ELLIPSE: Bidirectional Swing Trading Strategy (Strategy Version)

9. Okt. 2020

The eternal question that has occupied humanity since its early existence is what is the meaning of life and why am I here? On a daily basis this quest for meaning is distilled into a somewhat simpler question: What is the reason for getting up every morning?
For many of us, these thoughts arise even more as autumn arrives and it gets dark, bleak and cold outside. I guess it is easier to forget about the meaning of your life, while swimming on a sandy beach, enjoying a cocktail. Than you are living you life and you don’t need to rationalize it. Everything makes perfect sense!

In winter however, you need to get more “creative”. I, for example, would always try to change my perspective of things by doing something that makes my heart beat faster, like drinking a bottle of Heineken on a Friday evening or having endless conversations with my mates about stupid things, or kicking a ball against BALLONTHEROOF 7 on a Saturday morning. During the week, I would take out my frustrations on the fitness equipment at the local gym.

But what if all of this is canceled by CORONA? All that’s left is to work for the boss and run your 10km lap twice a week. The question is, what do you do now, with this huge amount of ”free” time than any old person would give anything for. When you are young time is never ending, when you are older it is never enough. Time has reached a different dimension in these days.
However, you can still do 2 things. You can slowly let the walls come to you and give up or you can actually do something useful with your time and find something that you are good at.

For us this choice was easy. After the success of our positioning trading strategy the MATRIX, at the time of the corona lockdown, we started making a swing trading strategy for the 4H timeframe, called ELLIPSE. We have included all feedback and any improvements we received about the positioning strategy and integrated it into the 4H script.

The main requirements of the script that we had set ourselves were:

• Bidirectional
  
  
• Low max drawdown
  
  
• High profit factor
  
  
• Works on all main crypto coins
  

By fully focusing ourselves on the script over the past few months, I can’t help but (unhumbly) say that we have not only succeeded in our mission, but that we have absolutely surpassed ourselves!
The only bright spot in this heavy corona time is, if a drug becomes available, there is extra money in the bank!


***The script is invite-only, message us to get script access***

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User Guidelines:

• The trading strategy was designed and optimized for trading cryptocurrencies only; furthermore it works best on established cryptocurrencies that have a clear historical trend such as:
  BTCUSD
  ETHUSD
  LTCUSD
  XRPUSD
  ADAUSD
  
  
• The trading strategy is based on swing trading methodology. The script must therefore be used on 4h candles only.
  
  
• Use USD trading pairs only (e.g. use ETHUSD instead of the ETHBTC) since the individual trend is captured more effectively and therefore gives better results.
  
  
• The trading strategy is bidirectional, both long and short entries are generated.
  

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Indicators used in this strategy:

• Ichimoku Cloud; acts as the leading indicator.
  
  
• Volume; without strong volume , a market move is not valid.
  
  
• MACD and Vortex; both being used as confirmation indicators.
  
  
• Choppiness index; avoids trading in choppy markets.
  
  
• Simple and Exponential Moving Averages; prevents trading against the trend.
  

The trading strategy is easy to use, bidirectional, trend based and without repainting, meaning once a signal has been made it is permanent and that no future data is used in the decision making. It detects the trend and filters out market noise based on more than 10 technical indicators. ONLY when all indicators align with each other the algorithm prints a LONG or SHORT signal. The trading strategy provides high probability trading signals and minimizes risk! This script aims to capture the profit from short to medium trending moves and by doing so filters out non-substantial trends and avoids the associated risks with these trades.

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Features:

• NO Repaint once candle is closed.
  
  
• Stop loss feature; set your own stop loss to manage your risks.
  
  
• Customizable Display for the Ichimoku cloud indicator display.
  
  
• Bidirectional; both long and short trading positions can be enabled.
  
  
• Full backtest feature; Easily generate your own backtest results for each asset (Strategy Version Script).
  
  
• Alerts; Get notified via email / pop-up / sms / app once a signal is given! (Alert Version Script).
  

