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Monday Reversal Intraday Trend Following Strategy

Author: ChaoZhang, Date: 2023-11-06 15:34:06
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Overview

The main idea of this strategy is to profit from Monday’s intraday reversal using trend following.

Principles

The core logic is:

  1. Check if it is Monday, if yes, continue to next steps;

  2. Identify if an uptrend reversal pattern exists - Close[1] < Close[2] and Close[2] < Close[3];

  3. If reversal pattern confirmed, go long at the close of 3rd bar to follow the trend;

  4. Exit if today’s high is breached, or stop loss is hit;

  5. Close position after 6 hours.

The strategy capitalizes on specific Monday reversal, identifies reversal patterns to go long at relative lows for profits. Stop loss in place to control risks.

Advantages

The biggest advantages are:

  1. Profits from Monday reversals during specific periods;

  2. Clear entry signals from reversal candlestick patterns;

  3. Stop loss and take profit to control risks;

  4. Trend following approach maximizes profits;

  5. Simple and easy to understand logic;

Risks

There are some risks:

  1. Losses if Monday reversals not significant;

  2. Price may retrace after entry leading to stop loss;

  3. Sudden market changes may result in large stop loss;

  4. Holding too long may also lead to losses;

The solutions are optimizing stop loss, shortening holding time, and controlling single loss size.

Enhancements

The strategy can be improved by:

  1. Using machine learning to identify reversals more accurately;

  2. Optimizing stop loss strategies like trailing stop or partial stop loss;

  3. Incorporating more factors to judge trend strength;

  4. Dynamically adjusting holding time;

  5. Using algorithms to find optimal parameters;

  6. Adding position switching for two-way trading;

These can increase the win rate and profitability.

Conclusion

In conclusion, the strategy capitalizes on Monday reversals, with clear entry/exit rules, to implement a simple trend following strategy. It can achieve better results than fixed stop loss/take profit. Further optimizations are needed to address market uncertainty. The strategy provides a reference for intraday trading.

/*backtest
start: 2023-10-06 00:00:00
end: 2023-11-05 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4
strategy("ET Forex TurnaroundMonday", overlay=true)
FirstYear = input(2018, minval=2000, maxval=2023, step=1)
FirstMonth = 1 //input(1, minval=1, maxval=12, step=1)
FirstDay = 1 //input(1, minval=1, maxval=31, step=1)

deltaDay = input(0)
StartHour = input(0)

f_barssince(_cond, _count) => _barssince=bar_index-valuewhen(_cond, bar_index, _count)

HoldTime = input(6, step=1)

MM = input(1)

startHour = input(-7, step=1)
endHour = input(34, step=1)
exitHour = input(30, step=1)


startdateCond = (year > FirstYear or (year == FirstYear and (month > FirstMonth or (month == FirstMonth and dayofmonth >= FirstDay))))

iHour = hour
if iHour > 19 
    iHour := iHour-20
else
    iHour := iHour+4    
    
    
timeCondition = true //(iHour>=startHour and iHour<=endHour and iHour<=exitHour)

since_flat_condition = strategy.position_size == 0

entryPrice=strategy.position_avg_price
EntryLongCondition = dayofweek == (dayofweek.monday+deltaDay) and close[0] < close[1] and close[1]<close[2] and startdateCond //and timeCondition and iHour > StartHour
ExitTimeCondition = false//(f_barssince(since_flat_condition, 0)>=HoldTime)
ExitLongCondition = strategy.position_size > 0  and (close[0] > high[1])// or close[0]< entryPrice-abs(close[1]-close[2])*0.2)//(ExitTimeCondition) //iHour >= exitHour or 
strategy.initial_capital =50000
// MM Block
lots = if MM < 2 
    strategy.initial_capital 
else 
    strategy.equity

lots := lots/close

entryPrice:=strategy.position_avg_price
strategy.close("ETLong",when=(ExitLongCondition==true))
strategy.entry("ETLong", strategy.long, qty=lots, comment="OpenLong",when=(EntryLongCondition==true))
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