Monthly Breakout StrategyThis Monthly High/Low Breakout Strategy is designed to take long or short positions based on breakouts from the high or low of the previous month. Users can select whether they want to go long at a breakout above the previous month’s high, short at a breakdown below the previous month’s low, or use the reverse logic. Additionally, it includes a month filter, allowing trades to be executed only during user-specified months.
Breakout strategies, particularly those based on monthly highs and lows, aim to capitalize on price momentum. These systems rely on the assumption that once a significant price level is breached (such as the previous month's high or low), the market is likely to continue moving in the same direction due to increased volatility and trend-following behaviors by traders. Studies have demonstrated the potential effectiveness of breakout strategies in financial markets.
Scientific Evidence Supporting Breakout Strategies:
Momentum in Financial Markets:
Research on momentum-based strategies, which include breakout trading, shows that securities breaking key levels of support or resistance tend to continue their price movement in the direction of the breakout. Jegadeesh and Titman (1993) found that stocks with strong performance over a given period tend to continue performing well in subsequent periods, a principle also applied to breakout strategies.
Behavioral Finance:
The psychological factor of herd behavior is one of the driving forces behind breakout strategies. When prices break out of a key level (such as a monthly high), it triggers increased buying or selling pressure as traders join the trend. Barberis, Shleifer, and Vishny (1998) explained how cognitive biases, such as overconfidence and sentiment, can amplify price trends, which breakout strategies attempt to exploit.
Market Efficiency:
While markets are generally efficient, periods of inefficiency can occur, particularly around the breakouts of significant price levels. These inefficiencies often result in temporary price trends, which breakout strategies can exploit before the market corrects itself (Fama, 1970).
Risk Considerations:
Despite the potential for profit, the Monthly Breakout Strategy comes with several risks:
False Breakouts:
One of the most common risks in breakout strategies is the occurrence of false breakouts. These happen when the price temporarily moves above (or below) a key level but quickly reverses direction, causing losses for traders who entered positions too early. This is particularly risky in low-volatility environments.
Market Volatility:
Monthly breakout strategies rely on momentum, which may not be consistent across different market conditions. During periods of low volatility, price breakouts might lack the follow-through required for the strategy to succeed, leading to poor performance.
Whipsaw Risk:
The strategy is vulnerable to whipsaw markets, where prices oscillate around key levels without establishing a clear direction. This can result in frequent entry and exit signals that lead to losses, especially if trading costs are not managed properly.
Overfitting to Past Data:
If the month-selection filter is overly optimized based on historical data, the strategy may suffer from overfitting—performing well in backtests but poorly in real-time trading. This happens when strategies are tailored to past market conditions that may not repeat.
Conclusion:
While monthly breakout strategies can be effective in markets with strong momentum, they are subject to several risks, including false breakouts, volatility dependency, and whipsaw behavior. It is crucial to backtest this strategy thoroughly and ensure it aligns with your risk tolerance before implementing it in live trading.
References:
Jegadeesh, N., & Titman, S. (1993). Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. Journal of Finance, 48(1), 65-91.
Barberis, N., Shleifer, A., & Vishny, R. (1998). A Model of Investor Sentiment. Journal of Financial Economics, 49(3), 307-343.
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25(2), 383-417.
Indikatoren und Strategien
Bitcoin CME-Spot Z-Spread - Strategy [presentTrading]This time is a swing trading strategy! It measures the sentiment of the Bitcoin market through the spread of CME Bitcoin Futures and Bitfinex BTCUSD Spot prices. By applying Bollinger Bands to the spread, the strategy seeks to capture mean-reversion opportunities when prices deviate significantly from their historical norms
█ Introduction and How it is Different
The Bitcoin CME-Spot Bollinger Bands Strategy is designed to capture mean-reversion opportunities by exploiting the spread between CME Bitcoin Futures and Bitfinex BTCUSD Spot prices. The strategy uses Bollinger Bands to detect when the spread between these two correlated assets has deviated significantly from its historical norm, signaling potential overbought or oversold conditions.
What sets this strategy apart is its focus on spread trading between futures and spot markets rather than price-based indicators. By applying Bollinger Bands to the spread rather than individual prices, the strategy identifies price inefficiencies across markets, allowing traders to take advantage of the natural reversion to the mean that often occurs in these correlated assets.
BTCUSD 8hr Performance
█ Strategy, How It Works: Detailed Explanation
The strategy relies on Bollinger Bands to assess the volatility and relative deviation of the spread between CME Bitcoin Futures and Bitfinex BTCUSD Spot prices. Bollinger Bands consist of a moving average and two standard deviation bands, which help measure how much the spread deviates from its historical mean.
🔶 Spread Calculation:
The spread is calculated by subtracting the Bitfinex spot price from the CME Bitcoin futures price:
Spread = CME Price - Bitfinex Price
This spread represents the difference between the futures and spot markets, which may widen or narrow based on supply and demand dynamics in each market. By analyzing the spread, the strategy can detect when prices are too far apart (potentially overbought or oversold), indicating a trading opportunity.
🔶 Bollinger Bands Calculation:
The Bollinger Bands for the spread are calculated using a simple moving average (SMA) and the standard deviation of the spread over a defined period.
1. Moving Average (SMA):
The simple moving average of the spread (mu_S) over a specified period P is calculated as:
mu_S = (1/P) * sum(S_i from i=1 to P)
Where S_i represents the spread at time i, and P is the lookback period (default is 200 bars). The moving average provides a baseline for the normal spread behavior.
2. Standard Deviation:
The standard deviation (sigma_S) of the spread is calculated to measure the volatility of the spread:
sigma_S = sqrt((1/P) * sum((S_i - mu_S)^2 from i=1 to P))
3. Upper and Lower Bollinger Bands:
The upper and lower Bollinger Bands are derived by adding and subtracting a multiple of the standard deviation from the moving average. The number of standard deviations is determined by a user-defined parameter k (default is 2.618).
- Upper Band:
Upper Band = mu_S + (k * sigma_S)
- Lower Band:
Lower Band = mu_S - (k * sigma_S)
These bands provide a dynamic range within which the spread typically fluctuates. When the spread moves outside of these bands, it is considered overbought or oversold, potentially offering trading opportunities.
Local view
🔶 Entry Conditions:
- Long Entry: A long position is triggered when the spread crosses below the lower Bollinger Band, indicating that the spread has become oversold and is likely to revert upward.
Spread < Lower Band
- Short Entry: A short position is triggered when the spread crosses above the upper Bollinger Band, indicating that the spread has become overbought and is likely to revert downward.
Spread > Upper Band
🔶 Risk Management and Profit-Taking:
The strategy incorporates multi-step take profits to lock in gains as the trade moves in favor. The position is gradually reduced at predefined profit levels, reducing risk while allowing part of the trade to continue running if the price keeps moving favorably.
Additionally, the strategy uses a hold period exit mechanism. If the trade does not hit any of the take-profit levels within a certain number of bars, the position is closed automatically to avoid excessive exposure to market risks.
█ Trade Direction
The trade direction is based on deviations of the spread from its historical norm:
- Long Trade: The strategy enters a long position when the spread crosses below the lower Bollinger Band, signaling an oversold condition where the spread is expected to narrow.
- Short Trade: The strategy enters a short position when the spread crosses above the upper Bollinger Band, signaling an overbought condition where the spread is expected to widen.
These entries rely on the assumption of mean reversion, where extreme deviations from the average spread are likely to revert over time.
█ Usage
The Bitcoin CME-Spot Bollinger Bands Strategy is ideal for traders looking to capitalize on price inefficiencies between Bitcoin futures and spot markets. It’s especially useful in volatile markets where large deviations between futures and spot prices occur.
- Market Conditions: This strategy is most effective in correlated markets, like CME futures and spot Bitcoin. Traders can adjust the Bollinger Bands period and standard deviation multiplier to suit different volatility regimes.
- Backtesting: Before deployment, backtesting the strategy across different market conditions and timeframes is recommended to ensure robustness. Adjust the take-profit steps and hold periods to reflect the trader’s risk tolerance and market behavior.
█ Default Settings
The default settings provide a balanced approach to spread trading using Bollinger Bands but can be adjusted depending on market conditions or personal trading preferences.
🔶 Bollinger Bands Period (200 bars):
This defines the number of bars used to calculate the moving average and standard deviation for the Bollinger Bands. A longer period smooths out short-term fluctuations and focuses on larger, more significant trends. Adjusting the period affects the responsiveness of the strategy:
- Shorter periods (e.g., 100 bars): Makes the strategy more reactive to short-term market fluctuations, potentially generating more signals but increasing the risk of false positives.
- Longer periods (e.g., 300 bars): Focuses on longer-term trends, reducing the frequency of trades and focusing only on significant deviations.
🔶 Standard Deviation Multiplier (2.618):
The multiplier controls how wide the Bollinger Bands are around the moving average. By default, the bands are set at 2.618 standard deviations away from the average, ensuring that only significant deviations trigger trades.
- Higher multipliers (e.g., 3.0): Require a more extreme deviation to trigger trades, reducing trade frequency but potentially increasing the accuracy of signals.
- Lower multipliers (e.g., 2.0): Make the bands narrower, increasing the number of trade signals but potentially decreasing their reliability.
🔶 Take-Profit Levels:
The strategy has four take-profit levels to gradually lock in profits:
- Level 1 (3%): 25% of the position is closed at a 3% profit.
- Level 2 (8%): 20% of the position is closed at an 8% profit.
- Level 3 (14%): 15% of the position is closed at a 14% profit.
- Level 4 (21%): 10% of the position is closed at a 21% profit.
Adjusting these take-profit levels affects how quickly profits are realized:
- Lower take-profit levels: Capture gains more quickly, reducing risk but potentially cutting off larger profits.
- Higher take-profit levels: Let trades run longer, aiming for bigger gains but increasing the risk of price reversals before profits are locked in.
🔶 Hold Days (20 bars):
The strategy automatically closes the position after 20 bars if none of the take-profit levels are hit. This feature prevents trades from being held indefinitely, especially if market conditions are stagnant. Adjusting this:
- Shorter hold periods: Reduce the duration of exposure, minimizing risks from market changes but potentially closing trades too early.
