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MACD Dual Moving Average Tracking Strategy

Author: ChaoZhang, Date: 2023-12-18 12:25:13
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Overview

This strategy is named MACD Dual Moving Average Tracking Strategy. It uses MACD indicator’s golden cross and death cross of dual moving averages as trading signals, combined with the previous day’s lowest price as the stop loss point to track the short-term price movement.

Strategy Logic

  1. Calculate fast EMA(close,5), slow EMA(close,8) and signal SMA(MACD,3)
  2. Define long signal: when fast MA crosses above slow MA
  3. Define short signal: when fast MA crosses below slow MA or closing price is lower than previous day’s lowest price
  4. Position size is initial capital 2000 USD divided by closing price
  5. Use short signal to close long position as stop loss

Advantage Analysis

  1. Use MACD indicator to determine overbought and oversold zones, with dual MAs to form trading signals, avoiding false breakout
  2. Track short-term trends, timely stop loss
  3. Dynamic adjustment of position size avoids excessively large single loss

Risk Analysis

  1. MACD indicator has lagging effect, may miss short-term opportunities
  2. Dual MA trading signals may produce false signals
  3. Stop loss point is too aggressive, with high frequency of being stopped out

Optimization Directions

  1. Optimize MACD parameters combination to improve indicator sensitivity
  2. Add trend judgment to avoid false signals from market consolidation
  3. Combine with Volatility Index to assess market volatility, adjust stop loss point

Summary

This strategy uses the classic MACD dual moving average combination indicator to determine overbought and oversold zones, generating trading signals, while introducing dynamic position sizing and previous day’s lowest price as stop loss point design to capture short-term price fluctuations. The overall strategy logic is clear and easy to understand, worth further testing and optimization.

/*backtest
start: 2023-12-10 00:00:00
end: 2023-12-13 02:00:00
period: 5m
basePeriod: 1m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=2
// macd/cam v1 strategizing Chris Moody Macd indicator https://www.tradingview.com/script/OQx7vju0-MacD-Custom-Indicator-Multiple-Time-Frame-All-Available-Options/
// macd/cam v2 changing to macd 5,8,3
// macd/cam v2.1 
//      Sell when lower than previous day low. 
//      Initial capital of $2k. Buy/sell quantity of initial capital / close price
//      Quitar short action
//      Note: custom 1-week resolution seems to put AMD at 80% profitable

strategy(title="MACD/CAM 2.1", shorttitle="MACD/CAM 2.1") //
source = close
//get inputs from options
useCurrentRes = input(true, title="Use Current Chart Resolution?")
resCustom = input(title="Use Different Timeframe? Uncheck Box Above", defval="60")
smd = input(true, title="Show MacD & Signal Line? Also Turn Off Dots Below")
sd = input(true, title="Show Dots When MacD Crosses Signal Line?")
sh = input(true, title="Show Histogram?")
macd_colorChange = input(true,title="Change MacD Line Color-Signal Line Cross?")
hist_colorChange = input(true,title="MacD Histogram 4 Colors?")
venderLowerPrev = input(true,title="Vender cuando closing price < previous day low?")

res = useCurrentRes ? timeframe.period : resCustom

fastLength = input(5, minval=1), slowLength=input(8,minval=1)
signalLength=input(3,minval=1)

// find exponential moving average of price as x and fastLength var as y
fastMA = ema(source, fastLength)
slowMA = ema(source, slowLength)

macd = fastMA - slowMA
// simple moving average
signal = sma(macd, signalLength)
hist = macd - signal

outMacD = request.security(syminfo.tickerid, res, macd)
outSignal = request.security(syminfo.tickerid, res, signal)
outHist = request.security(syminfo.tickerid, res, hist)

histA_IsUp = outHist > outHist[1] and outHist > 0
histA_IsDown = outHist < outHist[1] and outHist > 0
histB_IsDown = outHist < outHist[1] and outHist <= 0
histB_IsUp = outHist > outHist[1] and outHist <= 0

//MacD Color Definitions
macd_IsAbove = outMacD >= outSignal
macd_IsBelow = outMacD < outSignal

plot_color = hist_colorChange ? histA_IsUp ? aqua : histA_IsDown ? blue : histB_IsDown ? red : histB_IsUp ? maroon :yellow :gray
macd_color = macd_colorChange ? macd_IsAbove ? lime : red : red
signal_color = macd_colorChange ? macd_IsAbove ? yellow : yellow : lime

circleYPosition = outSignal
 
plot(smd and outMacD ? outMacD : na, title="MACD", color=macd_color, linewidth=4)
plot(smd and outSignal ? outSignal : na, title="Signal Line", color=signal_color, style=line ,linewidth=2)
plot(sh and outHist ? outHist : na, title="Histogram", color=plot_color, style=histogram, linewidth=4)

circleCondition = sd and cross(outMacD, outSignal)

// Determine long and short conditions
longCondition  = circleCondition and macd_color == lime

redCircle = circleCondition and macd_color == red
redCirclePrevLow = redCircle or low<low[1]
shortCondition = redCircle
if (venderLowerPrev)
    shortCondition = redCirclePrevLow

strategy.initial_capital = 20000
// Set quantity to initial capital / closing price
cantidad = strategy.initial_capital/close

// Submit orders
strategy.entry(id="long", long=true, qty=cantidad, when=longCondition)
strategy.close(id="long", when=shortCondition)
plot(circleCondition ? circleYPosition : na, title="Cross", style=cross, linewidth=10, color=macd_color)
// hline(0, '0 Line', linestyle=solid, linewidth=2, color=white)
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