From a differenced-average sketch to coded rules

A detrended path before any coded rule

Construction began by differencing successive values of a 35-day simple moving average of closes so later inspection acted on a detrended path. Differencing replaces a level series with the change from one sampling period to the next so later rules act on the detrended path rather than on the raw trend.

Hand-drawn lines on that differenced average were used to mark the start and end of price trends rather than the exact highs and lows.

From sketch lines to one procedure

The intended mechanical procedure was to trade the trend of the differenced average after reducing the sketch to explicit rules and then checking loss behavior on other spans of the same market. A mechanical-trading-system is a single coded procedure that turns those crossings into entry, exit, and later abstention without redrawing lines by hand.

Editorial. TradersWeek treats this construction as a translation job. The visual read is unfinished until the sketch is one coded procedure whose crossings can be audited, whose filters match the scale of the numbers, and whose first tester pass answers whether the rules ran, not whether the idea is ready to fund.

A smoother that code can cross

Because an automatic daily trendline series was unavailable, a smoother of the difference series was substituted so crossings could be referenced in code. The moving-average in this workflow is a fixed-lookback average of closes used both as the series being differenced and as a smoother of that difference so crossings can be coded.

When the chart and the table disagree

When the plotted smoother of the difference series looked too high near a mid-year peak, tabulated values were used to verify crossings because the chart display was unreliable. That step is a worksheet-audit: checking tabulated indicator values against the intended crossings whenever the chart display and the tester disagree.

Skeleton-rules before risk controls

The first coded logic used skeleton-rules: the simplest entry and exit, with stops omitted, so the rule set could be checked before risk controls were added.

A tester pass can fail for reasons outside the trading rules. After the parser accepted the logic, insufficient memory produced unusable profit-and-loss fields until allocation was increased. Once tabulated values showed the engine followed the rules, the next change was a filter on the crossings.

A crossing-filter sized to the digits

A minimum gap of 0.005 was added because indicator levels were on the order of 0.032498 and separations appeared in the third and fourth significant digits. That crossing-filter is a minimum gap required between the differenced average and its smoother before a signal counts, sized from the digits at which those two series actually separate.

That first filtered draft was treated as unfinished. The 0.005 gap was arbitrary, long and short sides might need different gaps, and remaining work included other periods, capital, stops, and the size and distribution of adverse moves.