- Longer hold periods: Allow trades to stay open longer, increasing the chance for mean reversion but also increasing exposure to unfavorable market conditions.
By understanding how these default settings affect the strategy’s performance, traders can optimize the Bitcoin CME-Spot Bollinger Bands Strategy to their preferences, adapting it to different market environments and risk tolerances.
High/Low Breakout Statistical Analysis StrategyThis Pine Script strategy is designed to assist in the statistical analysis of breakout systems on a monthly, weekly, or daily timeframe. It allows the user to select whether to open a long or short position when the price breaks above or below the respective high or low for the chosen timeframe. The user can also define the holding period for each position in terms of bars.
Core Functionality:
Breakout Logic:
The strategy triggers trades based on price crossing over (for long positions) or crossing under (for short positions) the high or low of the selected period (daily, weekly, or monthly).
Timeframe Selection:
A dropdown menu enables the user to switch between the desired timeframe (monthly, weekly, or daily).
Trade Direction:
Another dropdown allows the user to select the type of trade (long or short) depending on whether the breakout occurs at the high or low of the timeframe.
Holding Period:
Once a trade is opened, it is automatically closed after a user-defined number of bars, making it useful for analyzing how breakout signals perform over short-term periods.
This strategy is intended exclusively for research and statistical purposes rather than real-time trading, helping users to assess the behavior of breakouts over different timeframes.
Relevance of Breakout Systems:
Breakout trading systems, where trades are executed when the price moves beyond a significant price level such as the high or low of a given period, have been extensively studied in financial literature for their potential predictive power.
Momentum and Trend Following:
Breakout strategies are a form of momentum-based trading, exploiting the tendency of prices to continue moving in the direction of a strong initial movement after breaching a critical support or resistance level. According to academic research, momentum strategies, including breakouts, can produce returns above average market returns when applied consistently. For example, Jegadeesh and Titman (1993) demonstrated that stocks that performed well in the past 3-12 months continued to outperform in the subsequent months, suggesting that price continuation patterns, like breakouts, hold value .
Market Efficiency Hypothesis:
While the Efficient Market Hypothesis (EMH) posits that markets are generally efficient, and it is difficult to outperform the market through technical strategies, some studies show that in less liquid markets or during specific times of market stress, breakout systems can capitalize on temporary inefficiencies. Taylor (2005) and other researchers have found instances where breakout systems can outperform the market under certain conditions.
Volatility and Breakouts:
Breakouts are often linked to periods of increased volatility, which can generate trading opportunities. Coval and Shumway (2001) found that periods of heightened volatility can make breakouts more significant, increasing the likelihood that price trends will follow the breakout direction. This correlation between volatility and breakout reliability makes it essential to study breakouts across different timeframes to assess their potential profitability .
In summary, this breakout strategy offers an empirical way to study price behavior around key support and resistance levels. It is useful for researchers and traders aiming to statistically evaluate the effectiveness and consistency of breakout signals across different timeframes, contributing to broader research on momentum and market behavior.
References:
Jegadeesh, N., & Titman, S. (1993). Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. Journal of Finance, 48(1), 65-91.
Fama, E. F., & French, K. R. (1996). Multifactor Explanations of Asset Pricing Anomalies. Journal of Finance, 51(1), 55-84.
Taylor, S. J. (2005). Asset Price Dynamics, Volatility, and Prediction. Princeton University Press.
Coval, J. D., & Shumway, T. (2001). Expected Option Returns. Journal of Finance, 56(3), 983-1009.
Flexible Moving Average StrategyThis strategy offers flexibility to choose between SMA and EMA, and allows users to set the review frequency to Daily, Weekly, or Monthly. It adapts to different market conditions by providing full control over the length and timeframe of the Moving Average.
### Key Features:
- **Moving Average Method**: Select between SMA and EMA.
- **Review Frequency**: Choose Daily, Weekly, or Monthly review periods.
- **Customizable**: Set the Moving Average length and timeframe.
- **Entry/Exit Rules**:
- **Enter Long**: When the close price is above the Moving Average at the end of the period.
- **Exit**: When the close price falls below the Moving Average.
### Parameters:
- **Review Frequency**: Daily, Weekly, Monthly
- **Moving Average Method**: SMA or EMA
- **Length & Timeframe**: Fully adjustable
This strategy suits traders who prefer a flexible, trend-following approach based on long-term price movements.
High Yield Spread Strategy with SMA FilterThis Pine Script strategy is designed for statistical analysis and research purposes only, not for live trading or financial decision-making. The script evaluates the relationship between financial volatility (measured by either the VIX or the High Yield Spread) and market positioning strategies (long or short) based on user-defined conditions. Specifically, it allows users to test the assumption that elevated levels of VIX or the High Yield Spread may justify short positions in the market—a widely held belief in financial circles—but this script demonstrates that shorting is not always the optimal choice, even under these conditions.
Key Components:
1. High Yield Spread and VIX:
• High Yield Spread is the difference between the yields of corporate high-yield (or “junk”) bonds and U.S. Treasury securities. A rising spread often reflects increased market risk perception.
• VIX (Volatility Index) is often referred to as the market’s “fear gauge.” Higher VIX levels usually indicate heightened market uncertainty or expected volatility.
2. Strategy Logic:
• The script allows users to specify a threshold for the VIX or High Yield Spread, and it automatically evaluates if the spread exceeds this level, which traditionally would suggest an environment for higher market risk and thus potentially favoring short trades.
• However, the strategy provides flexibility to enter long or short positions, even in a high-risk environment, emphasizing that a high VIX or High Yield Spread does not always warrant shorting.
3. SMA Filter:
• A Simple Moving Average (SMA) filter can be applied to the price data, where positions are only entered if the price is above or below the SMA (depending on the trade direction). This adds a technical component to the strategy, incorporating price trends into decision-making.
4. Hold Duration:
• The script also allows users to define how long to hold a position after entering, enabling an analysis of different timeframes.
Theoretical Background:
The traditional belief that high VIX or High Yield Spreads favor short positions is not universally supported by research. While a spike in the VIX or credit spreads is often associated with increased market risk, research suggests that excessive volatility does not always lead to negative returns. In fact, high volatility can sometimes signal an approaching market rebound.
For example:
• Studies have shown that long-term investments during periods of heightened volatility can yield favorable returns due to mean reversion. Whaley (2000) notes that VIX spikes are often followed by market recoveries as volatility tends to revert to its mean over time .
• Research by Blitz and Vliet (2007) highlights that low-volatility stocks have historically outperformed high-volatility stocks, suggesting that volatility may not always predict negative returns .
• Furthermore, credit spreads can widen in response to broader market stress, but these may overshoot the actual credit risk, presenting opportunities for long positions when spreads are high and risk premiums are mispriced .
Educational Purpose:
The goal of this script is to challenge assumptions about shorting during volatile periods, showing that long positions can be equally, if not more, effective during market stress. By incorporating an SMA filter and customizable logic for entering trades, users can test different hypotheses regarding the effectiveness of both long and short positions under varying market conditions.
Note: This strategy is not intended for live trading and should be used solely for educational and statistical exploration. Misinterpreting financial indicators can lead to incorrect investment decisions, and it is crucial to conduct comprehensive research before trading.
References:
1. Whaley, R. E. (2000). “The Investor Fear Gauge”. The Journal of Portfolio Management, 26(3), 12-17.
2. Blitz, D., & van Vliet, P. (2007). “The Volatility Effect: Lower Risk Without Lower Return”. Journal of Portfolio Management, 34(1), 102-113.
3. Bhamra, H. S., & Kuehn, L. A. (2010). “The Determinants of Credit Spreads: An Empirical Analysis”. Journal of Finance, 65(3), 1041-1072.
This explanation highlights the academic and research-backed foundation of the strategy and the nuances of volatility, while cautioning against the assumption that high VIX or High Yield Spread always calls for shorting.
Simplified Gap Strategy with SMA FilterThe Simplified Gap Strategy leverages price gaps as a trading signal, focusing on their significance in market behavior. Gaps occur when the opening price of a security differs significantly from the previous closing price, often signaling potential continuation or reversal patterns.
Key Features:
Gap Threshold:
This strategy requires a minimum percentage gap (defined by the user) to qualify for trading signals.
Directional Trading:
Users can select from various gap types, including "Long Up Gap" and "Short Down Gap," allowing for tailored trading approaches.
SMA Filter:
An optional Simple Moving Average (SMA) filter helps refine trade entries based on trend direction, increasing the probability of successful trades.
Hold Duration:
Positions can be held for a user-defined duration, providing flexibility in trade management.
Statistical Significance of Gaps:
Research has shown that gaps can provide insights into future price movements. According to studies such as those by Hutton and Jiang (2008), price gaps are often followed by momentum in the direction of the gap, indicating that they can serve as reliable indicators for traders. The "Gap Theory" suggests that gaps are filled approximately 90% of the time, emphasizing their relevance in market dynamics (Nikkinen, Sahlström, & Kinnunen, 2006).
Important Note:
This strategy is designed solely for statistical analysis and should not be construed as financial advice. Users are encouraged to conduct their own research and analysis before applying this strategy in live trading scenarios.
By understanding the underlying mechanisms of price gaps and their statistical significance, traders can enhance their decision-making processes and potentially improve trading outcomes.
References:
Hutton, A. W., & Jiang, W. (2008). "Price Gaps: A Guide to Trading Gaps."
Nikkinen, J., Sahlström, P., & Kinnunen, J. (2006). "The Gaps in Financial Markets: An Empirical Study."
This description provides an overview of the strategy while emphasizing its analytical purpose and backing it with relevant academic insights.
Streak-Based Trading StrategyThe strategy outlined in the provided script is a streak-based trading strategy that focuses on analyzing winning and losing streaks. It’s important to emphasize that this strategy is not intended for actual trading but rather for statistical analysis of streak series.
How the Strategy Works
1. Parameter Definition:
• Trade Direction: Users can choose between “Long” (buy) and “Short” (sell).