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*Backtest results

Below are the back test results. Only well established cryptocurrencies are displayed with a clear historical trend:

Long and short trading positions,
Signal to signal trading (no multiple orders),
Initial Capital: 10 000 USD,
Order size: 10% of equity per trade,
commission fee 0.1%, period: start of chart,

Exchange-----Asset------Timeframe---Percent Profitable----Profit Factor---Total Trades----Max Drawdown----------Net Profit------
Bínance------BTCUSDT------4H-----------------54.4---------------5.32-----------------57----------------1.58%------------40.34%-(4034 USD)
Bínance------ETHUSD-------4H-----------------50.9---------------5.01---------------- 57----------------2.96%------------54.93%-(5493 USD)
Bínance------LTCUSD--------4H-----------------61.0---------------5.08-----------------59----------------2.09%------------57.06%-(5706 USD)
Bínance------XRPUSD-------4H-----------------43.13--------------3.52-----------------51----------------2.42%------------43.13%-(4313 USD)
Bínance------ADAUSD-------4H-----------------57.5---------------3.36-----------------47----------------3.46%------------40.82%-(4082 USD)

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Reminder: Use this trading strategy at your own risk and trade responsibly. We are not responsible for any financial loss using this strategy.

***The script is invite-only, message us to get script access***

22. Dez. 2020

Versionshinweise

We are always looking to optimize our trading strategies in terms of profit factor, net profit and maximum drawdown until we find the ultimate strategy.
We have chosen to integrate THE MATRIX positioning strategy (Daily) into ELLIPSE (4H). This is to prevent noise (whip saws / fake outs), among other things. After all, the trend is your friend!

New indicators added in this strategy:

• Integration of THE MATRIX, used to determine the overall trend of the market over different time frames (LONG only)
  Pivot points, support and resistance levels to determine entry and exit points (LONG as well as SHORT)
  

New features added:

• Conditionally colored background on MATRIX trigger, the background turns green when the MATRIX is activated on the day.
  

22. Dez. 2020

Versionshinweise

Minor fix regarding the labels.

22. Dez. 2020

Versionshinweise

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26. Dez. 2020

Versionshinweise

Script memory optimization. The script will load faster and is less computational demanding to the computer.

9. März 2021

Versionshinweise

-The script will now exit a long position more effectively if a weekly negative divergence on the RSI occurs.
-Added the option to display a coloured background if such divergence occurs.

26. Mai 2021

Versionshinweise

-Updated 26th May 2021

26. Mai 2021

Versionshinweise

-Finetuned the bearish divergence exit on the weekly RSI to only take place in an extreme overbought reversal situation, to reduce an early exit during market noise.
-Added an additional long entry based on cloud breakout with EMA alignment.
-Adjusted the short entry to never take place during conflicting bullish momentum on the daily timeframe.

25. Juli 2022

Versionshinweise

Since the release of ELLIPSE in October 2020, we have continuously worked on improving the script.
Today we are excited to finally announce the release of the updated version.
Below you will find an overview of the most important changes.

Long Entry and Exit triggers:
- Added several Long Entry triggers based on pivot reversal strategy in combination with Ichimoku Core
- Removed several Long Entry triggers based on multi-time frame analysis in combination with moving averages and Ichimoku Core.
- Refinement of the Long Exits by implementing PI cycle in combination with Ichimoku Core
- Refinement of the Long Exits by implementing weekly RSI in combination with Ichimoku Core

Short Entry and Exit triggers:
- Added several Short Entry triggers based on pivot reversal strategy in combination with Ichimoku Core
- Removed several Short Entry triggers based on multi-time frame analysis in combination with moving averages and Ichimoku Core
- Refinement of the Short Exits by implementing PR exit strategies
- Added an intrabar max take profit for all Short Exit triggers

The script ELLIPSE has been extensively and consistently tested on the top 100 cryptocurrencies (snapshot taken October 2020), ultimately resulting in a Profit Factor (Non-compounding) of 8.14 and Percent Profitable of 55% for both Long and Short entries.
There will be another medium post in which all backtest results are displayed completely transparently.

