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Momentum Breakout Intraday Trading Strategy

Author: ChaoZhang, Date: 2024-02-01 10:32:21
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Overview

This strategy tracks SPY trading data and makes buy and sell decisions to realize intraday trading profits through a combination of technical indicators such as moving averages, MACD, RSI to accurately determine short-term trends.

Strategy Logic

The core logic of this strategy is based on the following technical indicators to determine short-term trends and entry points:

The golden cross and death cross of the 5-day and 13-day exponential moving averages (EMA) are used to determine the turning point of bullish and bearish trends.
The MACD indicator is used to determine if there is upward momentum.
The ADX indicator is used to determine if a trend exists.
The RSI indicator is used to determine the strength of the trend.

By optimizing the parameters of the above indicators, key reversal points of bullish and bearish trends can be determined. When 5 out of 6 conditions are met, white L or S signals are displayed. When all six conditions are fully met, gold △ shapes are displayed on the candlestick bar close.

Long entry signal conditions:
5-day EMA greater than 13-day EMA AND MACD line less than 0.5 AND ADX greater than 20 AND MACD slope greater than 0 AND signal line greater than -0.1 AND RSI greater than 40

Short entry signal conditions:
5-day EMA less than 13-day EMA AND MACD line greater than -0.5 AND ADX greater than 20 AND signal line less than 0 AND MACD slope less than 0 AND RSI less than 60

Advantage Analysis

The advantages of this strategy include:

Higher accuracy from combining multiple indicator signals.
Balanced sensitivity and accuracy through parameter optimization.
Simple and clear signals, low barrier to operation.
Suitable for intraday trading, matches most investors’ risk appetite.
Avoids high volatility in late trading by not placing orders.

Risk Analysis

The risks of this strategy include:

Incorrect judgments from improper parameter settings. Continuous testing and optimization needed.
Single asset, unable to diversify industry and asset allocation risks.
Frequent trading leads to transaction fee and slippage risks.
Missing some opportunities by not trading in late trading sessions.

Optimization Directions

The strategy can be further optimized in the following aspects:

Test modifying parameter settings to improve judgment accuracy.
Add stop loss indicators to control single loss.
Optimize order placing time to filter out high volatility periods.
Add other products as strategy targets.
Incorporate machine learning algorithms to improve parameter self-adaptiveness.

Conclusion

This strategy determines short-term trends by tracking SPY data and combining multiple technical indicators such as moving averages, MACD and RSI. With high operation frequency, low drawdowns, it is very suitable for intraday trading. There is still large room for improvement through optimizations from multiple dimensions.

/*backtest
start: 2024-01-24 00:00:00
end: 2024-01-31 00:00:00
period: 5m
basePeriod: 1m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=5
strategy(title="SPY 1 Minute Day Trader", overlay=true)

//This script has been created to take into account how the following variables impact trend for SPY 1 Minute
//The SPY stop losses/take profit have been set at 30 cents which equates to 15 cents on SPY 1 DTE ATM contracts
//5 ema vs 13 ema : A cross establishes start of trend
//MACD (Line, Signal & Slope) : If you have momentum
//ADX : if you are trending
//RSI : If the trend has strength
//The above has been optimized to determine pivot points in the trend using key values for these 6 indicators
//bounce up = ema5 > ema13 and macdLine < .5 and adx > 20 and macdSlope > 0 and signalLine > -.1 and rsiSignal > 40
//bounce down = ema5 < ema13 and macdLine > -.5 and adx > 20 and signalLine < 0 and macdSlope < 0 and rsiSignal < 60
//White L's indicate that 5 of 6 conditions are met due to impending uptrend w/ missing one in green below it
//Yellow L's indicate that 6 of 6 conditions still are met
//White S's indicate that 5 of 6 conditions are met due to impending downtrend w/ missing condition in red above it
//Yellow S's indicate that 6 of 6 conditions still are met
//After a downtrend or uptrend is established, once it closes it can't repeat for 10 minutes
//Won't open any trades on last two minutes of any hours to avoid volatility
//Will close any open trades going into last minute of hour

// Initialize variables
var float long_entry_price = na
var float short_entry_price = na
var float stop_loss = na
var float take_profit = na
var float short_stop_loss = na
var float short_take_profit = na
var float option_SL = 0.3 //approx 15 cents on SPY 1 DTE
var float option_TP = 0.3 //approx 15 cents on SPY 1 DTE
var long_entry_time = 0
var short_entry_time = 0
var allow_long_entry = true
var allow_short_entry = true
var allow_trades = true
var hourlyclose = 0
var notify = 0
var shortnotify = 0

// Calculate the EMAs & SMAs
ema5 = ta.ema(close, 5)
ema13 = ta.ema(close, 13)
sma20 = ta.sma(close, 20)

