This strategy combines moving average and momentum indicators, belonging to trend following strategies. It judges the market trend direction by calculating the moving average over a certain period. When the price breaks through the moving average, it is considered that the trend has reversed, and trading can be carried out. At the same time, it introduces the number of consecutive up or down days within a certain period as a confirmation signal to avoid being deceived by false breakouts.
This strategy is mainly based on two indicators:
Simple Moving Average (SMA): Calculates the average closing price over a certain period to determine the general trend direction.
Consecutive up/down days: Counts the number of days the price has been in a persistent uptrend or downtrend as a confirmation signal for trend reversal.
Specifically, the strategy first calculates the 520-day SMA, representing the general trend direction. If the price rises and breaks through the SMA, it starts counting the number of up days; if the price falls and breaks through the SMA, it starts counting the number of down days. When the number of up days or down days reaches 27 days, a corresponding directional trade is made.
For example, if the price rises and breaks through the SMA, and continues to rise for 27 days, a long trade is made; if the price falls and breaks through the SMA, and continues to fall for 27 days, a short trade is made.
This strategy combines moving averages and momentum indicators to effectively track trends while avoiding short-term market noise interference. Its main advantages are:
Using long-period SMA to judge the major trend can effectively filter out short-term fluctuations and noise.
Increasing confirmation signals of consecutive up/down days can avoid being deceived by short-term false breakouts and reduce unnecessary trading.
Trading only when trend reverses can maximize capturing the direction and momentum of the trend.
The rules are clear and easy to implement, no complex parameter optimization is needed, suitable for ordinary investors.
This strategy also has some risks:
It may miss early entry opportunities in long-term bull market trends.
It is prone to be deceived by frequent false breakouts in range-bound markets, resulting in excessive invalid trading.
If SMA parameters are set improperly, the strategy may respond sluggishly to trend changes.
If perfusion parameters are set improperly, trading signals may be too frequent or too sparse.
The strategy can be further optimized in the following aspects:
Add SMA of multiple timeframes for multi-cycle verification to avoid limitations of a single cycle.
Add other trend indicators such as MACD for comprehensive judgment to improve accuracy.
Optimize perfusion parameters to find a balance point, avoiding too frequent or too sparse trading signals.
Add stop loss strategies to control single loss.
Incorporate volume indicators to avoid risks of volume divergence.
Overall, this strategy is a simple and practical trend following strategy. It judges the major trend with long-period SMA and uses perfusion to confirm trend reversal signals, which can effectively track trends while avoiding noise deception. With some optimization, it can become a reliable trend strategy. But still need to be aware of limitations under certain market conditions. In general, this strategy is suitable for investors with some trading experience, to be used as part of a portfolio strategy.
/*backtest
start: 2023-09-11 00:00:00
end: 2023-09-18 00:00:00
period: 5m
basePeriod: 1m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
strategy(title="Mbit Moving Average",overlay=true)
length = input(520)
confirmBars = input(27)
price = close
ma = ta.sma(price, length)
bcond = price > ma
bcount = bcond ? nz(bcount[1]) + 1 : 0
scond = price < ma
scount = scond ? nz(scount[1]) + 1 : 0
long = scount == confirmBars
short = bcount == confirmBars
//Strategy
strategy.entry("long", strategy.long, when=long)
strategy.entry("short",strategy.short, when=short)