This strategy generates trading signals using the Logarithmic MACD indicator. It calculates the difference between fast and slow logarithmic moving averages to gauge market momentum and opportunities.
The main logic is:
Calculate fast logarithmic MA (default 12) and slow logarithmic MA (default 26)
Logarithmic MACD is their difference, expressing market momentum
Signal line is smoothed MA of MACD (default 9)
Go long when MACD crosses above signal from below
Go short when MACD crosses below signal from above
MACD-Signal difference plotted as histogram
Compared to simple MACD, logarithmic MACD can better highlight exponential growth trends. Log transform maintains comparability of volatile values on the chart.
Detects exponential price movements using logarithmic transform
Log MACD highlights price fluctuation information
Signal line smooths MACD into trading signals
MACD histogram intuitively shows trend direction
Log transform may amplify price noise
Frequent signals, risks over-trading
No stop loss management, incomplete risk control
Mitigations:
Adjust parameters to reduce signal frequency
Add filters to avoid signals in choppy conditions
Implement stop loss to control loss per trade
Optimize parameters for stability
Try other transforms like exponential moving average
Add trend filter to screen signals
Incorporate stop loss strategies
Use machine learning to judge signal reliability
The logarithmic transform enhances MACD’s sensitivity for early trend detection. But trade frequency should be controlled. With optimizations in parameters, risk management etc., this strategy can become a stable and unique quantitative system.
/*backtest
start: 2022-09-14 00:00:00
end: 2023-09-20 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
//@version=3
strategy(title="Logarithmic Moving Average Convergence Divergence Strategy", shorttitle="LMACD Strategy")
// Getting inputs
fast_length = input(title="Fast Length", defval=12)
slow_length = input(title="Slow Length", defval=26)
src = input(title="Source", defval=close)
signal_length = input(title="Signal Smoothing", minval = 1, maxval = 50, defval = 9)
sma_source = input(title="Simple MA(Oscillator)", defval=false)
sma_signal = input(title="Simple MA(Signal Line)", defval=false)
// Plot colors
col_grow_above = #26A69A
col_grow_below = #FFCDD2
col_fall_above = #B2DFDB
col_fall_below = #EF5350
col_macd = #0094ff
col_signal = #ff6a00
// Calculating
fast_ma = sma_source ? sma(src, fast_length) : ema(src, fast_length)
slow_ma = sma_source ? sma(src, slow_length) : ema(src, slow_length)
lmacd = log(fast_ma) - log(slow_ma)
signal = sma_signal ? sma(lmacd, signal_length) : ema(lmacd, signal_length)
hist = lmacd - signal
plot(hist, title="Histogram", style=columns, color=(hist>=0 ? (hist[1] < hist ? col_grow_above : col_fall_above) : (hist[1] < hist ? col_grow_below : col_fall_below) ), transp=0 )
plot(lmacd, title="LMACD", color=col_macd, transp=0)
plot(signal, title="Signal", color=col_signal, transp=0)
if (crossover(hist, 0))
strategy.entry("Long", strategy.long, comment="LMACD long")
if (crossunder(hist, 0))
strategy.entry("Short", strategy.short, comment="LMACD short")