// Input parameters
fastLength = input.int(12, minval=1, title="Fast Length")
slowLength = input.int(26, minval=1, title="Slow Length")
signalLength = input.int(9, minval=1, title="Signal Smoothing")

// Inputs
length = input.int(14, "Length")
smoothK = input.int(3, "SmoothK")
src = input(close, "Source")
overbought = input.float(80, "Overbought")
oversold = input.float(20, "Oversold")

//Stochastic Calculation
highestHigh = ta.highest(src, length)
lowestLow = ta.lowest(src, length)
k = 100 * ((src - lowestLow) / (highestHigh - lowestLow))
d = ta.sma(k, smoothK)

// Calculate MACD
[macdLines, signalLines, _] = ta.macd(close, fastLength, slowLength, signalLength)

// Calculate slope of MACD line
macdSlope = (macdLines - macdLines[1]) / (bar_index - bar_index[1])

// Calculate the RSI
rsiValue = ta.rsi(close, 5)

// Calculate the signal line as the SMA of the RSI for 5 minute over 9 periods
rsiSignal = ta.sma(rsiValue, 9)

// Calculate MACD
[macdLine, signalLine, _] = ta.macd(close, 12, 26, 9)

// Length of the ATR
atr_length = input.int(14, title="ATR Length", minval=1)

// Calculate the True Range
tr = ta.tr(true)

// Calculate the ATR
atr = ta.atr(atr_length)

// Length of the ADX
len = input.int(14, minval=1)

// Set minimum number of bars between trades
min_bars_between_trades = 10

// Calculate the Directional Movement
up = ta.change(high)
down = -ta.change(low)
plusDM = na(up) ? na : (up > down and up > 0 ? up : 0)
minusDM = na(down) ? na : (down > up and down > 0 ? down : 0)

// Calculate the Smoothed Directional Movement
plusDI = 100 * ta.ema(plusDM, len) / ta.ema(tr, len)
minusDI = 100 * ta.ema(minusDM, len) / ta.ema(tr, len)

// Calculate the Directional Index (DX)
DX = 100 * math.abs(plusDI - minusDI) / (plusDI + minusDI)

// Calculate the ADX
adx = ta.ema(DX, len)

// Get high, low, and close prices
highPrice = high
lowPrice = low
closePrice = close

// Determine buy and sell signals - Tried to optimize as much as possible - changing these do impact results
buy_signal = ema5 > ema13 and macdLine < .5 and adx > 20 and macdSlope > 0 and signalLine > -.1 and rsiSignal > 40
short_buy_signal = ema5 < ema13 and macdLine > -.5 and adx > 20 and signalLine < 0 and macdSlope < 0 and rsiSignal < 60

// Define long entry conditions
C1 = ema5 > ema13 ? 1 : 0 //E below bar when only one missing
C2 = d < 70 ? 1 : 0 //no longer part of signal - but was Smoothed Stoicastic
C3 = macdLine < .5 ? 1 : 0 //M below bar when only one missing
C4 = adx > 20 ? 1 : 0 //A below bar when only one missing
C5 = macdSlope > 0 ? 1 : 0 //% below bar when only one missing
C6 = signalLine > -.01 ? 1 : 0 //S (MACD Signal) below bar when only one missing
C7 = rsiSignal > 50 ? 1 : 0 //R below bar when only one missing

// Define short entry conditions
C8 = ema5 < ema13 ? 1 : 0 //E above bar when only one missing
C9 = d > 40 ? 1 : 0 //no longer part of signal - but was Smoothed Stoicastic
C10 = macdLine > -0.5 ? 1 : 0 //M above bar when only one missing
C11 = adx > 20 ? 1 : 0 //A above bar when only one missing
C12 = macdSlope < 0 ? 1 : 0 //% above bar when only one missing
C13 = signalLine < 0 ? 1 : 0 //S (MACD Signal) above bar when only one missing
C14 = rsiSignal < 50 ? 1 : 0 //R above bar when only one missing

