Article: Buffy's B-Line System

My basic style is not to give very much of anything back to the market.  I would rather exit the trade and reenter than have a retracement turn into much more.  For example, those of you familiar with Retro will see that one of Retro's trades might be 3 to 5 trades for me.

My files have posted to the Internet so you can download them.    In Ensign Windows, click the Internet Services button on the main button bar.   Click on the Upgrade tab on the Internet Services form.   Select the Sample Workspace bullet, and click the Connect button, and then click the Download button when it becomes enabled.  This downloads my workspace file.   Do the same thing by selecting the Sample Template bullet and click the Download button.  Now you have my workspace shown as Ensign on the Workspace panel, and my template shown as Ensign on the Template panel.  You may wish to Resave both to use another name besides Ensign because the Downloader always uses the name Ensign when it saves the samples to your computer.

Now when you click on the template button in Ensign Windows and apply Ensign you will have my system on your chart.

Here's a quick overview of the indicators included in the Ensign template::

• The top color band is the trend of that time frame.
• The lower color bands are visual representations of the weighted moving average (WMA) on the price chart. (parameters 4,9,15,20)
• The cyan and red lines in the study sub-window are short term Stochastic (parameters 5,3,3).
• The yellow and green lines in the study sub-window are the longer term Stochastic (parameters 9,3,3).
• The white line (shown in black in the illustration) in the study window is what we call the "B line," which indicates strength of trend something like directional movement index (ADX) but always moves in the direction of the price trend (Stochastic parameters 35,10,1).
• The circles are warnings to tighten stops.  If the circles are both one color in a trend,  you can run a lose stop - 3-4 ticks (1.5 to 2 pts) or your preference. 
• If one of the circles turns a different color, it is a warning to check things out.  Look at the higher time frame (TF) - if trend is strong there, then you can start using one of the weighted moving averages (WMA) for your stop.  If it isn't, look at the lower TF and see what is going on there and if any reason to tighten.
• If circles both change color against the trend, then I tighten stop to 1 or 2 ticks. 
• The only time I might consider waving this rule is when there is an inside bar (either end can be even) per Mike Bruns.  But stop will not be higher/lower than 2 Ticks off the high/low of previous bar before inside bar.

When the "B line" is decked above 80 in the main TF and the next shorter TF, the up-trend is strong and might carry over to the higher TF (vice versa for "B line" below 20 in down trend).  I have now seen this happen right up through the 15 minute time frame on a strong downtrend.

These indicators work in all time frames.  You need to watch at least one TF higher and at least one lower. For example, I trade the 75 constant tick chart but have the 30, 50, 150,  and 300 constant tick charts up also.  The system also works on minute charts.  The signals aren't as fast, which is true of all indicators, but it still gives you the signals.

The divergences in the highs/lows of the stochastic can often call a failed retest of high/low before price does.

When the B line is rising and the Stochastic falls to meet it and then turns up, it usually signals the start of another leg up. (See example www.dacharts.com, 2001-10-15 folder, buffy-temp3 sig4.gif)

When the B line is falling, and the Stochastic rises to meet it and then turns down again, it usually signals the start of another leg down.

There were an equal number of people who did and didn't want a color band below the top one for the B line. To add this to your template right click on chart, click on draw tools, click on the alarm clock.  The cursor will turn into a pencil when over the chart.  Click on the B line.  A properties window will come up.  Make it exactly like the one posted (See example www.dacharts.com, 2001-10-15 folder, Buffy-B line color band5.gif), click on OK.  It should now be on the chart.  Green is used for up and yellow for down to quickly know which band is which.  If you want to add to templat3 or make another template with it included with other indicators on templat3, right click on chart.  Click on template, click on SAVE, click on the template you wish to save it to.

Summary:  System for day trading the Nasdaq and S&P index futures.  Signals can be as simple or as complicated as you wish to make it.   

Strengths:  Uses multi-timeframe analysis.  Frequent trading opportunities.  Leaves very little on the table.  Very suitable for part time trading.  Can scalp (tick charts) or trend (minute charts) trade intra-day.  (May also be used for stocks with 60 minute - daily - monthly charts.)

Weaknesses:  If scalping, requires close attention to the charts.

Intensity:  Scalping may have 20+ trades per day.  Trend trading depends on time frame used.

Resources:  Real-time charts posted throughout the day to the www.dacharts.com web site, real-time voice chat peer support in the B-Line chat room using Ventri1o port 3800, after-hours simulated trading with Buffy, voice chat Q&A.

Article by Judy MacKeigan