This strategy is named “High-Low Breakout Trend Following Strategy”. It identifies new price highs and lows to determine trend direction, and trades breakouts of latest high/low points to follow trends.
The specific logic is:
Calculate the highest high and lowest low over a certain period (e.g. 22 days).
When price breaks above the latest 1-day high, a buy signal is generated, flagging an uptrend.
When price breaks below the latest 1-day low, a sell signal is generated, flagging a downtrend.
Trend direction is checked to filter false signals. For example, new high price with bearish divergence is ignored for buying.
Only when indicators align with price trend will trades be taken on breakouts of the latest high/low points.
The advantage is capturing pivotal breakout timing, which often accompanies trend start or acceleration. But over-trading in ranging markets should be prevented.
In summary, watching key price area breakouts is essential in trend following. But confirmation with other indicators and parameter tuning based on actual conditions are needed to maximize the strategy’s utility.
/*backtest
start: 2023-08-13 00:00:00
end: 2023-09-12 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
//@version=1
strategy(title="HIGHER HIGH LOWER LOW STRATEGY", shorttitle="HH LL STRATEGY", overlay=true, calc_on_order_fills=true, initial_capital=100000, default_qty_type=strategy.percent_of_equity, currency="USD", default_qty_value=100)
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//Higher High or Lower Low Entry Inputs
price = input(hlc3)
LookBack = input(22)
Highest = highest(LookBack)
Lowest = lowest(LookBack)
long = price > Highest[1]
short = price < Lowest[1]
//Divergence Check Inputs
length = input(14)
High_Guard = highest(length)
Low_Guard = lowest(length)
length2 = input(2)
long1 = long == 1 and Highest[1] > High_Guard[length2]
short1 = short == 1 and Lowest[1] < Low_Guard[length2]
plot(long and long[1], color=green, style=line)
plot(short and short[1], color=red, style=line)
strategy.entry("Long", strategy.long, when=long1)
strategy.entry("Short", strategy.short, when=short1)