The main limit of such strategies are:
- False signals > the asset is not experiencing a strong trend. The strategy gets stuck with a sideways move or, worst, with the beginning of a downtrend.
- The sell signal may come later than the actual top, leading in some cases to turn a trade in profit into a loss.
This strategy tries to address these limitations to develop a trading system that optimises the entry and closes trade once the profit achieves a pre-set level.
The trading system uses the and the DMI to confirm when is the best time for buying. Combining these two indicators prevents trading during downtrends and reduces the likelihood of getting stuck in a market with low .
The system confirms the entry when:
- The histogram turns .
- When the positive DMI is greater than the negative DMI, there are more chances that the asset is trading in a sustained uptrend.
The strategy comes with a fixed take profit combined with a , which acts as a trailing stop to adapt to the trend's strength. Depending on your long term confidence in the asset, you can edit the fixed take profit to be more conservative or aggressive.
The position is closed when:
The best time frame for this strategy based on our backtest is the 3-hr. The 4-hr can work well. In general, this approach suits medium to long term strategies
The strategy assumes each order to trade 30% of the available capital to make the results more realistic. A trading fee of 0.1% is taken into account. The fee is aligned to the base fee applied on Binance, which is the largest cryptocurrency exchange.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.