This article explains in detail a quantitative trading strategy based on momentum trend analysis. It synthesizes indicators like moving averages, MACD, and RSI to identify price momentum and capture mid-long term trend opportunities.
I. Strategy Logic
The main judgment indicators include:
EMAs to gauge trends across different periods.
MACD to detect short-term momentum changes.
RSI to check overbought/oversold levels.
ATR for stop loss and take profit calculation.
It combines these indicators to identify persistent, strong breakouts that signal the start of a trend for trade entry.
When the short-term EMA fluctuates frequently, it judges the market as ranging. Trades are only taken when the long-term EMA is broken.
MACD judges momentum strength, RSI avoids chasing tops and bottoms. ATR sets stop loss and take profit controlling risk per trade.
II. Advantages of the Strategy
The biggest advantage is the complementarity of indicators, which can effectively identify the start of mid-long term trends.
Another advantage is the stop loss and take profit, which locks in trend profits and manages risk.
Lastly, the staged EMA periods allow smooth trend entries at different momentum levels.
III. Potential Risks
However, the strategy also has the following risks:
Firstly, trend detection may lag, causing missed opportunities.
Secondly, stops set too tightly risk being stopped out prematurely.
Finally, drawdown pressure needs psychological preparation.
IV. Summary
In summary, this article has explained a quantitative strategy based on momentum trend analysis. It synthesizes indicators like moving averages, MACD and RSI to determine trend direction. With proper parameter tuning, it can control risks and achieve steady profits. But risks like indicator lag need to be watched out for.
/*backtest
start: 2023-08-14 00:00:00
end: 2023-08-30 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
//@version=3
strategy("QuantCat Mom Finder Strateg (1H)", overlay=true)
//Series to sum the amount of crosses in EMA for sideways trend/noise filtering
//can change EMA lengths, can change to SMA's/WMA's e.t.c
lookback_value = 60
minMA = 20
midMA = 40
maxMA = 60
ema25_crossover = (crossover(close, ema(close, minMA))) == true ? 1 : 0
ema25_crossover_sum = sum(ema25_crossover, lookback_value) ///potentially change lookback value to alter results
ema50_crossover = (crossover(close, ema(close, midMA))) == true ? 1 : 0
ema50_crossover_sum = sum(ema50_crossover, lookback_value) ///potentially change lookback value to alter results
ema75_crossover = (crossover(close, ema(close, maxMA))) == true ? 1 : 0
ema75_crossover_sum = sum(ema75_crossover, lookback_value) ///potentially change lookback value to alter results
ema25_crossunder = (crossunder(close, ema(close, minMA))) == true ? 1 : 0
ema25_crossunder_sum = sum(ema25_crossunder, lookback_value) ///potentially change lookback value to alter results
ema50_crossunder = (crossunder(close, ema(close, midMA))) == true ? 1 : 0
ema50_crossunder_sum = sum(ema50_crossunder, lookback_value) ///potentially change lookback value to alter results
ema75_crossunder = (crossunder(close, ema(close, maxMA))) == true ? 1 : 0
ema75_crossunder_sum = sum(ema75_crossunder, lookback_value) ///potentially change lookback value to alter results4
//Boolean series declaration
//can change amount of times crossed over the EMA verification to stop sideways trend filtering (3)
maxNoCross=2
macdmidlinebull=-0.5
macdmidlinebear=0.5
[macdLine, signalLine, histLine] = macd(close, 12, 26, 9)
//---------------
//Series Creation
bullishMacd = (macdLine > signalLine) and (macdLine > macdmidlinebull) ? true : false
bearishMacd = (macdLine < signalLine) and (macdLine < macdmidlinebear) ? true : false
bullRsiMin = 50 //53 initial values
bullRsiMax = 60 //61
bearRsiMin = 40 //39
bearRsiMax = 50 //47
basicBullCross25bool = ((ema25_crossover_sum < ema50_crossover_sum)
and (ema25_crossover_sum < ema75_crossover_sum)
and (ema25_crossover_sum < maxNoCross)
and crossover(close, ema(close, minMA)) and (rsi(close, 14) > bullRsiMin)
