Trix Simple Trend Following Strategy

Overview

The Trix simple trend following strategy is a simple trend following strategy based on the Trix indicator. It uses the Trix indicator to judge price trends and combines moving averages to generate buy and sell signals. This strategy is suitable for medium-to-long term trading and can profit from larger trends.

Strategy Logic

This strategy is mainly based on the Trix indicator. The Trix indicator is a technical analysis tool that can identify price trend changes. It calculates the rate of change of prices through triple smoothed moving averages. When the Trix crosses above its moving average, it is a buy signal. When the Trix crosses below its moving average, it is a sell signal.

Specifically, this strategy first calculates two groups of Trix indicators with different parameters, named Trix and Trix1. The parameters for Trix are (7,4,4) and for Trix1 are (4,4,4). Then it calculates the 20-day simple moving average of Trix to get the middle band.

When the faster EMA13 crosses above the slower SMA68, and Trix is below the middle band, it is a buy signal. When Trix1 crosses above Trix, it triggers the buy. When Trix crosses back above the middle band, it closes the position.

When EMA13 crosses below SMA68, and Trix is above the middle band, it is a sell signal. When Trix1 crosses below Trix, it triggers the sell. When Trix crosses back below the middle band, it closes the position.

Advantages

This is a very simple trend following strategy with these advantages:

1. Using the Trix indicator can effectively identify price trends and reduce false signals.

2. Combining fast and slow moving averages helps determine trend direction.

3. Using two Trix indicators with different parameters improves signal quality.

4. The middle band filter increases the filtering effect and avoids frequent opening during market oscillation.

5. It is suitable for medium-to-long term trend trading and is not disturbed by short-term fluctuations.

6. It is easy to understand and implement, suitable for beginners to learn.

Risks

There are also some risks to note for this strategy:

1. It cannot catch trends in time during stable trends, missing some profits.

2. The Trix indicator may generate incorrect signals during huge market swings.

3. Improper fast and slow moving average position management can lead to greater losses.

4. It lacks a stop loss strategy and cannot effectively control single losses.

5. Improper parameter settings may lead to too high trading frequency or poor signal quality.

6. Transaction fees may take up some profits.

Optimization

This strategy can be optimized in the following aspects:

1. Add stop loss strategies like trailing stop loss or ATR stop loss to control single losses.

2. Optimize Trix parameters to find more suitable combinations and improve signal quality.

3. Add other indicator filters like MACD, KDJ etc. to avoid false signals.

4. Dynamically adjust fast and slow moving average parameters based on market conditions to improve flexibility.

5. Add trend judging indicators like ADX to avoid trading against the trend.

6. Use different parameter sets to distinguish bull and bear markets.

7. Optimize entry timing and enter after trend confirmation.

Conclusion

In summary, this is an easy to implement trend following strategy. It uses the Trix indicator to determine trend direction and generates trading signals in combination with moving averages. The advantages are its simplicity and ability to effectively track medium-to-long term trends, making it suitable for beginners to learn. But risks exist and need to be prevented. With proper optimizations, the strategy’s effectiveness can be improved. Overall, it provides beginners with a simple and practical trend trading idea.