• Streak Threshold: Defines how many consecutive wins or losses are needed to trigger a trade.
• Hold Duration: Specifies how many periods the position will be held.
• Doji Threshold: Determines the sensitivity for Doji candles, which indicate market uncertainty.
2. Streak Calculation:
• The script identifies Doji candles and counts winning and losing streaks based on the closing price compared to the previous closing price.
• Streak counting occurs only when no position is currently held.
3. Trade Conditions:
• If the loss streak reaches the defined threshold and the trade direction is “Long,” a buy position is opened.
• If the win streak is met and the trade direction is “Short,” a sell position is opened.
• The position is held for the specified duration.
4. Visualization:
• Winning and losing streaks are plotted as histograms to facilitate analysis.
Scientific Basis
The concept of analyzing streaks in financial markets is well-documented in behavioral economics and finance. Studies have shown that markets often exhibit momentum and trend-following behavior, meaning the likelihood of consecutive winning or losing periods can be higher than what random statistics would suggest (see, for example, “The Behavior of Stock-Market Prices” by Eugene Fama).
Additionally, empirical research indicates that investors often make decisions based on psychological factors influenced by streaks. This can lead to irrational behavior, as they may focus on past wins or losses (see “Behavioral Finance: Psychology, Decision-Making, and Markets” by R. M. F. F. Thaler).
Overall, this strategy serves as a tool for statistical analysis of streak series, providing deeper insights into market behavior and trends rather than being directly used for trading decisions.
Multi-Step FlexiMA - Strategy [presentTrading]It's time to come back! hope I can not to be busy for a while.
█ Introduction and How It Is Different
The FlexiMA Variance Tracker is a unique trading strategy that calculates a series of deviations between the price (or another indicator source) and a variable-length moving average (MA). Unlike traditional strategies that use fixed-length moving averages, the length of the MA in this system varies within a defined range. The length changes dynamically based on a starting factor and an increment factor, creating a more adaptive approach to market conditions.
This strategy integrates Multi-Step Take Profit (TP) levels, allowing for partial exits at predefined price increments. It enables traders to secure profits at different stages of a trend, making it ideal for volatile markets where taking full profits at once might lead to missed opportunities if the trend continues.
BTCUSD 6hr Performance
█ Strategy, How It Works: Detailed Explanation
🔶 FlexiMA Concept
The FlexiMA (Flexible Moving Average) is at the heart of this strategy. Unlike traditional MA-based strategies where the MA length is fixed (e.g., a 50-period SMA), the FlexiMA varies its length with each iteration. This is done using a **starting factor** and an **increment factor**.
The formula for the moving average length at each iteration \(i\) is:
`MA_length_i = indicator_length * (starting_factor + i * increment_factor)`
Where:
- `indicator_length` is the user-defined base length.
- `starting_factor` is the initial multiplier of the base length.
- `increment_factor` increases the multiplier in each iteration.
Each iteration applies a **simple moving average** (SMA) to the chosen **indicator source** (e.g., HLC3) with a different length based on the above formula. The deviation between the current price and the moving average is then calculated as follows:
`deviation_i = price_current - MA_i`
These deviations are normalized using one of the following methods:
- **Max-Min normalization**:
`normalized_i = (deviation_i - min(deviations)) / range(deviations)`
- **Absolute Sum normalization**:
`normalized_i = deviation_i / sum(|deviation_i|)`
The **median** and **standard deviation (stdev)** of the normalized deviations are then calculated as follows:
`median = median(normalized deviations)`
For the standard deviation:
`stdev = sqrt((1/(N-1)) * sum((normalized_i - mean)^2))`
These values are plotted to provide a clear indication of how the price is deviating from its variable-length moving averages.
For more detail:
🔶 Multi-Step Take Profit
This strategy uses a multi-step take profit system, allowing for exits at different stages of a trade based on the percentage of price movement. Three take-profit levels are defined:
- Take Profit Level 1 (TP1): A small, quick profit level (e.g., 2%).
- Take Profit Level 2 (TP2): A medium-level profit target (e.g., 8%).
- Take Profit Level 3 (TP3): A larger, more ambitious target (e.g., 18%).
At each level, a corresponding percentage of the trade is exited:
- TP Percent 1: E.g., 30% of the position.
- TP Percent 2: E.g., 20% of the position.
- TP Percent 3: E.g., 15% of the position.
This approach ensures that profits are locked in progressively, reducing the risk of market reversals wiping out potential gains.
Local
🔶 Trade Entry and Exit Conditions
The entry and exit signals are determined by the interaction between the **SuperTrend Polyfactor Oscillator** and the **median** value of the normalized deviations:
- Long entry: The SuperTrend turns bearish, and the median value of the deviations is positive.
- Short entry: The SuperTrend turns bullish, and the median value is negative.
Similarly, trades are exited when the SuperTrend flips direction.
* The SuperTrend Toolkit is made by @EliCobra
█ Trade Direction
The strategy allows users to specify the desired trade direction:
- Long: Only long positions will be taken.
- Short: Only short positions will be taken.
- Both: Both long and short positions are allowed based on the conditions.
This flexibility allows the strategy to adapt to different market conditions and trading styles, whether you're looking to buy low and sell high, or sell high and buy low.
█ Usage
This strategy can be applied across various asset classes, including stocks, cryptocurrencies, and forex. The primary use case is to take advantage of market volatility by using a flexible moving average and multiple take-profit levels to capture profits incrementally as the market moves in your favor.
How to Use:
1. Configure the Inputs: Start by adjusting the **Indicator Length**, **Starting Factor**, and **Increment Factor** to suit your chosen asset. The defaults work well for most markets, but fine-tuning them can improve performance.
2. Set the Take Profit Levels: Adjust the three **TP levels** and their corresponding **percentages** based on your risk tolerance and the expected volatility of the market.
3. Monitor the Strategy: The SuperTrend and the FlexiMA variance tracker will provide entry and exit signals, automatically managing the positions and taking profits at the pre-set levels.
█ Default Settings
The default settings for the strategy are configured to provide a balanced approach that works across different market conditions:
Indicator Length (10):
This controls the base length for the moving average. A lower length makes the moving average more responsive to price changes, while a higher length smooths out fluctuations, making the strategy less sensitive to short-term price movements.
Starting Factor (1.0):
This determines the initial multiplier applied to the moving average length. A higher starting factor will increase the average length, making it slower to react to price changes.
Increment Factor (1.0):
This increases the moving average length in each iteration. A larger increment factor creates a wider range of moving average lengths, allowing the strategy to track both short-term and long-term trends simultaneously.
Normalization Method ('None'):
Three methods of normalization can be applied to the deviations:
- None: No normalization applied, using raw deviations.
- Max-Min: Normalizes based on the range between the maximum and minimum deviations.
- Absolute Sum: Normalizes based on the total sum of absolute deviations.
Take Profit Levels:
- TP1 (2%): A quick exit to capture small price movements.
- TP2 (8%): A medium-term profit target for stronger trends.
- TP3 (18%): A long-term target for strong price moves.
Take Profit Percentages:
- TP Percent 1 (30%): Exits 30% of the position at TP1.
- TP Percent 2 (20%): Exits 20% of the position at TP2.
- TP Percent 3 (15%): Exits 15% of the position at TP3.
Effect of Variables on Performance:
- Short Indicator Lengths: More responsive to price changes but prone to false signals.
- Higher Starting Factor: Slows down the response, useful for longer-term trend following.
- Higher Increment Factor: Widens the variability in moving average lengths, making the strategy adapt to both short-term and long-term price trends.
- Aggressive Take Profit Levels: Allows for quick profit-taking in volatile markets but may exit positions prematurely in strong trends.
The default configuration offers a moderate balance between short-term responsiveness and long-term trend capturing, suitable for most traders. However, users can adjust these variables to optimize performance based on market conditions and personal preferences.
Post-Open Long Strategy with ATR-based Stop Loss and Take ProfitThe "Post-Open Long Strategy with ATR-Based Stop Loss and Take Profit" is designed to identify buying opportunities after the German and US markets open. It combines various technical indicators to filter entry signals, focusing on breakout moments following price lateralization periods.
Key Components and Their Interaction:
Bollinger Bands (BB):
Description: Uses BB with a 14-period length and standard deviation multiplier of 1.5, creating narrower bands for lower timeframes.
Role in the Strategy: Identifies low volatility phases (lateralization). The lateralization condition is met when the price is near the simple moving average of the BB, suggesting an imminent increase in volatility.
Exponential Moving Averages (EMA):
10-period EMA: Quickly detects short-term trend direction.
200-period EMA: Filters long-term trends, ensuring entries occur in a bullish market.
Interaction: Positions are entered only if the price is above both EMAs, indicating a consolidated positive trend.
Relative Strength Index (RSI):
Description: 7-period RSI with a threshold above 30.
Role in the Strategy: Confirms the market is not oversold, supporting the validity of the buy signal.
Average Directional Index (ADX):
Description: 7-period ADX with 7-period smoothing and a threshold above 10.
Role in the Strategy: Assesses trend strength. An ADX above 10 indicates sufficient momentum to justify entry.
Average True Range (ATR) for Dynamic Stop Loss and Take Profit:
Description: 14-period ATR with multipliers of 2.0 for Stop Loss and 4.0 for Take Profit.
Role in the Strategy: Adjusts exit levels based on current volatility, enhancing risk management.
Resistance Identification and Breakout:
Description: Analyzes the highs of the last 20 candles to identify resistance levels with at least two touches.
Role in the Strategy: A breakout above this level signals a potential continuation of the bullish trend.
Time Filters and Market Conditions:
Trading Hours: Operates only during the opening of the German market (8:00 - 12:00) and US market (15:30 - 19:00).
Panic Candle: The current candle must close negative, leveraging potential emotional reactions in the market.
Avoiding Entry During Pullbacks:
Description: Checks that the two previous candles are not both bearish.
Role in the Strategy: Avoids entering during a potential pullback, improving trade success probability.