and (rsi(close, 14) < bullRsiMax) and (bullishMacd == true)) ? true : false
basicBullCross50bool = ((ema50_crossover_sum < ema25_crossover_sum)
and (ema50_crossover_sum < ema75_crossover_sum)
and (ema50_crossover_sum < maxNoCross)
and crossover(close, ema(close, midMA)) and (rsi(close, 14) > bullRsiMin)
and (basicBullCross25bool == false)
and (rsi(close, 14) < bullRsiMax) and (bullishMacd == true)) ? true : false
basicBullCross75bool = ((ema75_crossover_sum < ema25_crossover_sum)
and (ema75_crossover_sum < ema50_crossover_sum)
and (ema75_crossover_sum < maxNoCross)
and crossover(close, ema(close, maxMA)) and (rsi(close, 14) > bullRsiMin)
and (basicBullCross25bool == false) and (basicBullCross50bool == false)
and (rsi(close, 14) < bullRsiMax) and (bullishMacd == true)) ? true : false
basicBearCross25bool = ((ema25_crossunder_sum < ema50_crossunder_sum)
and (ema25_crossunder_sum < ema75_crossunder_sum)
and (ema25_crossunder_sum < maxNoCross)
and crossunder(close, ema(close, minMA)) and (rsi(close, 14) <bearRsiMax)
and (rsi(close, 14) > bearRsiMin) and (bearishMacd == true)) ? true : false
basicBearCross50bool = ((ema50_crossunder_sum < ema25_crossunder_sum)
and (ema50_crossunder_sum < ema75_crossover_sum)
and (ema50_crossunder_sum < maxNoCross)
and crossunder(close, ema(close, midMA)) and (rsi(close, 14) < bearRsiMax)
and (basicBearCross25bool == false)
and (rsi(close, 14) > bearRsiMin) and (bearishMacd == true)) ? true : false
basicBearCross75bool = ((ema75_crossunder_sum < ema25_crossunder_sum)
and (ema75_crossunder_sum < ema50_crossunder_sum)
and (ema75_crossunder_sum < maxNoCross)
and crossunder(close, ema(close, maxMA)) and (rsi(close, 14) < bearRsiMax)
and (basicBearCross25bool == false) and (basicBearCross50bool == false)
and (rsi(close, 14) > bearRsiMin) and (bearishMacd == true)) ? true : false
//STRATEGY
//can change lookback input on ATR
atrLkb = input(14, minval=1, title='ATR Stop Period')
atrRes = input("D", title='ATR Resolution')
atr = security(syminfo.tickerid, atrRes, atr(atrLkb))
longCondition = (basicBullCross25bool or basicBullCross50bool or basicBullCross75bool) == true
if (longCondition)
strategy.entry("Long", strategy.long)
shortCondition = (basicBearCross25bool or basicBearCross50bool or basicBearCross75bool) == true
if (shortCondition)
strategy.entry("Short", strategy.short)
// Calc ATR Stops
// can change atr multiplier to affect stop distance/tp distance, and change "close" to ema values- could try ema 50
stopMult = 0.6 //0.6 is optimal
longStop = na
longStop := shortCondition ? na : longCondition and strategy.position_size <=0 ? close - (atr * stopMult) : longStop[1]
shortStop = na
shortStop := longCondition ? na : shortCondition and strategy.position_size >=0 ? close + (atr * stopMult) : shortStop[1]
//Calc ATR Target
targetMult = 2.2 //2.2 is optimal for crypto x/btc pairs
longTarget = na
longTarget := shortCondition ? na : longCondition and strategy.position_size <=0 ? close + (atr*targetMult) : longTarget[1]
shortTarget = na
shortTarget := longCondition ? na : shortCondition and strategy.position_size >=0 ? close - (atr*targetMult) : shortTarget[1]
// Place the exits
strategy.exit("Long ATR Stop", "Long", stop=longStop, limit=longTarget)
strategy.exit("Short ATR Stop", "Short", stop=shortStop, limit=shortTarget)
//Bar color series
longColour = longCondition ? lime : na
shortColour = shortCondition ? red : na
// Plot the stoplosses and targets
plot(longStop, style=linebr, color=red, linewidth=2, title='Long ATR Stop')
plot(shortStop, style=linebr, color=red, linewidth=2, title='Short ATR Stop')
plot(longTarget, style=linebr, linewidth=2, color=lime, title='Long ATR Target')
plot(shortTarget, linewidth=2, style=linebr, color=lime, title='Long ATR Target')
barcolor(color=longColour)
barcolor(color=shortColour)
alertcondition(((basicBullCross25bool or basicBullCross50bool or basicBullCross75bool)==true), title='Long Entry', message='Bullish Momentum Change!')
alertcondition(((basicBearCross25bool or basicBearCross50bool or basicBearCross75bool)==true), title='Short Entry', message='Bearish Momentum Change!')