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Dual MACD Quantitative Trading Strategy

Author: ChaoZhang, Date: 2024-01-30 16:43:29
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Overview

The Dual MACD quantitative trading strategy is a quantitative trading strategy implemented using dual timeframe MACD indicators. It goes long when the weekly MACD indicator forms a golden cross and closes the position when the daily MACD indicator forms a death cross. When the position is empty, if the daily MACD indicator forms another golden cross, a new long position can be opened.

Strategy Logic

The Dual MACD quantitative trading strategy uses a combination of weekly MACD and daily MACD indicators to determine entry and exit signals.

Firstly, when the MACD line of the weekly MACD indicator crosses above the signal line, a buy signal is generated and a long position is opened. Then when the MACD line of the daily MACD indicator crosses below the signal line, a sell signal is generated and the position is closed.

When the position is empty, if the MACD line of the daily MACD indicator crosses above the signal line again, a new long position is reopened. That is to say, the golden cross of the daily MACD acts as the re-entry condition.

Note that only the death cross of the daily MACD will close the position, but reopening is only allowed when the MACD line of the weekly MACD is above the signal line, within the “Trading Window”.

Advantages

The Dual MACD quantitative trading strategy combines dual timeframe analysis, which can effectively filter false signals and improve signal quality. Specifically, there are several main advantages:

The weekly timeframe judges the main trend direction, which helps avoid contrarian trading.
The daily timeframe determines entry and exit timing, which can timely capture short-term trading opportunities.
The “Trading Window” mechanism can avoid excessively frequent opening and closing due to short-term adjustments.
The MACD indicator parameters are adjustable and can be optimized according to different varieties and market conditions.
Integrates take profit, stop loss, trailing stop loss functions to effectively control risks.

Risks

The Dual MACD quantitative trading strategy also has some risks, mainly including:

MACD indicator tends to generate false signals and frequent crossovers, needs confirmation from other indicators.
The main trend identified in weekly/monthly timeframe may reverse, trailing stop loss is necessary.
Parameters need continuous optimization and adjustment according to varieties and market conditions.
Cannot overly rely on backtest results, live performance may differ from backtest.

Corresponding solutions:

Combine with other indicators to build strategy systems with logic optimization.
Set reasonable stop loss to avoid exceeding maximum tolerable loss.
Continuously optimize parameters to find optimal combinations.
Start live trading from minimum capital to validate stability.

Optimization

The Dual MACD quantitative trading strategy has room for further optimization:

Introduce Bollinger Bands, KDJ and other indicators to build multi-indicator combined strategies and improve signal quality.
Incorporate trading volume indicators to avoid false breakouts with insufficient volume.
Utilize machine learning methods to automatically optimize parameters and achieve dynamic adjustment.
Further risk adjustment of the strategy, such as adding advanced stop loss methods like profit & loss ratio.
Strategy fitness test & optimization to avoid overfitting problems.

Conclusion

The Dual MACD quantitative trading strategy integrates dual timeframe analysis to determine main and subordinate trends and gives full play to the advantages of each indicator. There is still great potential for strategy optimization, and it is expected to further improve strategy performance by introducing other indicators, automatic parameter optimization through machine learning, etc. Live trading verification is an indispensable step and important basis for further perfecting the strategy.

/*backtest
start: 2023-01-29 00:00:00
end: 2024-01-11 05:20:00
period: 1d
basePeriod: 1h
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/
// © maxits

// Long Position: Weekly Macd line crosses above Signal line   
// [Trading Window Macd Line > Signal Line] (Weekly)
// Close Position: Daily Macd Line crosses above Daily Signal line.  
// Re Entry Condition: Macd line crosses above Signal line only if [Trading Window MacdLine > Sgnal Line] (Weekly)

//@version=4
strategy("Dual MACD Strategy",
         shorttitle="Dual Macd Tester",
         overlay=false,
         initial_capital=1000,
         default_qty_value=20,
         default_qty_type=strategy.percent_of_equity,
         commission_value=0.1,
         pyramiding=0)



// Define user inputs
i_time     = input(defval = timestamp("01 May 2018 13:30 +0000"), title = "Start Time", type = input.time) // Starting  time for Backtesting
f_time     = input(defval = timestamp("9 Sep 2021 13:30 +0000"), title = "Finish Time", type = input.time) // Finishing time for Backtesting

sep1          = input(false, title="------ Profit & Loss ------")

enable_TP     = input(true, title="Enable Just a Profit Level?")
enable_SL     = input(false, title="Enable Just a S.Loss Level?")
enable_TS     = input(true, title=" Enable Only Trailing Stop")
long_TP_Input = input(30.0,   title='Take Profit %',      type=input.float, minval=0)/100
long_SL_Input = input(1.0,   title='Stop Loss %',        type=input.float, minval=0)/100
long_TS_Input = input(5.0,   title='Trailing Stop %',    type=input.float, minval=0)/100
cl_low_Input  = input(low,   title="Trailing Stop Source")
long_TP       = strategy.position_avg_price * (1 + long_TP_Input)
long_SL       = strategy.position_avg_price * (1 - long_SL_Input)
long_TS       = cl_low_Input * (1 - long_TS_Input)

sep2       = input(false, title="------ Macd Properties ------")

d_res      = input(title="Short Term TimeFrame", type=input.resolution, defval="D") // Daily Time Frame
w_res      = input(title="Long Term TimeFrame", type=input.resolution, defval="W")  // Weekly Time Frame
src        = input(close, title="Source")                                           // Indicator Price Source
fast_len   = input(title="Fast Length", type=input.integer, defval=12)              // Fast MA Length
slow_len   = input(title="Slow Length", type=input.integer, defval=26)              // Slow MA Length
sign_len   = input(title="Sign Length", type=input.integer, defval=9)               // Sign MA Length
d_w        = input(title="Daily or Weekly?", type=input.bool, defval=true)          // Plot Daily or Weekly MACD

