; i++ )
{
if (Sell9Bars[i] == 9)
{
LLV_b = LLV9[i];
if (LLV_b < C[i-9])
tdsts = LLV_b;
else tdsts = C[i-9];

for (j = 0; j < 9; j++ )
tdstsa[i-j] = tdsts;
}
else tdstsa[i] = tdsts;
}
Plot(tdstba, "TDSTb", colorBlue,styleStaircase | styleThick|styleDots);
Plot(tdstsa, "TDSTs", colorRed,styleStaircase | styleThick|styleDots);

}
/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
Title = "{{DATE}} - "+Name()+" ("+ FullName()+ ") - "+" Open="+O+", High="+H+", Low="+L+", Close="+C+StrFormat(" (%.2f %.1f%%) ",IIf(ROC(C,1)==0,0,C-Ref(C,-1)),SelectedValue( ROC( C, 1 )))+
"\n"+EncodeColor(colorBlue) +"TDST Buy = " +WriteVal(tdstba, 5.2) +" "+EncodeColor(colorRed) +"TDST Sell = " +WriteVal(tdstsa, 5.2)+
"\n"+EncodeColor(colorGold)+WriteIf(BuySignal, "(Buy Signal Active:"+Buy13Count, "(Sell Signal Active: "+Sell13Count)+")";

_SECTION_END();

Some explanation regarding the system is given in http://researchlabtrading. com/public/382.cfm?sd=36

We can discuss how effectively the TD sequential can be used and perhaps add more research to this.

Hope this helps.

Frankly Its all Grrek to me!!!

Can it also be done in Metastock!!!

Thanks Leo for starting this thread.

hi leo,

Got nice colorful graph in Ami. How do we interpret the indicators.

Cheers

looks interesting, could you explain how it signals as am a total layman, also It says TDST Buy= & TDST Sell= what do these figures signifies ?
Thanks

Like I said in the beginning of the thread, I am no expert or a follower of this indicator/system. I am researching this and found it very interesting. Attaching the chart that I got from using the above AFL on Nifty EOD.

In Amibroker, right click on the chart, Parameters, Select 'No' to Show 1-8 Numbers and Show TD setup trend. We get the pivot points alone. Many of our friends following Saint's method can evaluate this and see if it will be useful for new members on identification of major pivot points.

Going back to the system:

Sequential is a mechanical trading system developed by Thomas Demark. It consists of several stages:

1. Setup
2. Requisite filter (Intersection)
3. Countdown
4. Entry into the market
5. Position closing (exit)

Setup
Buy or Sold Setup is considered to be formed if within at least 9 consecutive bars, the closing prices are lower (higher) than the closing prices four bars preceding each bar of this sequence. There must be no less than nine bars in the setup.

Requisite filter (Intersection)
Intersection is designed to filter-out false setups. To confirm a buy (sell) setup the high (low) of bar 8 or 9 must be higher (lower) or at the same level as the low (high) of bars 3,4,5,6 or 7. If there is no intersection on bar 8 or 9, then the countdown stage is delayed until it happens.

The setup is canceled in the following cases:

If "looping" (will be described later) occurs.
If one of the following closing prices is higher than the highest daily top in the case of the Buy Setup; or less than the lowest daily bottom in the case of the Sell Setup.

Countdown
The countdown begins once the setup intersection has occurred (but not earlier than bar 9 for this Setup). For the Sell (Buy) Setup the countdown reveals the correlation between the closing price and the high (low) price two bars before. The closing price should be higher (lower) than the high (low) price two bars before. Once thirteen prices have been fixed (not necessarily sequential) the signal appears.

The countdown stage cannot be completed before twelve bars appear following the setup stage (the ninth bar is supposed to be on the countdown stage), but generally, it takes approximately 15-30 bars.

The countdown and the setup are canceled in the following cases:

If another opposite setup has been formed.
In case of "looping" (if another setup in the same direction is formed).

Enter the market
There are three methods of opening a position:

At the close of the bar which ended the countdown. This is the most risky method because there is a great chance of "looping".
Following the flip: in order to buy (sell) the closing price should be higher (lower) than the closing price four bars before.
Following two-bars flip: in order to buy (sell) the closing price should be higher (lower) than the closing price two bars before.
The third method is a compromise between the first and the second method.

Exit from the market
To determine the Stop Loss levels, Thomas DeMark used a range of the day with the lowest (the highest) price over the whole setup period and the Buy (Sell) signal countdown.

There are two methods to define the range:

The bar's low is subtracted from the bar's high or from the previous bar's close if it is higher. In the case of the Buy (Sell) signal the Stop Loss level is calculated by subtraction (adding) of this value from the bar's low (to the bar's high).
The second method is more "conservative". The bar for the Stop Loss level is chosen in a similar way. For the Buy position however, the Stop Loss level is calculated by subtracting the difference between the close and the low prices from the bar's low. For the Sell position the Stop Loss level is calculated by adding the high price and the difference between the high and the close.
It is very important to define levels at which to fix profit in case of favorable price behavior. There are two ways to close a position with profit:
If a new Setup stage has been finished and the price could not reach the highest/lowest price level registered during nearest inactive setup.
If there is a reversal signal.

Sequential is effective not only on daily charts but Thomas DeMark recommended it only for this period.

If you want to know more details about this system, it is fully explained in DeMark - The New Science of Technical Analysis. Additional reading is recommended of Tom DeMark - DeMark on day-trading options

You can download these from 4 shared.

Hi
Nice education and informatin
thanks
regards
sikandar