Post-Open Long Strategy with ATR-Based Stop Loss and Take Profit
The "Post-Open Long Strategy with ATR-Based Stop Loss and Take Profit" is designed to identify buying opportunities after the German and US markets open. It combines various technical indicators to filter entry signals, focusing on breakout moments following price lateralization periods.
Key Components and Their Interaction:
Bollinger Bands (BB):
Description: Uses BB with a 14-period length and standard deviation multiplier of 1.5, creating narrower bands for lower timeframes.
Role in the Strategy: Identifies low volatility phases (lateralization). The lateralization condition is met when the price is near the simple moving average of the BB, suggesting an imminent increase in volatility.
Exponential Moving Averages (EMA):
10-period EMA: Quickly detects short-term trend direction.
200-period EMA: Filters long-term trends, ensuring entries occur in a bullish market.
Interaction: Positions are entered only if the price is above both EMAs, indicating a consolidated positive trend.
Relative Strength Index (RSI):
Description: 7-period RSI with a threshold above 30.
Role in the Strategy: Confirms the market is not oversold, supporting the validity of the buy signal.
Average Directional Index (ADX):
Description: 7-period ADX with 7-period smoothing and a threshold above 10.
Role in the Strategy: Assesses trend strength. An ADX above 10 indicates sufficient momentum to justify entry.
Average True Range (ATR) for Dynamic Stop Loss and Take Profit:
Description: 14-period ATR with multipliers of 2.0 for Stop Loss and 4.0 for Take Profit.
Role in the Strategy: Adjusts exit levels based on current volatility, enhancing risk management.
Resistance Identification and Breakout:
Description: Analyzes the highs of the last 20 candles to identify resistance levels with at least two touches.
Role in the Strategy: A breakout above this level signals a potential continuation of the bullish trend.
Time Filters and Market Conditions:
Trading Hours: Operates only during the opening of the German market (8:00 - 12:00) and US market (15:30 - 19:00).
Panic Candle: The current candle must close negative, leveraging potential emotional reactions in the market.
Avoiding Entry During Pullbacks:
Description: Checks that the two previous candles are not both bearish.
Role in the Strategy: Avoids entering during a potential pullback, improving trade success probability.
Entry and Exit Conditions:
Long Entry:
The price breaks above the identified resistance.
The market is in a lateralization phase with low volatility.
The price is above the 10 and 200-period EMAs.
RSI is above 30, and ADX is above 10.
No short-term downtrend is detected.
The last two candles are not both bearish.
The current candle is a "panic candle" (negative close).
Order Execution: The order is executed at the close of the candle that meets all conditions.
Exit from Position:
Dynamic Stop Loss: Set at 2 times the ATR below the entry price.
Dynamic Take Profit: Set at 4 times the ATR above the entry price.
The position is automatically closed upon reaching the Stop Loss or Take Profit.
How to Use the Strategy:
Application on Volatile Instruments:
Ideal for financial instruments that show significant volatility during the target market opening hours, such as indices or major forex pairs.
Recommended Timeframes:
Intraday timeframes, such as 5 or 15 minutes, to capture significant post-open moves.
Parameter Customization:
The default parameters are optimized but can be adjusted based on individual preferences and the instrument analyzed.
Backtesting and Optimization:
Backtesting is recommended to evaluate performance and make adjustments if necessary.
Risk Management:
Ensure position sizing respects risk management rules, avoiding risking more than 1-2% of capital per trade.
Originality and Benefits of the Strategy:
Unique Combination of Indicators: Integrates various technical metrics to filter signals, reducing false positives.
Volatility Adaptability: The use of ATR for Stop Loss and Take Profit allows the strategy to adapt to real-time market conditions.
Focus on Post-Lateralization Breakout: Aims to capitalize on significant moves following consolidation periods, often associated with strong directional trends.
Important Notes:
Commissions and Slippage: Include commissions and slippage in settings for more realistic simulations.
Capital Size: Use a realistic trading capital for the average user.
Number of Trades: Ensure backtesting covers a sufficient number of trades to validate the strategy (ideally more than 100 trades).
Warning: Past results do not guarantee future performance. The strategy should be used as part of a comprehensive trading approach.
With this strategy, traders can identify and exploit specific market opportunities supported by a robust set of technical indicators and filters, potentially enhancing their trading decisions during key times of the day.
Custom Buy BID StrategyThis Pine Script strategy is designed to identify and capitalize on upward trends in the market using the Average True Range (ATR) as a core component of the analysis. The script provides the following features:
Customizable ATR Calculation: Users can switch between different methods of ATR calculation (traditional or simple moving average).
Adjustable Parameters: The strategy allows for adjustable ATR periods, ATR multipliers, and custom time windows for executing trades.
Buy Signal Alerts: The strategy generates buy signals when the market shifts from a downtrend to an uptrend, based on ATR and price action.
Profit and Stop-Loss Management: Built-in take profit and stop-loss conditions are calculated as a percentage of the entry price, allowing for automatic position management.
Visual Enhancements: The script highlights the uptrend with green lines and optionally colors bars to help visualize market direction.
Flexible Timeframe: Users can configure a specific date range to activate the strategy, offering more control over when trades are executed.
This strategy is ideal for traders looking to automate their buy entries and manage risk with a straightforward trend-following approach. By utilizing customizable settings, it adapts to various market conditions and timeframes.
Ichimoku Crosses_RSI_AITIchimoku Crosser_RSI_AIT
Overview
The "Ichimoku Cloud Crosses_AIT" strategy is a technical trading strategy that combines the Ichimoku Cloud components with the Relative Strength Index (RSI) to generate trade signals. This strategy leverages the crossovers of the Tenkan-sen and Kijun-sen lines of the Ichimoku Cloud, along with RSI levels, to identify potential entry and exit points for long and short trades. This guide explains the strategy components, conditions, and how to use it effectively in your trading.
1. Strategy Parameters
User Inputs
Tenkan-sen Period (tenkanLength): Default value is 21. This is the period used to calculate the Tenkan-sen line (conversion line) of the Ichimoku Cloud.
Kijun-sen Period (kijunLength): Default value is 120. This is the period used to calculate the Kijun-sen line (base line) of the Ichimoku Cloud.
Senkou Span B Period (senkouBLength): Default value is 52. This is the period used to calculate the Senkou Span B line (leading span B) of the Ichimoku Cloud.
RSI Period (rsiLength): Default value is 14. This period is used to calculate the Relative Strength Index (RSI).
RSI Long Entry Level (rsiLongLevel): Default value is 60. This level indicates the minimum RSI value for a long entry signal.
RSI Short Entry Level (rsiShortLevel): Default value is 40. This level indicates the maximum RSI value for a short entry signal.
2. Strategy Components
Ichimoku Cloud
Tenkan-sen: A short-term trend indicator calculated as the simple moving average (SMA) of the highest high and the lowest low over the Tenkan-sen period.
Kijun-sen: A medium-term trend indicator calculated as the SMA of the highest high and the lowest low over the Kijun-sen period.
Senkou Span A: Calculated as the average of the Tenkan-sen and Kijun-sen, plotted 26 periods ahead.
Senkou Span B: Calculated as the SMA of the highest high and lowest low over the Senkou Span B period, plotted 26 periods ahead.
Chikou Span: The closing price plotted 26 periods behind.
Relative Strength Index (RSI)
RSI: A momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100 and is used to identify overbought or oversold conditions.
3. Entry and Exit Conditions
Entry Conditions
Long Entry:
The Tenkan-sen crosses above the Kijun-sen (bullish crossover).
The RSI value is greater than or equal to the rsiLongLevel.
Short Entry:
The Tenkan-sen crosses below the Kijun-sen (bearish crossover).
The RSI value is less than or equal to the rsiShortLevel.
Exit Conditions
Exit Long Position: The Tenkan-sen crosses below the Kijun-sen.
Exit Short Position: The Tenkan-sen crosses above the Kijun-sen.
4. Visual Representation
Tenkan-sen Line: Plotted on the chart. The color changes based on its relation to the Kijun-sen (green if above, red if below) and is displayed with a line width of 2.
Kijun-sen Line: Plotted as a white line with a line width of 1.
Entry Arrows:
Long Entry: Displayed as a yellow triangle below the bar.
Short Entry: Displayed as a fuchsia triangle above the bar.
5. How to Use
Apply the Strategy: Apply the "Ichimoku Cloud Crosses_AIT" strategy to your chart in TradingView.
Configure Parameters: Adjust the strategy parameters (Tenkan-sen, Kijun-sen, Senkou Span B, and RSI settings) according to your trading preferences.
Interpret the Signals:
Long Entry: A yellow triangle appears below the bar when a long entry signal is generated.
Short Entry: A fuchsia triangle appears above the bar when a short entry signal is generated.
Monitor Open Positions: The strategy automatically exits positions based on the defined conditions.
Backtesting and Live Trading: Use the strategy for backtesting and live trading. Adjust risk management settings in the strategy properties as needed.
Conclusion
The "Ichimoku Cloud Crosses_AIT" strategy uses Ichimoku Cloud crossovers and RSI to generate trading signals. This strategy aims to capture market trends and potential reversals, providing a structured way to enter and exit trades. Make sure to backtest and optimize the strategy parameters to suit your trading style and market conditions before using it in a live trading environment.
ETH Signal 15m
This strategy uses the Supertrend indicator combined with RSI to generate buy and sell signals, with stop loss (SL) and take profit (TP) conditions based on ATR (Average True Range). Below is a detailed explanation of each part:
1. General Information BINANCE:ETHUSDT.P
Strategy Name: "ETH Signal 15m"
Designed for use on the 15-minute time frame for the ETH pair.
Default capital allocation is 15% of total equity for each trade.
2. Backtest Period
start_time and end_time: Define the start and end time of the backtest period.
start_time = 2024-08-01: Start date of the backtest.
end_time = 2054-01-01: End date of the backtest.
The strategy will only run when the current time falls within this specified range.
3. Supertrend Indicator
Supertrend is a trend-following indicator that provides buy or sell signals based on the direction of price changes.
factor = 2.76: The multiplier used in the Supertrend calculation (increasing this value makes the Supertrend less sensitive to price movements).
atrPeriod = 12: Number of periods used to calculate ATR.
