YinYang RSI Volume Trend Trading Strategy
Author: ChaoZhang, Date: 2023-12-22 14:29:05Tags:
Overview
This strategy is a trend following strategy that utilizes a combination of Relative Strength Index (RSI) and volume to identify trend direction and follow trends. Key points include:
- Using Volume Weighted Moving Average to calculate midline and incorporate volume information to determine trend midpoint
- Setting up buy zone and sell zone based on midline
- Using RSI information to adjust range of buy zone and sell zone
- Setting stop loss and take profit after entering buy/sell zones
- Having re-entry mechanism
Strategy Logic
This strategy uses the following indicators and parameters:
- Midline: Volume Weighted Moving Average of highest and lowest prices in certain periods to determine midpoint of the trend
- RSI: Relative Strength Index calculated over certain periods, converted into 0-1 range
- Buy Zone: Midline plus RSI adjusted amount at certain ratio, long entry when price enters
- Sell Zone: Midline minus RSI adjusted amount at certain ratio, short entry when price enters
- Take Profit Line: Midline
- Stop Loss Line: Certain percentage below buy zone/above sell zone
When price enters buy or sell zone, a corresponding direction order will be opened. Stop loss and take profit lines are then set. When take profit or stop loss is triggered, position will be closed. A re-entry mechanism is also set so that new orders can be opened when signal triggers again if configured.
Advantages
The advantages of this strategy include:
- Using both RSI and volume to identify trends, improving accuracy
- RSI parameterized adjustment makes buy/sell zone adapt better to actual trend
- Volume information assigns higher weight to price actions, making midline more accurate
- Having stop loss mechanism to control risks
- Allows re-entry, reducing risks of false breakouts
Risks
There are also some risks:
- Improper RSI and volume parameters may affect buy/sell zone accuracy
- Midline may fail to accurately determine trend, causing false breakout
- Stop loss too wide may lead to higher losses
- Re-entry may cause over-trading
Solutions:
- Adjust RSI and volume cycle to fit market conditions
- Use other indicators to verify buy/sell signals
- Tighten stop loss to limit losses
- Limit trades per day to prevent over-trading
Optimization
This strategy can be optimized by:
- Trying other indicators to verify signals e.g. candlestick, volatility indicators etc
- Adding position sizing mechanisms e.g. pyramiding winners
- Using machine learning algorithms to improve buy/sell zone accuracy
- Evaluating optimum parameters for stop loss and take profit
- Parameters need separate test and optimization for different products
Conclusion
In conclusion, this is a quantitative trend following strategy utilizing RSI and volume indicators. It has dual verification system to identify signals, stop loss/profit take to control risks, and re-entry mechanism to improve profitability. With parameter tuning and algorithm optimization, it can become a very practical trend trading strategy.
/*backtest
start: 2023-11-21 00:00:00
end: 2023-12-21 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
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// © YinYangAlgorithms
//@version=5
strategy("YinYang RSI Volume Trend Strategy", shorttitle="YinYang RSVT Strategy", overlay=true )
// ~~~~~~~~~~~ INPUTS ~~~~~~~~~~~ //
len = input.int(80, "Trend Length:", tooltip="How far back should we span this indicator?\nThis length effects all lengths of the indicator")
purchaseSrc = input.source(close, "Purchase Source (Long and Short):", tooltip="What source needs to exit the purchase zone for a purchase to happen?")
exitSrc = input.source(close, "Exit Source (Long and Short):", tooltip="What source needs to hit a exit condition to stop the trade (Take profit, Stop Loss or hitting the other sides Purchase Zone)?")
useTakeProfit = input.bool(true, "Use Take Profit", tooltip="Should we take profit IF we cross the basis line and then cross it AGAIN?")
useStopLoss = input.bool(true, "Use Stop Loss", tooltip="Stop loss will ensure you don't lose too much if its a bad call")
stopLossMult = input.float(0.1, "Stoploss Multiplier %:", tooltip="How far from the purchase lines should the stop loss be")
resetCondition = input.string("Entry", "Reset Purchase Availability After:", options=["Entry", "Stop Loss", "None"],
tooltip="If we reset after a condition is hit, this means we can purchase again when the purchase condition is met. \n" +
"Otherwise, we will only purchase after an opposite signal has appeared.\n" +
"Entry: means when the close enters the purchase zone (buy or sell).\n" +
"Stop Loss: means when the close hits the stop loss location (even when were out of a trade)\n" +
"This allows us to get more trades and also if our stop loss initally was hit but it WAS a good time to purchase, we don't lose that chance.")
