Below is a tutorial on using msPaint for FLIR, as described in Dennis Hudson's November 2009 Equity Trading Techniques piece.
If you have Windows, you have msPaint, and you can use the program to easily identify FLIR points as described in the Futures article “Price charts: Profits without the complexity,” November 2009.
Note that whenever you make an error, Edit/Undo will restore the image as it was.
1. Open a Paint file- Start/Programs/Accessories/Paint
2. Bring up a chart in your charting program.
3. Putting your chart in paint. Hit "PrtSc" on your keyboard. This will save a copy of the entire screen of your charting page.
4. Go back to your Paint file. Edit/Paste. This will paste in the copy of your chart page. Now you want to get rid of all the extraneous stuff and have only the chart.
5. At this point, you can't see it but there's a dotted selector line around the image. Click the dotted rectangle (Selector tool) towards upper left. This turns off the selector line and fixes the image in place (otherwise you could drag it about). It also enables the Selector tool.
6. Click-and-drag your mouse to encompass only the chart with a dotted selector line, then release the mouse. Edit/Cut. This cuts the chart from the image and saves it as a copy on your clipboard.
7. Edit/Select All. Hit Delete. This will delete extraneous matter and give your a clean canvas. Edit/Paste. This will paste in only the chart. You can adjust canvas size by hovering your mouse over the extreme lower right corner of your canvas and dragging.
8. Click the Zoom tool (magnifying glass). Click once on an area of the chart containing bars or candles, preferably a group of candles in a sideways pattern. This will zoom you in.
9. Creating a scale. Click the straight Line tool at left. Starting at the middle (wick) of one candle, drag your mouse to the right until you've drawn a line ending exactly above the fifth candle to the right. This line is your Scale. For ease of drawing, note that you can also hold down the Shf key while dragging the mouse to create a perfectly straight horizontal, vertical, or 45-degree line. Now draw short vertical lines in your Scale to mark the midpoint of each of your candles.
10. Click the Selector. Use it to select your Scale, then either copy or cut the selection. Now click your scrollbars to move over to the last candle on your chart. Paste in your Scale and drag it so that its left end is exactly aligned with the middle of the last candle. Paste in a second copy and drag it so that its left end is aligned with the right end of the first Scale; repeat this until you have five scales together, i.e., a 25-bar Scale. Seems like a lot of work but if it's accurate for other charts you can simply copy it across for re-use. When done, use the Eraser tool to remove any unwanted matter from your copies.
11. Click Zoom tool, then click once on image and it will return to normal size. You do this because you need to type something now and typing will not work in Zoom mode. Click the "A" tool (this is the Text tool), then drag you mouse a bit over a blank area of your canvas and this will open a space for typing. Type in, "5 10 15 25".
12. Now Zoom in again. Use Selector to select and drag each of the above numbers into their correct positions on your Scale. When done, select the entire scale, copy it, then paste it into a blank area of your chart for safekeeping and re-use on other charts (remember to always check to see if it's accurate for those charts). Zoom out.
13. Draw your two trendlines.
14. Backtesting. Now you want a crosshair for a cursor; the Line tool or Selector will give you this. You want to measure the distance between two extremes of price, for this example a low to a low. For backtesting, it's important to select a low-to-low pair in which the distance between them, if drawn vertically, looks like it would fit between your two trendlines someplace in the price history shown on your screen. Hover your mouse over the "wick" of a first low and notice at lower right of screen what number is shown (write it down!). Then move to the next low, hover over it, and write down the new number at lower right (one number is horizontal movement and one is vertical- you want the horizontal). Subtract one from the other to find the distance between the two candles. Write it down.
15. Click Line tool. In a blank area, hold down your Shift key while dragging your mouse vertically and while watching numbers changing at extreme lower right of your screen. When it shows a length equal to the distance between your first and second lows, release.
16. Click Selector. Note that when your Selector is active, it offers you the choice of two panels at the bottom of your toolbar on the left. The top panel is "opaque" mode; the lower panel is "transparent" mode. Click the lower panel. Capture the vertical line you just drew and drag it until it exactly fits between your two trendlines. If it marks a reversal, it's a successful backtest. Repeat this procedure at least twice more using different combinations of highs and lows as measuring sticks.
17. FLIR. Follow a procedure similar to Backtesting (above) to create FLIRs in the future. You may be able to use your previous measuring sticks, as long as they register somewhere on your 25-period Scale (yes, you can create a longer Scale if you wish).
18. Miscellaneous notes. The Color Panel can be used to change colors of lines and text. The Paint Can can be used to change colors, very helpful if you're trying to keep track of relationships. If you Select an area, then Image/Rotate, you can rotate a line 90 degrees or more. Sometimes, Image/Invert Colors enables a better view of your work.
Dennis Hudson first developed FLIR. He honed his quant skills at General Electric Co. in the 1960s, in forecasting particle size distributions in diamonds manufacture. He's an active options trader and principal of OrangeQuant.com, where he can be reached.