2006 Dec 24 - Sun

Merrill Patterns

On page 94 of Bollinger's Book: Bollinger on Bollinger Bands, he talks about matching various tradeable patterns developed by Arthur Merrill. In an earlier article on Peak Matching, I provided some code to match chart trading peaks and valleys in real-time. By using that code in addition to my Merrill Pattern Matcher code, Aurther Merrill's patterns can be computed live during a trading session. The PeakMatch code stores it's values in a DoubleSeries array from which the MerrillPattern code uses the last five values to compute the pattern. Then based upon the analysis provided in Bollinger's book and Merrill's book, one can use the information to influence trading styles.

The code is built upon a table driven decision format, which in turn is based upon the observation that Merrill's patterns can be described within a 5x5 grid where each of five peaks/valleys will fall into unique row. The rows are numbered 1 through 5. With five rows, there are 2 to the 5 combinations, ie, 32 combinations.

A set of five points is classified by placing the price point and an index into a sorted array. The concatenation of the sorted indexes is used to generate 'key' to be used in looking for the pattern in the pattern list.