The AFL uses looping on all bars to generate buy-sell signals. This is because the entries and exit conditions are different but occur too frequently. Using flags in the loop helps to confirm. The proper cycle of Buy, Sell, Short, and Cover signals is maintained. There are no consecutive buy or sell signals.
Strategy Premise
In the book “The New Technical Trader”, Tushar Chande introduced the Chande Momentum Oscillator (CMO). It is a momentum indicator very similar to RSI and Stochastics indicator. However it differs from them in its construction that the Up and Down days are used in both numerator and denominator.
The overbought and oversold levels in CMO as suggested by Tushar Chande are +50 and -50. We use these levels similar to the RSI AFL Trading System. We Buy when CMO crosses above +50 using the recent high of last 5 candles as stop loss. The default period of 20 is used for CMO.
Strategy Logic
Buy: When CMO crosses above +50
Sell: When recent low of last 5 candles is breached
When Strategy gives Buy, it will send LE in Call and LX in Put. When Strategy gives Sell, it will send LE in Put and LX in Call.
Amibroker Settings
Step 1: Make sure you have completed Jump Start setup
Step 2: Download AFL from here. In Amibroker, Go to Formula editor and paste the AFL here.
Step 3: Right Click on the chart and go Parameters to adjust the inputs of the strategy.
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