This is a scalping strategy that utilizes volume and Volume Weighted Average Price (VWAP) for confirmation. It combines these two important technical indicators to identify trends and locate higher probability entry points.
The strategy mainly relies on two indicators for decision making - volume and VWAP.
Firstly, it calculates the 20-period VWAP. VWAP represents the average price of the day, and is an important benchmark for assessing price reasonableness. If the price is higher than VWAP, it indicates stronger bullish forces, and vice versa for bearish forces.
Secondly, the strategy also checks if the volume of each candlestick bar exceeds the preset threshold of 100. Only when the trading volume is sufficiently active, a definite trend is considered to exist. This avoids incorrect trades when the market is dull and inactive.
Based on these two criteria, the entry and exit rules are formed:
Entry Conditions
Exit Conditions
As we can see, the strategy combines both the price indicator VWAP and volume, using dual confirmation to improve stability.
The main advantages of this strategy include:
There are also some risks to note:
To mitigate risks, high liquidity stocks with narrow price range and volatility are recommended. Fine tune parameters for different stocks. Also control position sizing to limit losses.
Some ways to further optimize the strategy:
Through parameter tuning, adding filters, stop loss etc, we can further improve the stability and profitability.
The strategy consolidates two major indicators, VWAP and volume, to pick stocks with price reasonableness and high volume confirmation. It has high operation frequency and strong trend capturing capability. At the same time, trading costs and stop losses should be managed. Further optimizations can lead to even better strategy performance.
/*backtest start: 2023-12-01 00:00:00 end: 2023-12-31 23:59:59 period: 1h basePeriod: 15m exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}] */ // This Pine Script™ code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/ // © netyogindia //@version=5 strategy("Scalping Strategy with Volume and VWAP Confirmation", overlay=true) // Input parameters length = input(14, title="MACD Length") volume_threshold = input(100, title="Volume Threshold") vwap_length = input(20, title="VWAP Length") // Calculate VWAP vwapValue = ta.vwap(close, vwap_length) // Calculate volume barVolume = volume // Define entry conditions longCondition = close > vwapValue and barVolume > volume_threshold shortCondition = close < vwapValue and barVolume > volume_threshold // Define exit conditions exitLongCondition = close < vwapValue exitShortCondition = close > vwapValue // Plot VWAP plot(vwapValue, color=color.blue, title="VWAP") // Plot Volume bars barcolor(barVolume >= volume_threshold ? color.green : na) // Execute strategy orders strategy.entry("Long", strategy.long, when=longCondition) strategy.entry("Short", strategy.short, when=shortCondition) strategy.close("Long", when=exitLongCondition) strategy.close("Short", when=exitShortCondition)