资源加载中... loading...
  1. Square
  2. Financial Asset MFI-Based Oversold Zone Exit and Signal Averaging System

Financial Asset MFI-Based Oversold Zone Exit and Signal Averaging System

Author: ChaoZhang, Date: 2024-12-05 16:40:47
Tags: MFIRSISLTPMA

img

Overview

This strategy is an automated trading system based on the Money Flow Index (MFI), primarily designed to capture potential reversal opportunities by identifying asset behavior in oversold zones. The core mechanism generates buy signals when the MFI indicator rebounds from the oversold zone (default below 20), utilizing limit orders, stop-loss, and take-profit mechanisms to manage trade risk and returns. This strategy is particularly suitable for positioning during market oversold bounces.

Strategy Principles

The strategy operates based on the following key steps:

  1. Continuously monitors MFI value changes, marking entry into the oversold zone when MFI falls below the preset threshold (default 20).
  2. When MFI rebounds and breaks above the threshold from the oversold zone, the system places a buy limit order below the current price, with the specific price determined by a user-defined percentage.
  3. The system monitors the limit order’s validity period, automatically canceling if not filled within the preset observation period (default 5 candles).
  4. Once the buy order is filled, the system immediately sets stop-loss and profit target levels, calculated based on entry price percentages.
  5. Trades automatically close when either the stop-loss or profit target is reached.

Strategy Advantages

  1. Comprehensive Risk Control: Provides clear risk-reward ratios through preset stop-loss and profit targets.
  2. Flexible Entry Mechanism: Using limit orders for entry can achieve better execution prices, enhancing overall profit potential.
  3. High Automation Level: Fully automated from signal generation to position management, reducing emotional interference.
  4. Strong Parameter Adjustability: Key parameters like MFI period, oversold threshold, and order validity can be optimized for different market characteristics.
  5. Clear System Logic: Strategy rules are explicit, facilitating backtesting and live monitoring.

Strategy Risks

  1. False Signal Risk: MFI may generate false oversold signals in volatile markets. Consider cross-validation with other technical indicators.
  2. Slippage Risk: Limit orders may not execute at expected prices due to rapid market movements. Consider widening limit order prices or extending validity periods.
  3. Trend Risk: Early entry in strong downtrends may face significant losses. Consider adding trend filters.
  4. Parameter Sensitivity: Strategy performance is sensitive to parameter settings, requiring optimization for different market environments.

Strategy Optimization Directions

  1. Add Market Trend Filtering: Incorporate moving averages or other trend indicators to enable trading only in uptrends.
  2. Optimize Signal Confirmation: Combine with RSI, MACD, or other technical indicators to improve signal reliability.
  3. Dynamic Stop-Loss Mechanism: Adjust stop-loss distances based on market volatility for more flexible risk management.
  4. Phased Position Building and Closing: Implement multiple price level limit orders to reduce overall position cost.
  5. Introduce Time Filtering: Selectively enable trading based on different time period market characteristics.

Summary

This is a well-designed, logically clear automated trading strategy. Through flexible use of the MFI indicator, combined with comprehensive order management mechanisms, it effectively captures market rebounds after oversold conditions. The strategy’s high configurability facilitates optimization for different market environments. While certain risks exist, they can be addressed through the suggested optimization directions to further enhance strategy stability and profitability. Suitable for medium to long-term investment, especially for investors seeking oversold bounce opportunities in oscillating markets.

/*backtest
start: 2024-11-04 00:00:00
end: 2024-12-04 00:00:00
period: 3h
basePeriod: 3h
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/
// © traderhub

//@version=5
strategy("MFI Strategy with Oversold Zone Exit and Averaging", overlay=true)

// Strategy parameters
mfiPeriod = input.int(title="MFI Period", defval=14) // Period for calculating MFI
mfiOS = input.float(title="MFI Oversold Level", defval=20.0) // Oversold level for MFI
longEntryPercentage = input.float(title="Long Entry Percentage (%)", minval=0.0, step=0.1, defval=0.1) // Percentage for the buy limit order
stopLossPercentage = input.float(title="Stop Loss Percentage (%)", minval=0.0, step=0.1, defval=1.0) // Percentage for the stop-loss
exitGainPercentage = input.float(title="Exit Gain Percentage (%)", minval=0.0, step=0.1, defval=1.0) // Percentage gain for the take-profit
cancelAfterBars = input.int(title="Cancel Order After # Bars", minval=1, defval=5) // Cancel order after a certain number of bars

// Calculate MFI
mfi = ta.mfi(close, mfiPeriod)  // MFI with specified period

// Variables for tracking state
var bool inOversoldZone = false  // Flag for being in the oversold zone
var float longEntryPrice = na  // Price for long entry
var int barsSinceEntryOrder = na  // Counter for bars after placing an order

// Define being in the oversold zone
if (mfi < mfiOS)
    inOversoldZone := true  // Entered oversold zone

// Condition for exiting the oversold zone and placing a limit order
if (inOversoldZone and mfi > mfiOS)
    inOversoldZone := false  // Leaving the oversold zone
    longEntryPrice := close * (1 - longEntryPercentage / 100)  // Calculate limit price for entry
    strategy.entry("Long Entry", strategy.long, limit=longEntryPrice)  // Place a limit order
    barsSinceEntryOrder := 0  // Reset counter for bars after placing the order

// Increase the bar counter if the order has not yet been filled
if (not na(barsSinceEntryOrder))
    barsSinceEntryOrder += 1

// Cancel order if it hasn’t been filled within the specified number of bars
if (not na(barsSinceEntryOrder) and barsSinceEntryOrder >= cancelAfterBars and strategy.position_size == 0)
    strategy.cancel("Long Entry")
    barsSinceEntryOrder := na  // Reset bar counter

// Set stop-loss and take-profit for filled positions
if (strategy.position_size > 0)
    stopLossPrice = longEntryPrice * (1 - stopLossPercentage / 100)  // Calculate stop-loss level
    takeProfitPrice = longEntryPrice * (1 + exitGainPercentage / 100)  // Calculate take-profit level
    strategy.exit("Exit Long", from_entry="Long Entry", limit=takeProfitPrice, stop=stopLossPrice)

// Visualize oversold and overbought zones
bgcolor(mfi < mfiOS ? color.new(color.green, 90) : na)  // Background in oversold zone
plot(mfi, title="MFI", color=color.blue)  // MFI plot
hline(mfiOS, "Oversold Level", color=color.red)  // Oversold level line
Related
More

2019 FMZ - All rights reserved