This is perhaps the simplest afl trading system in which the afl code can be understood by non-programmers also. We carefully define the Buy, Sell, Short and Cover rules; where Short and Cover are symmetrically opposite if Buy and Sell. This helps in smooth integration of this AFL with automated trading systems.
Strategy Premise
Selecting Indicators for Dynamic Momentum Index System. The Dynamic Momentum Index (DMI) was developed by Tushar Chande and Stanley Kroll. The period of DMI changes dynamically depending upon recent volatility. During slow market movement, the number of periods used to calculate DMI is increased. The volatility indicator used in controlling the time periods in the DMI is based on a calculation using a five-period standard deviation and a ten-period average of the standard deviation.
A moving average on DMI is used to trigger signals. The periods used are: DMI (smoothening) = 20 and DMI (average)= 30. However, the DMI, being a momentum oscillator, produces too many signal triggers. To filter the signals, we further use PDI and MDI levels.
Strategy Logic
Buy: When DMI crosses above its average and Plus Directional Index is greater than 25
Sell: When DMI crosses below its average
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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