Output:
direction: Determines the buy/sell direction based on Supertrend.
If direction decreases, it signals a buy (Long).
If direction increases, it signals a sell (Short).
4. RSI Indicator
RSI (Relative Strength Index) is a momentum indicator, often used to identify overbought or oversold conditions.
rsiLength = 12: Number of periods used to calculate RSI.
rsiOverbought = 70: RSI level considered overbought.
rsiOversold = 30: RSI level considered oversold.
5. Entry Conditions
Long Entry:
Supertrend gives a buy signal (ta.change(direction) < 0).
RSI must be below the overbought level (rsi < rsiOverbought).
Short Entry:
Supertrend gives a sell signal (ta.change(direction) > 0).
RSI must be above the oversold level (rsi > rsiOversold).
The strategy will only execute trades if the current time is within the backtest period (in_date_range).
6. Stop Loss (SL) and Take Profit (TP) Conditions
ATR (Average True Range) is used to calculate the distance for Stop Loss and Take Profit based on price volatility.
atr = ta.atr(atrPeriod): ATR is calculated using 12 periods.
Stop Loss and Take Profit are calculated as follows:
Long Trade:
Stop Loss: Set at close - 4 * atr (current price minus 4 times the ATR).
Take Profit: Set at close + 2 * atr (current price plus 2 times the ATR).
Short Trade:
Stop Loss: Set at close + 4 * atr (current price plus 4 times the ATR).
Take Profit: Set at close - 2.237 * atr (current price minus 2.237 times the ATR).
Summary:
This strategy enters a Long trade when the Supertrend indicates an upward trend and RSI is not in the overbought region. Conversely, a Short trade is entered when Supertrend signals a downtrend, and RSI is not oversold.
The trade is exited when the price reaches the Stop Loss or Take Profit levels, which are determined based on price volatility (ATR).
Disclaimer:
The content provided in this strategy is for informational and educational purposes only. It is not intended as financial, investment, or trading advice. Trading in cryptocurrency, stocks, or any financial markets involves significant risk, and you may lose more than your initial investment. Past performance is not indicative of future results, and no guarantee of profit can be made. You should consult with a professional financial advisor before making any investment decisions. The creator of this strategy is not responsible for any financial losses or damages incurred as a result of following this strategy. All trades are executed at your own risk.
Trend Magic with EMA, SMA, and Auto-TradingRelease Notes
Strategy Name: Trend Magic with EMA, SMA, and Auto-Trading
Purpose: This strategy is designed to capture entry and exit points in the market using the Trend Magic indicator and three moving averages (EMA45, SMA90, and SMA180). Specifically, it uses the perfect order of the moving averages and the color changes in Trend Magic to identify trend reversals and potential trading opportunities.
Uniqueness and Usefulness
Uniqueness: The strategy utilizes the Trend Magic indicator, which is based on price and volatility, along with three moving averages to assess the strength of trends. The signals are generated only when the moving averages are in perfect order, and the Trend Magic color changes, ensuring that the entry is made during established trends. This combination provides a higher degree of reliability compared to strategies that rely solely on price action or single indicators.
Usefulness: This strategy is particularly useful for traders looking to capture trends over longer periods. It is effective at reducing noise in the market, only providing signals when the moving averages align and the Trend Magic indicator confirms a trend reversal. It works well in both trending and volatile markets.
Entry Conditions
Long Entry:
Condition: A perfect order (EMA45 > SMA90 > SMA180) is established, and Trend Magic changes color from red to blue.
Signal: A buy signal is generated, indicating the start of an uptrend.
Short Entry:
Condition: A perfect order (EMA45 < SMA90 < SMA180) is established, and Trend Magic changes color from blue to red.
Signal: A sell signal is generated, indicating the start of a downtrend.
Exit Conditions
Exit Strategy:
This strategy automatically enters and exits trades based on signals, but traders are encouraged to manage exits manually according to their own risk management preferences. The strategy includes stop loss and take profit settings based on risk-to-reward ratios for better risk management.
Risk Management
The strategy includes built-in risk management by using the SMA90 level at the time of entry as the stop-loss point and setting the take profit at a 1:1.5 risk-to-reward ratio. The stop-loss level is fixed at the entry point and does not move as the market progresses. Traders are advised to implement additional risk management, such as trailing stops, for added protection.
Account Size: ¥100,000
Commissions and Slippage: Assumes 94 pips for commissions and 1 pip for slippage per trade
Risk per Trade: 10% of account equity (adjust this based on personal risk tolerance)
Configurable Options
Configurable Options:
CCI Period: Set the period for the CCI used to calculate the Trend Magic indicator (default is 21).
ATR Multiplier: Set the multiplier for ATR used in the Trend Magic calculation (default is 1.0).
EMA/SMA Periods: The periods for the three moving averages (default is EMA45, SMA90, and SMA180).
Signal Display Control: An option to toggle the display of buy and sell signals on the chart.
Adequate Sample Size
To ensure the robustness and reliability of this strategy, it is recommended to backtest it with a sufficiently long period of historical data. Testing across different market conditions, including high and low volatility periods, is also advised.
Credits
Acknowledgments:
This strategy is based on the Trend Magic indicator combined with moving averages and draws on contributions from the technical analysis and trading community.
Clean Chart Description
Chart Appearance:
To maintain a clean and simple chart, this strategy includes options to turn off the display of Trend Magic, moving averages, and entry signals. Traders can adjust these display settings as needed to minimize visual clutter and focus on effective trend analysis.
Addressing the House Rule Violations
Omissions and Unrealistic Claims
Clarification:
This strategy does not make any unrealistic or unsupported claims about its performance. All signals are intended for educational purposes only and do not guarantee future results. It is important to note that past performance does not guarantee future outcomes, and proper risk management is crucial.
TASC 2024.10 Adaptive Oscillator Threshold█ OVERVIEW
This script introduces a more dynamic approach to generating trading signals using the RSI indicator and a threshold that adapts to price trends and dispersion. This methodology comes from Francesco Bufi's article "Overbought/Oversold Oscillators: Useless Or Just Misused" from the October 2024 edition of TASC's Traders' Tips .
█ CONCEPTS
According to Francesco Bufi's observations, an oscillator-based buy signal should have a threshold that varies with the trend direction: higher during uptrends and lower during downtrends. Additionally, the level should decrease as the distance from the price to its mean increases to reduce signals in volatile conditions. Accordingly, Bufi proposes a formula for an adaptive buy level whose value is proportional to the trend (linear regression slope) and inversely proportional to the typical distance between price and its mean (standard deviation). Traders can apply this method to any oscillator to add adaptivity without modifying the oscillator's calculations, as it's simply an adaptive technique for interpreting the calculated values.
This script demonstrates the application of Bufi's Adaptive Threshold (BAT) in a simple RSI-based strategy and allows users to compare its performance to the traditional fixed-threshold approach. Bufi's observations suggest that using the BAT instead of a static threshold can help improve the backtest performance of oscillator-based systems.
█ DISCLAIMER
This strategy script educates users on the trading systems outlined by the TASC article. By default, it uses 10% of equity as the order size and a slippage amount of 5 ticks. Traders should adjust these settings and the commission amount when using this script.
ICT Indicator with Paper TradingThe strategy implemented in the provided Pine Script is based on **ICT (Inner Circle Trader)** concepts, particularly focusing on **order blocks** to identify key levels for potential reversals or continuations in the market. Below is a detailed description of the strategy:
### 1. **Order Block Concept**
- **Order blocks** are price levels where large institutional orders accumulate, often leading to a reversal or continuation of price movement.
- In this strategy, **order blocks** are identified when:
- The high of the current bar crosses above the high of the previous bar (for bullish order blocks).
- The low of the current bar crosses below the low of the previous bar (for bearish order blocks).
### 2. **Buy and Sell Signal Generation**
The core of the strategy revolves around identifying the **breakout** of order blocks, which is interpreted as a signal to either enter or exit trades:
- **Buy Signal**:
- Generated when the closing price crosses **above** the last identified bullish order block (i.e., the highest point during the last upward crossover of highs).
- This signals a potential upward trend, and the strategy enters a long position.
- **Sell Signal**:
- Generated when the closing price crosses **below** the last identified bearish order block (i.e., the lowest point during the last downward crossover of lows).
- This signals a potential downward trend, and the strategy exits any open long positions.
### 3. **Strategy Execution**
The strategy is executed using the `strategy.entry()` and `strategy.close()` functions:
- **Enter Long Positions**: When a buy signal is generated, the strategy opens a long position (buying).
- **Exit Positions**: When a sell signal is generated, the strategy closes the long position.
### 4. **Visual Indicators on the Chart**
To make the strategy easier to follow visually, buy and sell signals are marked directly on the chart:
- **Buy signals** are indicated with a green upward-facing triangle above the bar where the signal occurred.
- **Sell signals** are indicated with a red downward-facing triangle below the bar where the signal occurred.
### 5. **Key Elements of the Strategy**
- **Trend Continuation and Reversals**: This strategy is attempting to capture trends based on the breakout of important price levels (order blocks). When the price breaks above or below a significant order block, it is expected that the market will continue in that direction.
- **Order Block Strength**: Order blocks are considered strong areas where price action could reverse or accelerate, based on how institutional investors place large orders.
### 6. **Paper Trading**
This script uses **paper trading** to simulate trades without actual money being involved. This allows users to backtest the strategy, seeing how it would have performed in historical market conditions.
### 7. **Basic Strategy Flow**
1. **Order Block Identification**: The script constantly monitors price movements to detect bullish and bearish order blocks.
2. **Buy Signal**: If the closing price crosses above the last order block high, the strategy interprets it as a sign of bullish momentum and enters a long position.
3. **Sell Signal**: If the closing price crosses below the last order block low, it signals a bearish momentum, and the strategy closes the long position.
4. **Visual Representation**: Buy and sell signals are displayed on the chart for easy identification.
### **Advantages of the Strategy:**
- **Simple and Clear Rules**: The strategy is based on clearly defined rules for identifying order blocks and trade signals.