If you would like access please DM us on Tradingview or on Twitter @cryptonerdsio

25. Juli 2022

Versionshinweise

Updated chart.

31. Juli 2022

Versionshinweise

-Updated the strategy to Pine Script V5.
-Implemented compatibility for Automated Trading.

If you have questions regarding how to set up automated trading, send us a DM.

3. Dez. 2022

Versionshinweise

- 24-12 Pivot Reversal Long Entry above the cloud was added in conjunction with a TK cross.
- 24-12 Pivot Reversal Short Entry was added in conjunction with a cloud breakout.
- Minor optimization of the long entry with respect to the lagging line.
- Small optimization of the Short Exit to reduce the risk.

8. Jan. 2023

Versionshinweise

1) Added additional filters to reduce the amount of trading in ranging markets.
2) Added an extra volume indicator specifically for identifying opportunities to enter into short positions.

11. Feb. 2023

Versionshinweise

- Integrated multiple pivot reversal strategies consider the daily timeframe, allows for earlier trades on the 4H.

- Included multiple Ichimoku Cloud break out strategies, take into account multiple timeframes (12H, Daily).

- Inserted 600 and 1200 Simple Moving Averages. Distinguish between bearish and bullish territories on the 4-hour timeframe.

- Thorough code review. Several bugs removed.

28. Apr. 2023

Versionshinweise

- Added multiple pivot reversal strategies based on longer pivots (48/24, 36/18) for longs/shorts.
- Isolated all breakout strategies in the ELLIPSE and conducted backtesting.
- Removed a few strategies that did not add value.
- Rewrote the whole script in a smarter way to improve loading speed.

We now consider the script to be completely finalized. It is designed specifically for the volatile cryptocurrency market and will be subject to annual monitoring and backtesting.

4. Dez. 2023

Versionshinweise

Throughout our annual review of long entry and short strategies, we experimented with various approaches. As a result of analyzing the backtest results, we adopted the following methods:

• Utilizing entries based on daily cloud-to-cloud trading in combination with diverse pivot reversals.
  
• Implementing extreme long pivots (72/36, 60/30) along with notable volume surges in both semi-bullish conditions (within the daily cloud) and bullish territory (above the daily cloud).
  

6. Feb.

Versionshinweise

The algorithm has been fine-tuned to identify local tops in a bull market.
These tops are identified through a combination of:

• Monthly/yearly pivot points.
  
• Bearish divergence on the RSI.
  

11. März

Versionshinweise

Implementation of a breakout strategy that incorporates a 20-100 EMA (Exponential Moving Average) band squeeze along with the core principles of the Ichimoku trading system.

11. März

Versionshinweise

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6. Juli

Versionshinweise

• We've added several new short entries to the script.
  
• The concept is based on using very long moving averages in combination with double pivot reversals within a semi-bearish zone (e.g., when the lagging line is not yet below the 4H cloud).
  
• Additionally, we've revisited and further optimized the long exits.
  
• The entire script (both longs and shorts) has been backtested on the top 100 cryptocurrency market cap.
  

12. Sept.

Versionshinweise

Resolved an infrequent issue where a short alert signal was triggered incorrectly.

vor 6 Tagen

Versionshinweise

• Added long strategies on the 4H timeframe where the price was above the daily cloud, but the TK cross on the daily had not yet occurred.
  

• Removed monthly/yearly pivot resistance combined with bearish divergence from long exits, as they provided no added value.
  

Since the release of the ELLIPSE, we have been constantly working to improve the script.

We have now refined the script to its fullest potential.

We are proud to say that this swing trading script on the 4H timeframe performs across the top 100 cryptocurrencies by market cap with an average Profit Factor (PF) of 5 (both Long and Short) and a low % max drawdown.

That said, we will continue to monitor both the script and market conditions (read: volatility) to ensure optimal performance.

Happy trading! 🚀