Wick Zone

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AndyG
Posts: 4
Joined: Thu Dec 22, 2022 3:46 am

Wick Zone

Post by AndyG »

Here is my next project. I have traded this manually when I see it.
The general concept is identify were price does not like to spend time. This is represented as wicks. When you have an area where only wicks penetrate it provides a tight entry and also an obvious invalidation - when a candle closes inside that area then the zone is violated and you would look for exit.

I would trade it like this
3 wicks or more in recent X candles. No closes or candle bodies in that area (space to left for reversal) == WICK ZONE

Enter on a 3rd or forth candle with wick rejection, or use limit order to tag an entry with next wick. Or just enter on close of a candle in your direction with SL beyond wicks.

I am trying to figure out how to program this in Naked Markets. If you are interested in working on this together I would be open to it.

The first riddle is trying to figure out how to identify multiple wicks in an area of some quality.

If candle closes inside the wick zone I would set TP to Entry to get out at BE, or just exit on the close of that candle.

If anyone is interested in developing a core rule to identify the wick zone I would appreciate the help.
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chrisb
Posts: 8
Joined: Wed Dec 14, 2022 5:09 pm

Re: Wick Zone

Post by chrisb »

How interesting! I love the idea. It seems like your idea would lend and easier way to automate S/R zones. Am I thinking about this right? If so, this seems like quite the feature.
AndyG
Posts: 4
Joined: Thu Dec 22, 2022 3:46 am

Re: Wick Zone

Post by AndyG »

That's correct. You can think of it as identifying short term S/R zones. From a short term perspective it is a current S/R forming and looking to get in at the tail end of the S/R being formed.
Referring to Anna Coulling's books A Complete Guide to Volume Price Analysis she describes the market in terms of Accumulation and Distribution of supply.
From the perspective of the market maker, in an upward move the wick zone represents the distribution zone (emptying the supply in the warehouse)
So the inventory is being sold off, sellers are emptying the warehouse at this zone. Large holders have to do this over time so as not to spook the market and cause price to fall until all inventory has been sold off. After this the market moves lower to restock the warehouse at a better price.

From this perspective S/R zones are not barriers, they are areas where inventory is either accumulated or distributed.

Anyway, I am trying to think of how we can program an algorithm to identify when these wick zones are being created. Here are some ideas I am working on before I start to create rules. Once I have the characteristics identified I need to figure out how to create these with Core Rules.

How do we identify the wick zone?
Buy Signal
1. (sum of wick lengths on bottom end) > 50% of Sum of ranges
2. Upper Zone boundary = lowest body Open or Close
3. Lower zone boundary = lowest wick
4. difference in the Lows < length of longest wick
5. Define wick length = Close - Low (distance from low to close of candle.
6. Must have at least 3 wicks penetrate the wick zone.
7. Candle 0 and 1 fail to close below low of 2
8. Real Wicks must all share some common zone.
chrisb
Posts: 8
Joined: Wed Dec 14, 2022 5:09 pm

Re: Wick Zone

Post by chrisb »

This is such an interesting idea.
A price pattern using a top/bottom pinbar, for example, could possibly be used in a rule to identify when multiple wicks occur.
https://www.naked-markets.com/Wiki/Pric ... Top_PinBar
But that won't detect the lows or highs as in S/R areas.
However, I just found that NM has documented source code for their indicators:
https://github.com/NakedMarkets/Indicators
I'm wondering how difficult it would be to modify the S/R code, to achieve what you want:
https://github.com/NakedMarkets/Indicat ... Resistance

I've actually been wanting to modify this indicator anyway, so I may try to setup a dev env to attempt this. I'm certainly no programmer, but I have played around with different languages, mostly python, because of its finance libraries.
chrisb
Posts: 8
Joined: Wed Dec 14, 2022 5:09 pm

Re: Wick Zone

Post by chrisb »

The triple tap price pattern seems like it might be close to this idea.
https://www.naked-markets.com/Wiki/Pric ... Triple_Tap
AndyG
Posts: 4
Joined: Thu Dec 22, 2022 3:46 am

Re: Wick Zone

Post by AndyG »

These are great ideas Chrisb. I certainly think a triple tap may be a great core to start with and could layer in some qualifying core rules.
I haven't played with the triple tap yet, But I will start now to get to know how it works.
chrisb
Posts: 8
Joined: Wed Dec 14, 2022 5:09 pm

Re: Wick Zone

Post by chrisb »

Awesome! Good luck. I'm curious to hear how your testing results turn out.
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