// Color Plot for Macd

col_grow_above = #26A69A
col_grow_below = #FFCDD2
col_fall_above = #B2DFDB
col_fall_below = #EF5350

// BG Color

bg_color = color.rgb(127, 232, 34, 75)

// Daily Macd

[d_macdLine, d_singleLine, d_histLine] = security(syminfo.tickerid, d_res, macd(src, fast_len, slow_len, sign_len)) // Funcion Security para poder usar correcta resolución

plot(d_w ? d_macdLine   : na, color=color.blue)
plot(d_w ? d_singleLine : na, color=color.orange)
plot(d_w ? d_histLine   : na, style=plot.style_columns,
     color=(d_histLine>=0 ? (d_histLine[1] < d_histLine ? col_grow_above : col_fall_above) : 
     (d_histLine[1] < d_histLine ? col_grow_below : col_fall_below)))
    
// Weekly Macd

[w_macdLine, w_singleLine, w_histLine] = security(syminfo.tickerid, w_res, macd(src, fast_len, slow_len, sign_len)) // Funcion Security para poder usar correcta resolución

plot(d_w ? na : w_macdLine,   color=color.blue)
plot(d_w ? na : w_singleLine, color=color.orange)
plot(d_w ? na : w_histLine,   style=plot.style_columns,
     color=(w_histLine>=0 ? (w_histLine[1] < w_histLine ? col_grow_above : col_fall_above) : 
     (w_histLine[1] < w_histLine ? col_grow_below : col_fall_below)))

///////////////////////////////// Entry Conditions
inTrade    = strategy.position_size != 0       // Posición abierta
notInTrade = strategy.position_size == 0       // Posición Cerrada
start_time = true

trading_window = w_macdLine > w_singleLine   // Weekly Macd Signal enables a trading window 
bgcolor(trading_window ? bg_color : na)
buy_cond       = crossover (w_macdLine, w_singleLine)
sell_cond      = crossunder(d_macdLine, d_singleLine)
re_entry_cond  = crossover (d_macdLine, d_singleLine) and trading_window

// Entry Exit Conditions

trailing_stop  = 0.0        // Code for calculating Long Positions Trailing Stop Loss
trailing_stop := if (strategy.position_size != 0)
    stopValue = long_TS
    max(trailing_stop[1], stopValue)
else 
    0

if (buy_cond and notInTrade and start_time)
    strategy.entry(id="First Entry", long=strategy.long, comment="First Long")

if (sell_cond and inTrade)
    strategy.close(id="First Entry", comment="Close First Long")
    
if (re_entry_cond and notInTrade and start_time)
    strategy.entry(id="Further Entry", long=strategy.long, comment="Further Entry")

if (sell_cond and inTrade)
    strategy.close(id="Further Entry", comment="Close First Long")

if enable_TP
    if (enable_TS and not enable_SL)
        strategy.exit("Long TP & TS FiEn", "First Entry",   limit = long_TP, stop = trailing_stop)
        strategy.exit("Long TP & TS FuEn", "Further Entry", limit = long_TP, stop = trailing_stop)
    else
        if (enable_SL and not enable_TS)
            strategy.exit("Long TP & TS FiEn", "First Entry",   limit = long_TP, stop = long_SL)
            strategy.exit("Long TP & TS FuEn", "Further Entry", limit = long_TP, stop = long_SL)
        else 
            strategy.exit("Long TP & TS FiEn", "First Entry",   limit = long_TP)
            strategy.exit("Long TP & TS FuEn", "Further Entry", limit = long_TP)
else
    if not enable_TP 
        if (enable_TS and not enable_SL)
            strategy.exit("Long TP & TS FiEn", "First Entry",   stop = trailing_stop)
            strategy.exit("Long TP & TS FuEn", "Further Entry", stop = trailing_stop)
        else
            if (enable_SL and not enable_TS)
                strategy.exit("Long TP & TS FiEn", "First Entry",   stop = long_SL)
                strategy.exit("Long TP & TS FuEn", "Further Entry", stop = long_SL)

plot(enable_TP ? long_TP : na, title="TP Level", color=color.green, style=plot.style_linebr, linewidth=2)
plot(enable_SL ? long_SL : na, title="SL Level", color=color.red,   style=plot.style_linebr, linewidth=2)
plot(enable_TS and trailing_stop ? trailing_stop : na, title="TS Level", color=color.red, style=plot.style_linebr, linewidth=2)

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