// Long or Short Incoming denoted by white color and gold means all conditions met
plotchar((C1 + C3 + C4 + C5 + C6 + C7) == 5 ? 1 : na, title="Pivot Up White", char="L", location=location.belowbar, color=color.white, size = size.tiny)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) == 5 ? 1 : na, title="Pivot Down White", char="S", location=location.abovebar, color=color.white, size = size.tiny)
plotchar((C1 + C3 + C4 + C5 + C6 + C7) > 5 ? 1 : na, title="Pivot Up Gold", char="L", location=location.belowbar, color=color.yellow, size = size.tiny)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) > 5 ? 1 : na, title="Pivot Down Gold", char="S", location=location.abovebar, color=color.yellow, size = size.tiny)
plotchar((C1 + C3 + C4 + C5 + C6 + C7) >= 5 and (C1) != 1 ? 1 : na, title="Missing", char = "", text="E", location=location.belowbar, color=color.green, size = size.small)
plotchar((C1 + C3 + C4 + C5 + C6 + C7) >= 5 and (C3) != 1 ? 1 : na, title="Missing", char = "", text="M", location=location.belowbar, color=color.green, size = size.small)
plotchar((C1 + C3 + C4 + C5 + C6 + C7) >= 5 and (C4) != 1 ? 1 : na, title="Missing", char = "", text="A", location=location.belowbar, color=color.green, size = size.small)
plotchar((C1 + C3 + C4 + C5 + C6 + C7) >= 5 and (C5) != 1 ? 1 : na, title="Missing", char = "", text="%", location=location.belowbar, color=color.green, size = size.small)
plotchar((C1 + C3 + C4 + C5 + C6 + C7) >= 5 and (C6) != 1 ? 1 : na, title="Missing", char = "", text="S", location=location.belowbar, color=color.green, size = size.small)
plotchar((C1 + C3 + C4 + C5 + C6 + C7) >= 5 and (C7) != 1 ? 1 : na, title="Missing", char = "", text="R", location=location.belowbar, color=color.green, size = size.small)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) >= 5 and (C8) != 1 ? 1 : na, title="Missing", char = "", text="E", location=location.abovebar, color=color.red, size = size.small)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) >= 5 and (C10) != 1 ? 1 : na, title="Missing", char = "", text="M", location=location.abovebar, color=color.red, size = size.small)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) >= 5 and (C11) != 1 ? 1 : na, title="Missing", char = "", text="A", location=location.abovebar, color=color.red, size = size.small)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) >= 5 and (C12) != 1 ? 1 : na, title="Missing", char = "", text="%", location=location.abovebar, color=color.red, size = size.small)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) >= 5 and (C13) != 1 ? 1 : na, title="Missing", char = "", text="S", location=location.abovebar, color=color.red, size = size.small)
plotchar((C8 + C10 + C11 + C12 + C13 + C14) >= 5 and (C14) != 1 ? 1 : na, title="Missing", char = "", text="R", location=location.abovebar, color=color.red, size = size.small)

// Execute buy and sell orders
if buy_signal and allow_trades and allow_long_entry  //Don't buy on last 2 minutes of hour
    long_entry_price := open
    strategy.entry("Pivot Up", strategy.long)
    stop_loss := long_entry_price - option_SL
    take_profit := long_entry_price + option_TP
    long_entry_time := time
    allow_long_entry := false
    allow_trades := false
    notify := 1
plotshape(notify == 1 ? 1 : na, "Pivot Up", style=shape.triangleup, offset = 1, location=location.belowbar, size=size.normal, textcolor = color.orange, color=color.orange)
if notify == 1
    notify := notify - 1

if short_buy_signal and allow_trades and allow_short_entry  //Don't buy on last 2 minutes of hour
    short_entry_price := open
    strategy.entry("Pivot Down", strategy.short)
    short_stop_loss := short_entry_price + option_SL
    short_take_profit := short_entry_price - option_TP
    short_entry_time := time
    allow_short_entry := false
    allow_trades := false
    shortnotify := 1
plotshape(shortnotify == 1 ? 1 : na, "Pivot Down", style=shape.triangledown, offset = 1, location=location.abovebar, size=size.normal, textcolor = color.orange, color=color.orange)
if shortnotify == 1
    shortnotify := shortnotify - 1

// Take scalp when in a position and 5 or more parameters are met!
if strategy.position_size != 0 and (C1 + C3 + C4 + C5 + C6 + C7) >5
    strategy.exit("Exit Longs", "Pivot Up", stop=stop_loss, limit = take_profit)
else if strategy.position_size != 0 and (C8 + C10 + C11 + C12 + C13 + C14) >5
    strategy.exit("Exit Shorts", "Pivot Down", stop=short_stop_loss, limit = short_take_profit)

// Reset allow_trades after cool-down period of min_bars_between_trades bars set above
if time > long_entry_time + (time - time[1]) * min_bars_between_trades
    allow_long_entry := true
    allow_trades := true

if time > short_entry_time + (time - time[1]) * min_bars_between_trades
    allow_short_entry := true
    allow_trades := true

// Close all positions at the end of the trading day and when volatile hours approach!
if  strategy.position_size != 0
    strategy.close("Pivot Up")
    strategy.close("Pivot Down")
    hourlyclose := 1
plotshape(hourlyclose == 1 ? 1 : na, "Suggested Volatile Hour Close", text="Suggested Volatile Hour Close", offset = 1, style=shape.triangledown, location=location.abovebar, size=size.tiny, textcolor = color.orange, color=color.orange)
if hourlyclose == 1
    hourlyclose := hourlyclose - 1

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