// ~~~~~~~~~~~ VARIABLES ~~~~~~~~~~~ //
var bool longStart = na
var bool longAvailable = na
var bool longTakeProfitAvailable = na
var bool longStopLoss = na
var bool shortStart = na
var bool shortAvailable = na
var bool shortTakeProfitAvailable = na
var bool shortStopLoss = na
resetAfterStopLoss = resetCondition == "Stop Loss"
resetAfterEntry = resetCondition == "Entry"
// ~~~~~~~~~~~ CALCULATIONS ~~~~~~~~~~~ //
// Mid Line
midHigh = ta.vwma(ta.highest(high, len), len)
midLow = ta.vwma(ta.lowest(low, len), len)
mid = math.avg(midHigh, midLow)
midSmoothed = ta.ema(mid, len)
//Volume Filtered
avgVol = ta.vwma(volume, len)
volDiff = volume / avgVol
midVolSmoothed = ta.vwma(midSmoothed * volDiff, 3)
//RSI Filtered
midDifference = ta.sma(midHigh - midLow, len)
midRSI = ta.rsi(midVolSmoothed, len) * 0.01
midAdd = midRSI * midDifference
//Calculate Zones
purchaseZoneHigh = midSmoothed + midAdd
purchaseZoneLow = midSmoothed - midAdd
purchaseZoneBasis = math.avg(purchaseZoneHigh, purchaseZoneLow)
//Create Stop Loss Locations
stopLossHigh = purchaseZoneHigh * (1 + (stopLossMult * 0.01))
stopLossLow = purchaseZoneLow * (1 - (stopLossMult * 0.01))
// ~~~~~~~~~~~ PURCHASE CALCULATIONS ~~~~~~~~~~~ //
//Long
longEntry = ta.crossunder(purchaseSrc, purchaseZoneLow)
longStart := ta.crossover(purchaseSrc, purchaseZoneLow) and longAvailable
longAvailable := ta.crossunder(purchaseSrc, purchaseZoneHigh) or (resetAfterStopLoss and longStopLoss) or (resetAfterEntry and longEntry) ? true : longStart ? false : longAvailable[1]
longEnd = ta.crossover(exitSrc, purchaseZoneHigh)
longStopLoss := ta.crossunder(exitSrc, stopLossLow)
longTakeProfitAvailable := ta.crossover(exitSrc, purchaseZoneBasis) ? true : longEnd ? false : longTakeProfitAvailable[1]
longTakeProfit = ta.crossunder(exitSrc, purchaseZoneBasis) and longTakeProfitAvailable
//Short
shortEntry = ta.crossover(purchaseSrc, purchaseZoneHigh)
shortStart := ta.crossunder(purchaseSrc, purchaseZoneHigh) and shortAvailable
shortAvailable := ta.crossover(purchaseSrc, purchaseZoneLow) or (resetAfterStopLoss and shortStopLoss) or (resetAfterEntry and shortEntry)? true : shortStart ? false : shortAvailable[1]
shortEnd = ta.crossunder(exitSrc, purchaseZoneLow)
shortStopLoss := ta.crossover(exitSrc, stopLossHigh)
shortTakeProfitAvailable := ta.crossunder(exitSrc, purchaseZoneBasis) ? true : shortEnd ? false : shortTakeProfitAvailable[1]
shortTakeProfit = ta.crossover(exitSrc, purchaseZoneBasis) and shortTakeProfitAvailable
// ~~~~~~~~~~~ PLOTS ~~~~~~~~~~~ //
shortLine = plot(purchaseZoneHigh, color=color.green)
shortStopLossLine = plot(stopLossHigh, color=color.green) //color=color.rgb(0, 97, 3)
fill(shortLine, shortStopLossLine, color = color.new(color.green, 90))
plot(purchaseZoneBasis, color=color.white)
longLine = plot(purchaseZoneLow, color=color.red)
longStopLossLine = plot(stopLossLow, color=color.red) //color=color.rgb(105, 0, 0)
fill(longLine, longStopLossLine, color=color.new(color.red, 90))
// ~~~~~~~~~~~ STRATEGY ~~~~~~~~~~~ //
if (longStart)
strategy.entry("buy", strategy.long)
else if (longEnd or (useStopLoss and longStopLoss) or (useTakeProfit and longTakeProfit))
strategy.close("buy")
if (shortStart)
strategy.entry("sell", strategy.short)
else if (shortEnd or (useStopLoss and shortStopLoss) or (useTakeProfit and shortTakeProfit))
strategy.close("sell")
// ~~~~~~~~~~~ ALERTS ~~~~~~~~~~~ //
if longStart or (longEnd or (useStopLoss and longStopLoss) or (useTakeProfit and longTakeProfit)) or shortStart or (shortEnd or (useStopLoss and shortStopLoss) or (useTakeProfit and shortTakeProfit))
alert("{{strategy.order.action}} | {{ticker}} | {{close}}", alert.freq_once_per_bar)
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