Overview

The "Building Blocks" settings in the Automatic Strategy Builder (ASB) allow users to define the core components that will be used to construct trading strategies. These elements form the foundation of the strategies, guiding the algorithm in creating robust and effective trading rules. Below is a detailed explanation of each building block element:

1. Predefined Signals

• Description: Users can select signals based on different indicators to be used in building trading rules. These predefined signals serve as the foundational triggers for strategy entry and exit points.
• Usage: This setting allows users to leverage well-known indicator-based signals, such as moving average crossovers or RSI oversold/overbought conditions, to form the basis of their trading strategies.
• Example: Selecting a predefined signal like "RSI below 30" could be used as a trigger for entering a long position.

2. Indicators

• Description: Users can select various indicators and define possible conditions between them. The builder will then attempt to find hidden relationships between the selected indicators to construct trading rules.
• Usage: This setting enables the creation of complex strategies by combining multiple indicators, allowing the algorithm to discover synergistic effects and optimize trading decisions.
• Example: Combining indicators such as SMA, MACD, and Bollinger Bands to identify unique trading opportunities based on their interactions.

3. Candlestick Patterns

• Description: Allows users to include selected candlestick pattern detection into the strategy trading rules creation. Candlestick patterns are visual representations of price movements that can indicate potential market reversals or continuations.
• Usage: By integrating candlestick patterns, users can enhance their strategies with technical analysis techniques that capture market sentiment and price action.
• Example: Including patterns like "Hammer," "Doji," or "Engulfing" to signal potential entry or exit points.

4. Chart Patterns

• Description: Enables users to include selected chart pattern detection into the strategy trading rules creation. Chart patterns are larger formations on the price chart that often indicate significant market movements.
• Usage: Incorporating chart patterns helps in identifying broader market trends and potential breakout or breakdown points, adding depth to the strategy’s analytical framework.
• Example: Including patterns such as "Head and Shoulders," "Double Bottom," or "Triangles" to identify key trading opportunities.

5. Order Types

• Description: Users can select the type of entry orders to be used in the strategies, such as Market, Stop, or Limit orders. Each order type has different characteristics and uses depending on the trading scenario.
• Usage: Choosing the appropriate order type ensures that trades are executed in a manner consistent with the strategy’s objectives and market conditions.
• Example: Using Stop orders to enter trades once a certain price level is reached, or Limit orders to ensure trades are only executed at favorable prices.

6. Exit Signals

• Description: Users can select exit signals to be used for closing positions in the strategy. Exit signals are critical for managing risk and locking in profits.
• Usage: Defining clear exit signals helps in systematically closing trades based on predetermined criteria, thereby improving strategy performance and risk management.
• Example: Selecting exit signals like "Trailing Stop," "Take Profit," or "Stop Loss" to manage how and when positions are closed.

Summary

The "Building Blocks" settings in the ASB provide the essential components for constructing trading strategies. By selecting predefined signals, indicators, candlestick patterns, chart patterns, order types, and exit signals, users can customize the strategy generation process to align with their trading style and objectives. These building blocks form the basis of sophisticated and responsive trading strategies, allowing the ASB to generate rules that are both effective and aligned with market dynamics.