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Multi-Wave Trend Following Price Analysis Strategy

Author: ChaoZhang, Date: 2024-11-29 16:40:36
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Overview

This strategy is a multi-wave trend following system that identifies market trends by analyzing price changes across three consecutive trading periods through their highs and lows. The strategy employs dynamic stop-loss and take-profit mechanisms to protect capital while pursuing stable returns. This approach is particularly suitable for markets with clear trends, effectively capturing medium to long-term price movements.

Strategy Principles

The core logic is built on the principles of price movement continuity and trend continuation. Specifically, the strategy operates through the following steps:

  1. Trend Identification Mechanism: Continuously monitors highs and lows over three periods, identifying an uptrend when three consecutive higher lows appear, and a downtrend when three consecutive lower highs occur.
  2. Signal Generation System: Automatically generates corresponding buy or sell signals once a trend is confirmed.
  3. Risk Management System: Each trade is equipped with dynamic stop-loss and take-profit points, with a stop-loss distance of 2 units and a profit target of 6 units.

Strategy Advantages

  1. Trend Following Reliability: Confirmation across three periods significantly reduces the possibility of false breakouts.
  2. Reasonable Risk-Reward Ratio: The set 1:3 risk-reward ratio (2 units stop-loss vs 6 units take-profit) adheres to professional trading principles.
  3. High Automation Level: The system automatically identifies signals and executes trades, reducing emotional interference.
  4. Good Visualization: Clear graphical markers for buy and sell points facilitate understanding and review.

Strategy Risks

  1. Ranging Market Risk: May generate frequent false signals in sideways markets, leading to consecutive stops.
  2. Slippage Risk: Actual execution prices may significantly deviate from expected prices during high volatility.
  3. Money Management Risk: Fixed stop-loss and take-profit distances may not suit all market conditions.

Optimization Directions

  1. Add Volatility Filter: Consider incorporating ATR indicator for dynamic adjustment of stop-loss and take-profit distances.
  2. Include Trend Confirmation Indicators: Combine with moving averages or MACD to filter false signals.
  3. Implement Position Sizing System: Dynamically adjust position sizes based on market volatility and account risk tolerance.
  4. Optimize Signal Confirmation: Consider adding volume confirmation or other technical indicators.

Summary

This is a well-designed trend following strategy that enhances trading reliability through multiple confirmation mechanisms. While there are areas for optimization, the overall approach is clear and suitable as a basic strategy framework for further refinement and customization. The strategy’s core strength lies in its simple yet effective trend identification mechanism, coupled with a reasonable risk management system, capable of achieving good results in trending markets.

/*backtest
start: 2019-12-23 08:00:00
end: 2024-11-28 00:00:00
period: 1d
basePeriod: 1d
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=5
strategy("Indicatore Minimi e Massimi", overlay=true)

// Parametri di input per stop loss e take profit
stopLossDistance = input(2, title="Distanza Stop Loss")
takeProfitDistance = input(6, title="Distanza Take Profit")

// Funzione per il conteggio dei massimi e minimi
var int countUp = 0
var int countDown = 0

// Calcola i massimi e minimi
if (low > low[1] and low[1] > low[2])
    countUp := countUp + 1
    countDown := 0
else if (high < high[1] and high[1] < high[2])
    countDown := countDown + 1
    countUp := 0
else
    countUp := 0
    countDown := 0

// Segnali di acquisto e vendita
longSignal = countUp == 3
shortSignal = countDown == 3

// Impostazione dello stop loss e take profit
longStopLoss = close - stopLossDistance
longTakeProfit = close + takeProfitDistance
shortStopLoss = close + stopLossDistance
shortTakeProfit = close - takeProfitDistance

// Esegui le operazioni
if (longSignal)
    strategy.entry("Long", strategy.long)
    strategy.exit("Take Profit", "Long", limit=longTakeProfit, stop=longStopLoss)

if (shortSignal)
    strategy.entry("Short", strategy.short)
    strategy.exit("Take Profit", "Short", limit=shortTakeProfit, stop=shortStopLoss)

// Visualizza segnali sul grafico
plotshape(series=longSignal, location=location.belowbar, color=color.green, style=shape.labelup, text="Compra")
plotshape(series=shortSignal, location=location.abovebar, color=color.red, style=shape.labeldown, text="Vendi")
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