This strategy uses dynamic profit targets and stop losses that adjust based on current price and volatility.
The logic is:
Calculate Average True Range (ATR) over a period (e.g. 20 days)
In uptrend, profit target/stop is highest price minus ATR multiple
In downtrend, profit target/stop is lowest price plus ATR multiple
Reverse trade when price exceeds profit target/stop
Trend changes when price breaches profit target/stop
Adjust profit target/stop based on new trend state
The strategy leverages ATR to automatically set dynamic trailing profit targets and stops. This allows timely locking in of profits and preventing excessive losses.
ATR automatically calculates profit/stop levels
Dynamic adjustment trails price in real-time
Timely profit taking and stopping controls risk
ATR parameters require optimization
Stops too close risks being stopped out
Need to monitor real-time ATR changes
This strategy uses ATR to dynamically set profit/stop levels for automatic trailing. ATR tuning can improve stop performance. But over-tight stops require caution.
/*backtest
start: 2023-01-01 00:00:00
end: 2023-09-13 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
//@version=2
strategy("Dhananjay Volatility stop strategy v1.0", overlay=true)
length = input(20)
mult = input(1)
atr_ = atr(length)
max1 = max(nz(max_[1]), close)
min1 = min(nz(min_[1]), close)
is_uptrend_prev = nz(is_uptrend[1], true)
stop = is_uptrend_prev ? max1 - mult * atr_ : min1 + mult * atr_
vstop_prev = nz(vstop[1])
vstop1 = is_uptrend_prev ? max(vstop_prev, stop) : min(vstop_prev, stop)
is_uptrend = close - vstop1 >= 0
is_trend_changed = is_uptrend != is_uptrend_prev
max_ = is_trend_changed ? close : max1
min_ = is_trend_changed ? close : min1
vstop = is_trend_changed ? is_uptrend ? max_ - mult * atr_ : min_ + mult * atr_ : vstop1
plot(vstop, color = is_uptrend ? green : red, style=line, linewidth=2)
bearish = close < vstop
bullish = close > vstop
if (bullish)
strategy.entry("Buy", strategy.long, 1)
if (bearish)
strategy.entry("Sell", strategy.short, 1)