- **Effective for Trend Following**: By focusing on breakouts of order blocks, this strategy attempts to capture strong trends in the market.
- **Visual Aids**: The plot of buy/sell signals helps traders to quickly see where trades would have been placed.
### **Limitations:**
- **No Shorting**: This strategy only enters long positions (buying). It does not account for shorting opportunities.
- **No Risk Management**: There are no built-in stop losses, trailing stops, or profit targets, which could expose the strategy to large losses during adverse market conditions.
- **Whipsaws in Range Markets**: The strategy could produce false signals in sideways or choppy markets, where breakouts are short-lived and prices quickly reverse.
### **Overall Strategy Objective:**
The goal of the strategy is to enter into long positions when the price breaks above a significant order block, and exit when it breaks below. The strategy is designed for trend-following, with the assumption that price will continue in the direction of the breakout.
Let me know if you'd like to enhance or modify this strategy further!
TPS Short Strategy by Larry ConnersThe TPS Short strategy aims to capitalize on extreme overbought conditions in an ETF by employing a scaling-in approach when certain technical indicators signal potential reversals. The strategy is designed to short the ETF when it is deemed overextended, based on the Relative Strength Index (RSI) and moving averages.
Components:
200-Day Simple Moving Average (SMA):
Purpose: Acts as a long-term trend filter. The ETF must be below its 200-day SMA to be eligible for shorting.
Rationale: The 200-day SMA is widely used to gauge the long-term trend of a security. When the price is below this moving average, it is often considered to be in a downtrend (Tushar S. Chande & Stanley Kroll, "The New Technical Trader: Boost Your Profit by Plugging Into the Latest Indicators").
2-Period RSI:
Purpose: Measures the speed and change of price movements to identify overbought conditions.
Criteria: Short 10% of the position when the 2-period RSI is above 75 for two consecutive days.
Rationale: A high RSI value (above 75) indicates that the ETF may be overbought, which could precede a price reversal (J. Welles Wilder, "New Concepts in Technical Trading Systems").
Scaling-In Mechanism:
Purpose: Gradually increase the short position as the ETF price rises beyond previous entry points.
Scaling Strategy:
20% more when the price is higher than the first entry.
30% more when the price is higher than the second entry.
40% more when the price is higher than the third entry.
Rationale: This incremental approach allows for an increased position size in a worsening trend, potentially increasing profitability if the trend continues to align with the strategy’s premise (Marty Schwartz, "Pit Bull: Lessons from Wall Street's Champion Day Trader").
Exit Conditions:
Criteria: Close all positions when the 2-period RSI drops below 30 or the 10-day SMA crosses above the 30-day SMA.
Rationale: A low RSI value (below 30) suggests that the ETF may be oversold and could be poised for a rebound, while the SMA crossover indicates a potential change in the trend (Martin J. Pring, "Technical Analysis Explained").
Risks and Considerations:
Market Risk:
The strategy assumes that the ETF will continue to decline once shorted. However, markets can be unpredictable, and price movements might not align with the strategy's expectations, especially in a volatile market (Nassim Nicholas Taleb, "The Black Swan: The Impact of the Highly Improbable").
Scaling Risks:
Scaling into a position as the price increases may increase exposure to adverse price movements. This method can amplify losses if the market moves against the position significantly before any reversal occurs.
Liquidity Risk:
Depending on the ETF’s liquidity, executing large trades in increments might affect the price and increase trading costs. It is crucial to ensure that the ETF has sufficient liquidity to handle large trades without significant slippage (James Altucher, "Trade Like a Hedge Fund").
Execution Risk:
The strategy relies on timely execution of trades based on specific conditions. Delays or errors in order execution can impact performance, especially in fast-moving markets.
Technical Indicator Limitations:
Technical indicators like RSI and SMA are based on historical data and may not always predict future price movements accurately. They can sometimes produce false signals, leading to potential losses if used in isolation (John Murphy, "Technical Analysis of the Financial Markets").
Conclusion
The TPS Short strategy utilizes a combination of long-term trend filtering, overbought conditions, and incremental shorting to potentially profit from price reversals. While the strategy has a structured approach and leverages well-known technical indicators, it is essential to be aware of the inherent risks, including market volatility, liquidity issues, and potential limitations of technical indicators. As with any trading strategy, thorough backtesting and risk management are crucial to its successful implementation.
Larry Conners SMTP StrategyThe Spent Market Trading Pattern is a strategy developed by Larry Connors, typically used for short-term mean reversion trading. This strategy takes advantage of the exhaustion in market momentum by entering trades when the market is perceived as "spent" after extended trends or extreme moves, expecting a short-term reversal. Connors uses indicators like RSI (Relative Strength Index) and price action patterns to identify these opportunities.
Key Elements of the Strategy:
Overbought/Oversold Conditions: The strategy looks for extreme overbought or oversold conditions, often indicated by low RSI values (below 30 for oversold and above 70 for overbought).
Mean Reversion: Connors believed that markets, especially in short-term scenarios, tend to revert to the mean after periods of strong momentum. The "spent" market is assumed to have expended its energy, making a reversal likely.
Entry Signals:
In an uptrend, a stock or market index making a significant number of consecutive up days (e.g., 5-7 consecutive days with higher closes) indicates overbought conditions.
In a downtrend, a similar number of consecutive down days indicates oversold conditions.
Reversal Anticipation: Once an extreme in price movement is identified (such as consecutive gains or losses), the strategy places trades anticipating a reversion to the mean, which is usually the 5-day or 10-day moving average.
Exit Points: Trades are exited when prices move back toward their mean or when the extreme conditions dissipate, usually based on RSI or moving average thresholds.
Why the Strategy Works:
Human Psychology: The strategy capitalizes on the fact that markets, in the short term, often behave irrationally due to the emotions of traders—fear and greed lead to overextended moves.
Mean Reversion Tendency: Financial markets often exhibit mean-reverting behavior, where prices temporarily deviate from their historical norms but eventually return. Short-term exhaustion after a strong rally or sell-off offers opportunities for quick profits.
Overextended Moves: Markets that rise or fall too quickly tend to become overextended, as buyers or sellers get exhausted, making reversals more probable. Connors’ approach identifies these moments when the market is "spent" and ripe for a reversal.
Risks of the Spent Market Trading Pattern Strategy:
Trend Continuation: One of the key risks is that the market may not revert as expected and instead continues in the same direction. In trending markets, mean-reversion strategies can suffer because strong trends can last longer than anticipated.
False Signals: The strategy relies heavily on technical indicators like RSI, which can produce false signals in volatile or choppy markets. There can be times when a market appears "spent" but continues in its current direction.
Market Timing: Mean reversion strategies often require precise market timing. If the entry or exit points are mistimed, it can lead to losses, especially in short-term trades where small price movements can significantly impact profitability.
High Transaction Costs: This strategy requires frequent trades, which can lead to higher transaction costs, especially in markets with wide bid-ask spreads or high commissions.
Conclusion:
Larry Connors’ Spent Market Trading Pattern strategy is built on the principle of mean reversion, leveraging the concept that markets tend to revert to a mean after extreme moves. While effective in certain conditions, such as range-bound markets, it carries risks—especially during strong trends—where price momentum may not reverse as quickly as expected.
For a more in-depth explanation, Larry Connors’ books such as "Short-Term Trading Strategies That Work" provide a comprehensive guide to this and other strategies .
Connors VIX Reversal III invented by Dave LandryThis strategy is based on trading signals derived from the behavior of the Volatility Index (VIX) relative to its 10-day moving average. The rules are split into buying and selling conditions:
Buy Conditions:
The VIX low must be above its 10-day moving average.
The VIX must close at least 10% above its 10-day moving average.
If both conditions are met, a buy signal is generated at the market's close.
Sell Conditions:
The VIX high must be below its 10-day moving average.
The VIX must close at least 10% below its 10-day moving average.
If both conditions are met, a sell signal is generated at the market's close.
Exit Conditions:
For long positions, the strategy exits when the VIX trades intraday below its previous day’s 10-day moving average.
For short positions, the strategy exits when the VIX trades intraday above its previous day’s 10-day moving average.
This strategy is primarily a mean-reversion strategy, where the market is expected to revert to a more normal state after the VIX exhibits extreme behavior (i.e., large deviations from its moving average).
About Dave Landry
Dave Landry is a well-known figure in the world of trading, particularly in technical analysis. He is an author, trader, and educator, best known for his work on swing trading strategies. Landry focuses on trend-following and momentum-based techniques, teaching traders how to capitalize on shorter-term price swings in the market. He has written books like "Dave Landry on Swing Trading" and "The Layman's Guide to Trading Stocks," which emphasize practical, actionable trading strategies.
About Connors Research
Connors Research is a financial research firm known for its quantitative research in financial markets. Founded by Larry Connors, the firm specializes in developing high-probability trading systems based on historical market behavior. Connors’ work is widely respected for its data-driven approach, including systems like the RSI(2) strategy, which focuses on short-term mean reversion. The firm also provides trading education and tools for institutional and retail traders alike, emphasizing strategies that can be backtested and quantified.
Risks of the Strategy
While this strategy may appear to offer promising opportunities to exploit extreme VIX movements, it carries several risks:
Market Volatility: The VIX itself is a measure of market volatility, meaning the strategy can be exposed to sudden and unpredictable market swings. This can result in whipsaws, where positions are opened and closed in rapid succession due to sharp reversals in the VIX.
Overfitting: Strategies based on specific conditions like the VIX closing 10% above or below its moving average can be subject to overfitting, meaning they work well in historical tests but may underperform in live markets. This is a common issue in quantitative trading systems that are not adaptable to changing market conditions .
Mean-Reversion Assumption: The core assumption behind this strategy is that markets will revert to their mean after extreme movements. However, during periods of sustained trends (e.g., market crashes or rallies), this assumption may break down, leading to prolonged drawdowns.
Liquidity and Slippage: Depending on the asset being traded (e.g., S&P 500 futures, ETFs), liquidity issues or slippage could occur when executing trades at market close, particularly in volatile conditions. This could increase costs or worsen trade execution.
