Lines and Colors and Clouds Oh My! - Thinkorswim Thinkscript

I have been playing around with the "AddCloud" functionality within the Thinkscript API and came up with a variation on the GMMA strategy I call GMMA_Cloud, combined with what I call the ChrisStoplight system. This system is effectively 3 indicators built into one, the RSI up top, the DMI in the middle, and the StochasticMomentumIndex down below. Rather than focusing on the lines that make up the indicators, I've decided it's more important to keep track of the relationship between them.

The concept here is I believe that our brains are designed to deal more with spacial / color relation than trying to distinctly interpret lines all saying different things. My goal is to be able to glance at my chart and immediately get a feel for the movement of the security (in my case, forex pair). When all colors agree, odds are statistics are in your favor and it is reasonable to enter in agreement with the color.

The GMMA_Cloud consists of two clouds, the difference between the 3 and 15 ema is one cloud, and the difference between the 30 and 60 ema is the other.

I don't have a distinct strategy built up for this setup, as there are a lot of places for trader discretion that every trader will handle differently. The main idea is to use the GMMA clouds, combined with the RSI and DMI to determine trend and use the Stochastics to determine pinpointed entries. I'm leaning toward exits being targeted at daily pivot point levels unless the trend breaks sooner.

#Name:             GMMA_CLOUD
#Programmed By:    Chris Ball (chris.m.ball@gmail.com) on 1/31/09
#Posted At:        http://chartingwithchris.blogspot.com
#Description:      This is a cloud representation of the Guppy Multiple Moving Average system using only the exterior EMA's for the two groups.

declare upper;

input price = close;
input displace = 0;

def length3ema = 3;
def length15ema = 15;
def length30ema = 30;
def length60ema = 60;

plot avgexp3 = ExpAverage(data = price[-displace], length = length3ema);
avgexp3.SetDefaultColor(Color.Gray);
plot avgexp15 = ExpAverage(data = price[-displace], length = length15ema);
avgexp15.SetDefaultColor(Color.Gray);

AddCloud(avgexp3, avgexp15);

plot avgexp30 = ExpAverage(data = price[-displace], length = length30ema);
avgexp30.SetDefaultColor(Color.Gray);
plot avgexp60 = ExpAverage(data = price[-displace], length = length60ema);
avgexp60.SetDefaultColor(Color.Gray);

AddCloud(avgexp30, avgexp60);

#Name:             ChrisStoplight
#Programmed By:    Chris Ball (chris.m.ball@gmail.com) on 1/31/09
#Posted At:        http://chartingwithchris.blogspot.com
#Description:      This indicator is truly a representation of 3 indicators (RSI, DMI and the StochasticsMomentumIndex).

declare lower;

plot rsi1 = if RSIWilder(length = 14)."RSI" >= 50 then 10 else 9;
plot rsi2 = if RSIWilder(length = 14)."RSI" < 50 then 10 else 9;

AddCloud(rsi1, rsi2);

plot dmi1 = if DMI(length = 14)."DI+" >= DMI(length = 14)."DI-" then 8 else 7;
plot dmi2 = if DMI(length = 14)."DI+" < DMI(length = 14)."DI-" then 8 else 7;

AddCloud(dmi1, dmi2);

plot sto1 = if StochasticMomentumIndex()."SMI" >= StochasticMomentumIndex()."AvgSMI" then 6 else 5;
plot sto2 = if StochasticMomentumIndex()."SMI" < StochasticMomentumIndex()."AvgSMI" then 6 else 5;

AddCloud(sto1, sto2);

rsi1.setDefaultColor(Color.Gray);
rsi2.setDefaultColor(Color.Gray);
dmi1.setDefaultColor(Color.Gray);
dmi2.setDefaultColor(Color.Gray);
sto1.setDefaultColor(Color.Gray);
sto2.setDefaultColor(Color.Gray);

As can be seen in the above picture, there are usually several trading opportunities, depending on the time frame you're analyzing. I've been focusing on the 30 and 15 minute time frames. The idea is to trade when all colors are in agreement and get out when 1 or 2 start to go against your position. Due to the vast amount of trader discretion involved, I'd say my system is something to toy with and use as a starting base for creating your own strict rules. Without rules and money management, there's no way to consistently make money! Hopefully this will spark some inspiration with my fellow swimmers.

Cheers,
Chris