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Daily FX Strategy Based on Moving Average and Williams Indicator

Author: ChaoZhang, Date: 2024-01-29 14:35:48
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Overview

This strategy combines moving average, ATR indicator and Williams indicator for daily FX trading. It first judges price trend and potential reversal points through moving average, then uses Williams indicator to further confirm trading signals, and leverages ATR indicator to calculate stop loss and position sizing.

Strategy Logic

  1. Use 20-day moving average (baseline) to determine overall trend. Price crossing from below to above is buy signal, while crossing from above to below is sell signal.
  2. Williams indicator is used to confirm price reversal. Indicator crossing above -35 is buy confirmation, while crossing below -70 is sell confirmation.
  3. ATR indicator calculates average of price range over last 2 days. The value multiplied by a factor is set as stop loss distance.
  4. Position sizing is based on 50% risk of account equity. Trade size is calculated based on stop loss distance and risk percentage.
  5. After entering long position, stop loss is set at price low minus stop loss distance. Take profit is set at entry price plus 100 points. Exiting logic further confirms exit signals.
  6. Similarly for short position, stop loss and take profit are set the same way. Exiting logic also used to confirm exits.

Advantage Analysis

  1. Combining trend judgment by moving average and confirmation by indicator can effectively avoid losses from false breakouts.
  2. Dynamic stop loss by ATR can set reasonable stop distance based on market volatility.
  3. Risk control and dynamic position sizing can maximize control over single trade loss.
  4. Exiting logic combined with moving average can help further confirm good exit timing and avoid premature profit taking.

Risk Analysis

  1. Moving average signals may have higher probability of being wrong, needing further confirmation from indicators.
  2. Indicators themselves can also generate wrong signals, unable to completely avoid losses.
  3. This strategy fits trending pairs better, may have poorer results for range-bound pairs.
  4. Improper risk control ratio settings can also impact strategy profitability.

Methods like adjusting moving average period, combining more indicators, manual intervention etc. can help further optimize and improve strategy.

Conclusion

This strategy combines trend judgment and indicator filter for daily trading. It also leverages dynamic stop loss, risk control and other means to control trading risk. Much room for optimization exists by parameter tuning and method combination to further improve strategy performance.

/*backtest
start: 2023-12-29 00:00:00
end: 2024-01-28 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4
strategy("GBPJPY DAILY FX",initial_capital = 1000,currency="USD", overlay=true)

UseHAcandles    = input(false, title="Use Heikin Ashi Candles in Algo Calculations")
//
// === /INPUTS ===

// === BASE FUNCTIONS ===

haClose = UseHAcandles ? security(heikinashi(syminfo.tickerid), timeframe.period, close) : close
haOpen  = UseHAcandles ? security(heikinashi(syminfo.tickerid), timeframe.period, open) : open
haHigh  = UseHAcandles ? security(heikinashi(syminfo.tickerid), timeframe.period, high) : high
haLow   = UseHAcandles ? security(heikinashi(syminfo.tickerid), timeframe.period, low) : low

//INDICATOR---------------------------------------------------------------------    
    //Average True Range (1. RISK)
atr_period = 2
atr = atr(atr_period)



    //Ichimoku Cloud - Kijun Sen (2. BASELINE)
ks_period = 20
kijun_sen = (highest(haHigh,ks_period) + lowest(haLow,ks_period))/2
base_long = haOpen < kijun_sen and haClose > kijun_sen
base_short = haOpen > kijun_sen and haClose < kijun_sen

    //Williams Percent Range (3. Confirmation#1)
use_wpr = true
wpr_len = 4
wpr = -100*(highest(haHigh,wpr_len) - haClose)/(highest(haHigh,wpr_len) - lowest(haLow,wpr_len))
wpr_up = -35
wpr_low = -70
conf1_long = wpr >= wpr_up
conf1_short = wpr <= wpr_low
if(use_wpr == false)
    conf1_long := true
    conf1_short := true
//TRADE LOGIC-------------------------------------------------------------------
    //Long Entry
    //if -> WPR crosses below -39 AND MACD line is less than signal line
l_en = base_long and conf1_long
    //Long Exit
    //if -> WPR crosses above -14
l_ex = haClose < kijun_sen
    //Short Entry
    //if -> WPR crosses above -39 AND MACD line is greater than signal line
s_en = base_short and conf1_short
    //Short Exit
    //if -> WPR crosses under -14
s_ex = haClose > kijun_sen
    
strategy.initial_capital = 50000
//MONEY MANAGEMENT--------------------------------------------------------------
balance = strategy.netprofit + strategy.initial_capital //current balance
floating = strategy.openprofit          //floating profit/loss
isTwoDigit = input(true,"Is this a 2 digit pair? (JPY, XAU, XPD...")
risk = input(50,"Risk %")/100           //risk % per trade
equity_protector = input(30,"Equity Protection %")/100  //equity protection %
stop = atr*100000*input(1,"Average True Range multiplier")    //Stop level
if(isTwoDigit)
    stop := stop/100
target = input(100, "Target TP in Points")  //TP level
    //Calculate current DD and determine if stopout is necessary
equity_stopout = false
if(floating<0 and abs(floating/balance)>equity_protector)
    equity_stopout := true
    
    //Calculate the size of the next trade
temp01 = balance * risk     //Risk in USD
temp02 = temp01/stop        //Risk in lots
temp03 = temp02*100000      //Convert to contracts
size = temp03 - temp03%1000 //Normalize to 1000s (Trade size)
if(size < 1)
    size := 1            //Set min. lot size

//TRADE EXECUTION---------------------------------------------------------------
strategy.close_all(equity_stopout)      //Close all trades w/equity protector
is_open = strategy.opentrades > 0

fromDay = input(defval = 1, title = "From Day", minval = 1, maxval = 31)
fromMonth = input(defval = 1, title = "From Month", minval = 1, maxval = 12)
fromYear = input(defval = 2000, title = "From Year", minval = 1970)
 //monday and session 
// To Date Inputs
toDay = input(defval = 31, title = "To Day", minval = 1, maxval = 31)
toMonth = input(defval = 12, title = "To Month", minval = 1, maxval = 12)
toYear = input(defval = 2021, title = "To Year", minval = 1970)

startDate = timestamp(fromYear, fromMonth, fromDay, 00, 00)
finishDate = timestamp(toYear, toMonth, toDay, 00, 00)
time_cond = true

if(time_cond)
    strategy.entry("l_en",true,1,oca_name="a",when=l_en and not is_open)  //Long entry
    strategy.entry("s_en",false,1,oca_name="a",when=s_en and not is_open) //Short entry
    
    strategy.exit("S/L","l_en",loss=stop, profit=target)      //Long exit (stop loss)
    strategy.close("l_en",when=l_ex)            //Long exit (exit condition)
    strategy.exit("S/L","s_en",loss=stop, profit=target)      //Short exit (stop loss)
    strategy.close("s_en",when=s_ex)            //Short exit (exit condition)
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