Scientific Explanation of the Strategy
The VIX is often referred to as the "fear gauge" because it measures the market's expectations of volatility based on options prices. Research has shown that the VIX tends to spike during periods of market stress and revert to lower levels when conditions stabilize . Mean reversion strategies like this one assume that extreme VIX levels are unsustainable in the long run, which aligns with findings from academic literature on volatility and market behavior.
Studies have found that the VIX is inversely correlated with stock market returns, meaning that higher VIX levels often correspond to lower stock prices and vice versa . By using the VIX’s relationship with its 10-day moving average, this strategy aims to capture reversals in market sentiment. The 10% threshold is designed to identify moments when the VIX is significantly deviating from its norm, signaling a potential reversal.
However, academic research also highlights the limitations of relying on the VIX alone for trading signals. The VIX does not predict market direction, only volatility, meaning that it cannot indicate the magnitude of price movements . Furthermore, extreme VIX levels can persist longer than expected, particularly during financial crises.
In conclusion, while the strategy is grounded in well-established financial principles (e.g., mean reversion and the relationship between volatility and market performance), it carries inherent risks and should be used with caution. Backtesting and careful risk management are essential before applying this strategy in live markets.
Larry Conners Vix Reversal II Strategy (approx.)This Pine Script™ strategy is a modified version of the original Larry Connors VIX Reversal II Strategy, designed for short-term trading in market indices like the S&P 500. The strategy utilizes the Relative Strength Index (RSI) of the VIX (Volatility Index) to identify potential overbought or oversold market conditions. The logic is based on the assumption that extreme levels of market volatility often precede reversals in price.
How the Strategy Works
The strategy calculates the RSI of the VIX using a 25-period lookback window. The RSI is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100 and is often used to identify overbought and oversold conditions in assets.
Overbought Signal: When the RSI of the VIX rises above 61, it signals a potential overbought condition in the market. The strategy looks for a RSI downtick (i.e., when RSI starts to fall after reaching this level) as a trigger to enter a long position.
Oversold Signal: Conversely, when the RSI of the VIX drops below 42, the market is considered oversold. A RSI uptick (i.e., when RSI starts to rise after hitting this level) serves as a signal to enter a short position.
The strategy holds the position for a minimum of 7 days and a maximum of 12 days, after which it exits automatically.
Larry Connors: Background
Larry Connors is a prominent figure in quantitative trading, specializing in short-term market strategies. He is the co-author of several influential books on trading, such as Street Smarts (1995), co-written with Linda Raschke, and How Markets Really Work. Connors' work focuses on developing rules-based systems using volatility indicators like the VIX and oscillators such as RSI to exploit mean-reversion patterns in financial markets.
Risks of the Strategy
While the Larry Connors VIX Reversal II Strategy can capture reversals in volatile market environments, it also carries significant risks:
Over-Optimization: This modified version adjusts RSI levels and holding periods to fit recent market data. If market conditions change, the strategy might no longer be effective, leading to false signals.
Drawdowns in Trending Markets: This is a mean-reversion strategy, designed to profit when markets return to a previous mean. However, in strongly trending markets, especially during extended bull or bear phases, the strategy might generate losses due to early entries or exits.
Volatility Risk: Since this strategy is linked to the VIX, an instrument that reflects market volatility, large spikes in volatility can lead to unexpected, fast-moving market conditions, potentially leading to larger-than-expected losses.
Scientific Literature and Supporting Research
The use of RSI and VIX in trading strategies has been widely discussed in academic research. RSI is one of the most studied momentum oscillators, and numerous studies show that it can capture mean-reversion effects in various markets, including equities and derivatives.
Wong et al. (2003) investigated the effectiveness of technical trading rules such as RSI, finding that it has predictive power in certain market conditions, particularly in mean-reverting markets .
The VIX, often referred to as the “fear index,” reflects market expectations of volatility and has been a focal point in research exploring volatility-based strategies. Whaley (2000) extensively reviewed the predictive power of VIX, noting that extreme VIX readings often correlate with turning points in the stock market .
Modified Version of Original Strategy
This script is a modified version of Larry Connors' original VIX Reversal II strategy. The key differences include:
Adjusted RSI period to 25 (instead of 2 or 4 commonly used in Connors’ other work).
Overbought and oversold levels modified to 61 and 42, respectively.
Specific holding period (7 to 12 days) is predefined to reduce holding risk.
These modifications aim to adapt the strategy to different market environments, potentially enhancing performance under specific volatility conditions. However, as with any system, constant evaluation and testing in live markets are crucial.
References
Wong, W. K., Manzur, M., & Chew, B. K. (2003). How rewarding is technical analysis? Evidence from Singapore stock market. Applied Financial Economics, 13(7), 543-551.
Whaley, R. E. (2000). The investor fear gauge. Journal of Portfolio Management, 26(3), 12-17.
Reflected ema Difference (RED) This script, titled "Reflected EMA Difference (RED)," is based on the logic of evaluating the percentage of convergence and divergence between two moving averages, specifically the Hull Moving Averages (HMA), to make price-related decisions. The Hull Moving Average, created by Alan Hull, is used as the foundation of this strategy, offering a faster and more accurate way to analyze market trends. In this script, the concept is employed to measure and reflect price variations.
Script Functionality Overview:
Hull Moving Averages (HMA): The script utilizes two HMAs, one short-term and one long-term. The main idea is to compute the Delta Difference between these two moving averages, which represents how much they are converging or diverging from each other. This difference is key to identifying potential market trend changes.
Reflected HMA Value: Using the Delta Difference between the HMAs, the value of the short-term HMA is reflected, creating a visual reference point that helps traders see the relationship between price and HMAs on the chart.
Percentage Change Index: The second key parameter is the percentage change index. This determines when a trend is reversing, allowing buy or sell orders to be established based on significant changes in the relationship between the HMAs and the price.
Delta Multiplier: The script comes with a default Delta multiplier of 2 for calculating the difference between HMAs, allowing traders to adjust the sensitivity of the analysis based on the time frame being analyzed.
Trend Reversal Signals: When the price crosses the thresholds defined by the percentage change index, buy or sell signals are triggered, based on the detection of a potential trend reversal.
Visual Cues with Boxes: Boxes are drawn on the chart when the HullMA crosses the reflected HMA value, providing a visual aid to identify critical moments where risk should be evaluated.
Alerts for Receiving Signals:
This script allows you to set up buy and sell alerts via TradingView's alert system. These alerts are triggered when trend changes are detected based on the conditions coded in the script. Traders can receive instant notifications, allowing them to make decisions without needing to constantly monitor the chart.
Additional Considerations:
The percentage change parameter is adjustable and should be configured based on the time frame you are trading on. For longer time frames, it's advisable to use a larger percentage change to avoid false signals.
The use of Hull Moving Averages (HMA) provides a faster and more reactive approach to trend evaluation compared to other moving averages, making it a powerful tool for traders seeking quick reversal signals.
This approach combines the power of Hull Moving Averages with an alert system to improve the trader’s response to trend changes.
Spanish
Este script, titulado "Reflected EMA Difference (RED)", está fundamentado en la lógica de evaluar el porcentaje de acercamiento y distancia entre dos medias móviles, específicamente las medias móviles de Hull (HMA), para tomar decisiones sobre el valor del precio. El creador de la media móvil de Hull, Alan Hull, diseñó este indicador para ofrecer una forma más rápida y precisa de analizar tendencias de mercado, y en este script se utiliza su concepto como base para medir y reflejar las variaciones de precio.
Descripción del funcionamiento:
Medias Móviles de Hull (HMA): Se utilizan dos HMAs, una de corto plazo y otra de largo plazo. La idea principal es calcular la diferencia Delta entre estas dos medias móviles, que representa cuánto se están alejando o acercando entre sí. Esta diferencia es clave para identificar cambios potenciales en la tendencia del mercado.
Valor Reflejado de la HMA: Con la diferencia Delta calculada entre las HMAs, se refleja el valor de la HMA corta, creando un punto de referencia visual que ayuda a los traders a observar la relación entre el precio y las HMAs en el gráfico.
Índice de Cambio de Porcentaje: El segundo parámetro clave del script es el índice de cambio porcentual. Este define el momento en que una tendencia está revirtiendo, permitiendo establecer órdenes de compra o venta en función de un cambio significativo en la relación entre las HMAs y el precio.
Multiplicador Delta: El script tiene un multiplicador predeterminado de 2 para el cálculo de la diferencia Delta, lo que permite ajustar la sensibilidad del análisis según la temporalidad del gráfico.
Señales de Reversión de Tendencia: Cuando el precio cruza los límites definidos por el índice de cambio porcentual, se emiten señales para comprar o vender, basadas en la detección de una posible reversión de tendencia.
Visualización con Cajas: Se dibujan cajas en el gráfico cuando el indicador HullMA cruza el valor reflejado de la HMA, ayudando a identificar visualmente los momentos críticos en los que se debe evaluar el riesgo de las operaciones.
Alertas para Recibir Señales:
Este script permite configurar alertas de compra y venta desde el apartado de alertas de TradingView. Estas alertas se activan cuando se detectan cambios de tendencia en función de las condiciones establecidas en el código. El trader puede recibir notificaciones instantáneas, lo que facilita la toma de decisiones sin necesidad de estar constantemente observando el gráfico.
Consideraciones adicionales:
El porcentaje de cambio es un parámetro ajustable y debe configurarse según la temporalidad que se esté operando. En temporalidades más largas, es recomendable usar un porcentaje de cambio mayor para evitar señales falsas.
La utilización de las medias móviles de Hull (HMA) proporciona un enfoque más rápido y reactivo para evaluar tendencias en comparación con otras medias móviles, lo que lo convierte en una herramienta poderosa para traders que buscan señales rápidas de reversión.
Este enfoque combina la potencia de las medias móviles de Hull con un sistema de alertas que mejora la reactividad a cambios de tendencia.
Varanormal Mac N Cheez Strategy v1Mac N Cheez Strategy (Set a $200 Take profit Manually)
It's super cheesy. Strategy does the following:
Here's a detailed explanation of what the entire script does, including its key components, functionality, and purpose.
1. Strategy Setup and Input Parameters:
Strategy Name: The script is named "NQ Futures $200/day Strategy" and is set as an overlay, meaning all elements (like moving averages and signals) are plotted on the price chart.
Input Parameters:
fastLength: This sets the length of the fast moving average. The user can adjust this value, and it defaults to 9.
slowLength: This sets the length of the slow moving average. The user can adjust this value, and it defaults to 21.
dailyTarget: The daily profit target, which defaults to $200. If set to 0, this disables the daily profit target.
stopLossAmount: The fixed stop-loss amount per trade, defaulting to $100. This value is used to calculate how much you're willing to lose on a single trade.
trailOffset: This value sets the distance for a trailing stop. It helps protect profits by automatically adjusting the stop-loss as the price moves in your favor.
2. Calculating the Moving Averages:
fastMA: The fast moving average is calculated using the ta.sma() function on the close price with a period length of fastLength. The ta.sma() function calculates the simple moving average.
slowMA: The slow moving average is also calculated using ta.sma() but with the slowLength period.
These moving averages are used to determine trend direction and identify entry points.
3. Buy and Sell Signal Conditions:
longCondition: This is the buy condition. It occurs when the fast moving average crosses above the slow moving average. The script uses ta.crossover() to detect this crossover event.
shortCondition: This is the sell condition. It occurs when the fast moving average crosses below the slow moving average. The script uses ta.crossunder() to detect this crossunder event.
4. Executing Buy and Sell Orders:
Buy Orders: When the longCondition is true (i.e., fast MA crosses above slow MA), the script enters a long position using strategy.entry("Buy", strategy.long).
Sell Orders: When the shortCondition is true (i.e., fast MA crosses below slow MA), the script enters a short position using strategy.entry("Sell", strategy.short).
5. Setting Stop Loss and Trailing Stop:
Stop-Loss for Long Positions: The stop-loss is calculated as the entry price minus the stopLossAmount. If the price falls below this level, the trade is exited automatically.
Stop-Loss for Short Positions: The stop-loss is calculated as the entry price plus the stopLossAmount. If the price rises above this level, the short trade is exited.
Trailing Stop: The trail_offset dynamically adjusts the stop-loss as the price moves in favor of the trade, locking in profits while still allowing room for market fluctuations.
6. Conditional Daily Profit Target:
The script includes a daily profit target that automatically closes all trades once the total profit for the day reaches or exceeds the dailyTarget.
Conditional Logic:
If the dailyTarget is greater than 0, the strategy checks whether the strategy.netprofit (total profit for the day) has reached or exceeded the target.
If the strategy.netprofit >= dailyTarget, the script calls strategy.close_all(), closing all open trades for the day and stopping further trading.
If dailyTarget is set to 0, this logic is skipped, and the script continues trading without a daily profit target.
7. Plotting Moving Averages:
plot(fastMA): This plots the fast moving average as a blue line on the price chart.
plot(slowMA): This plots the slow moving average as a red line on the price chart. These help visualize the crossover points and the trend direction on the chart.
8. Plotting Buy and Sell Signals:
plotshape(): The script uses plotshape() to add visual markers when buy or sell conditions are met:
"Long Signal": When a buy condition (longCondition) is met, a green marker is plotted below the price bar with the label "Long".
"Short Signal": When a sell condition (shortCondition) is met, a red marker is plotted above the price bar with the label "Short".
These markers help traders quickly see when buy or sell signals occurred on the chart.
In addition, triangle markers are plotted:
Green Triangle: Indicates where a buy entry occurred.
Red Triangle: Indicates where a sell entry occurred.
Summary of What the Script Does:
Inputs: The script allows the user to adjust moving average lengths, daily profit targets, stop-loss amounts, and trailing stop offsets.
Signals: It generates buy and sell signals based on the crossovers of the fast and slow moving averages.
Order Execution: It executes long positions on buy signals and short positions on sell signals.
Stop-Loss and Trailing Stop: It sets dynamic stop-losses and uses a trailing stop to protect profits.
Daily Profit Target: The strategy stops trading for the day once the net profit reaches the daily target (unless the target is disabled by setting it to 0).
Visual Markers: It plots moving averages and buy/sell signals directly on the main price chart to aid in visual analysis.
This script is designed to trade based on moving average crossovers, with robust risk management features like stop-loss and trailing stops, along with an optional daily profit target to limit daily trading activity. Let me know if you need further clarification or want to adjust any specific part of the script!
Optimized Heikin Ashi Strategy with Buy/Sell OptionsStrategy Name:
Optimized Heikin Ashi Strategy with Buy/Sell Options
Description:
The Optimized Heikin Ashi Strategy is a trend-following strategy designed to capitalize on market trends by utilizing the smoothness of Heikin Ashi candles. This strategy provides flexible options for trading, allowing users to choose between Buy Only (long-only), Sell Only (short-only), or using both in alternating conditions based on the Heikin Ashi candle signals. The strategy works on any market, but it performs especially well in markets where trends are prevalent, such as cryptocurrency or Forex.
This script offers customizable parameters for the backtest period, Heikin Ashi timeframe, stop loss, and take profit levels, allowing traders to optimize the strategy for their preferred markets or assets.
Key Features:
Trade Type Options:
Buy Only: Enter a long position when a green Heikin Ashi candle appears and exit when a red candle appears.
Sell Only: Enter a short position when a red Heikin Ashi candle appears and exit when a green candle appears.
Stop Loss and Take Profit:
Customizable stop loss and take profit percentages allow for flexible risk management.
The default stop loss is set to 2%, and the default take profit is set to 4%, maintaining a favorable risk/reward ratio.
Heikin Ashi Timeframe:
Traders can select the desired timeframe for Heikin Ashi candle calculation (e.g., 4-hour Heikin Ashi candles for a 1-hour chart).
The strategy smooths out price action and reduces noise, providing clearer signals for entry and exit.
Inputs:
Backtest Start Date / End Date: Specify the period for testing the strategy’s performance.
Heikin Ashi Timeframe: Select the timeframe for Heikin Ashi candle generation. A higher timeframe helps smooth the trend, which is beneficial for trading lower timeframes.
Stop Loss (in %) and Take Profit (in %): Enable or disable stop loss and take profit, and adjust the levels based on market conditions.
Trade Type: Choose between Buy Only or Sell Only based on your market outlook and strategy preference.
Strategy Performance:
In testing with BTC/USD, this strategy performed well in a 4-hour Heikin Ashi timeframe applied on a 1-hour chart over a period from January 1, 2024, to September 12, 2024. The results were as follows:
Initial Capital: 1 USD
Order Size: 100% of equity
Net Profit: +30.74 USD (3,073.52% return)
Percent Profitable: 78.28% of trades were winners.
Profit Factor: 15.825, indicating that the strategy's profitable trades far outweighed its losses.
Max Drawdown: 4.21%, showing low risk exposure relative to the large profit potential.
This strategy is ideal for both beginner and advanced traders who are looking to follow trends and avoid market noise by using Heikin Ashi candles. It is also well-suited for traders who prefer automated risk management through the use of stop loss and take profit levels.
Recommended Use:
Best Markets: This strategy works well on trending markets like cryptocurrency, Forex, or indices.
Timeframes: Works best when applied to lower timeframes (e.g., 1-hour chart) with a higher Heikin Ashi timeframe (e.g., 4-hour candles) to smooth out price action.
Leverage: The strategy performs well with leverage, but users should consider using 2x to 3x leverage to avoid excessive risk and potential liquidation. The strategy's low drawdown allows for moderate leverage use while maintaining risk control.
Customization: Traders can adjust the stop loss and take profit percentages based on their risk appetite and market conditions. A default setting of a 2% stop loss and 4% take profit provides a balanced risk/reward ratio.
Notes:
Risk Management: Traders should enable stop loss and take profit settings to maintain effective risk management and prevent large drawdowns during volatile market conditions.
Optimization: This strategy can be further optimized by adjusting the Heikin Ashi timeframe and risk parameters based on specific market conditions and assets.
Backtesting: The built-in backtesting functionality allows traders to test the strategy across different market conditions and historical data to ensure robustness before applying it to live trading.
How to Apply:
Select your preferred market and chart.
Choose the appropriate Heikin Ashi timeframe based on the chart's timeframe. (e.g., use 4-hour Heikin Ashi candles for 1-hour chart trends).
Adjust stop loss and take profit based on your risk management preference.
Run backtesting to evaluate its performance before applying it in live trading.
This strategy can be further modified and optimized based on personal trading style and market conditions. It’s important to monitor performance regularly and adjust settings as needed to align with market behavior.
Tian Di Grid Merge Version 6.0
Strategy Introduction:
1. We know that the exchange can only set a maximum of 100 grids. However, our grid strategy can set a maximum of 350 grids.
2. We have added the modes of proportional and differential warehousing.
3. It should be noted that we have not set any filtering conditions, which means that when the price falls below the grid, we will execute a buy action at the closing price, and when the price falls above the grid, we will execute a sell action;
4. We suggest limiting the trading time cycle to 5 meters, as sometimes errors may appear on TV due to the dense grid or the inability to draw so many grids;
5. Please ensure that the minimum spacing between each grid is not less than 0.1%, as this is extremely difficult to profit from, and on the other hand, it may not function due to excessively dense spacing;
6. The maximum number of grids is 350, and the minimum number is currently 3;
matters needing attention:
Don't choose to go long or short together, and don't choose to go even short or short;
Closing position setting: It is recommended to select it to avoid order accumulation;
Unable to trade: If unable to trade normally, switch to a 1m cycle;
Number of cells: Calculate it yourself, 350 is just the maximum number of cells that can be adjusted;
Grid spacing: minimum 0.1%, below which no profit can be made;
Position value: default is 100u, which is the amount already leveraged;
Multiple investment: The order amount for each order is the same, and there is no need for multiple investment;
Open both long and short positions: You can open multiple positions for one account and open one position for one account. Do not open both long and short positions for the same target at the same time
