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High-Frequency Breakout Trading Strategy Based on Candlestick Close Direction

Author: ChaoZhang, Date: 2024-12-12 14:35:24
Tags: HFTSLTPROEMDDTPR

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Overview

This is a high-frequency trading strategy based on 1-minute candlestick close direction. The strategy determines market trends by analyzing the relationship between closing and opening prices, taking long positions after bullish candles and short positions after bearish candles. It employs fixed holding periods, closes positions at the next candlestick’s close, and limits daily trading frequency to control risk.

Strategy Principles

The core logic relies on candlestick close direction to judge short-term market trends:

  1. When closing price is above opening price, forming a bullish candle, indicating buyer dominance in the current period, the strategy goes long.
  2. When closing price is below opening price, forming a bearish candle, indicating seller dominance in the current period, the strategy goes short.
  3. Positions are closed at the next candlestick’s close, enabling quick profit-taking or loss-cutting.
  4. Daily trades are limited to 200 to prevent overtrading.
  5. Each trade uses 1% of account balance, implementing risk control.

Strategy Advantages

  1. Simple and clear trading logic, easy to understand and implement
  2. Short holding periods reduce market volatility risk
  3. Fixed holding time eliminates subjective judgment bias
  4. Daily trade limit effectively controls risk
  5. Percentage-based risk management protects account capital
  6. Visual trade signal display facilitates strategy monitoring and optimization

Strategy Risks

  1. High-frequency trading may incur high transaction costs Solution: Choose instruments with low spreads, optimize trading time periods
  2. Potential consecutive losses in volatile markets Solution: Add market volatility filtering conditions
  3. Strategy may be affected by false breakouts Solution: Include volume and other confirmatory indicators
  4. Fixed holding periods might miss larger profit opportunities Solution: Dynamically adjust holding periods based on market conditions
  5. Limited consideration of market information and technical indicators Solution: Incorporate additional technical indicators for entry optimization

Strategy Optimization Directions

  1. Implement volume indicators: Confirm candlestick validity through volume analysis, improving signal reliability
  2. Add trend filters: Combine with trend indicators like moving averages to trade in the primary trend direction
  3. Dynamic holding periods: Adjust holding times based on market volatility for better adaptability
  4. Optimize money management: Dynamically adjust position size based on historical performance
  5. Add volatility filters: Pause trading during extremely high or low volatility conditions
  6. Implement time filters: Avoid high-volatility market opening and closing periods

Summary

This strategy is a high-frequency trading system based on candlestick close direction, capturing short-term market opportunities through simple price action analysis. Its strengths lie in simple logic, short holding periods, and controllable risk, while facing challenges like high transaction costs and false breakouts. Through the introduction of additional technical indicators and optimization measures, the strategy’s stability and profitability can be further enhanced. For investors seeking short-term trading opportunities, this is a trading strategy worth testing and improving.

/*backtest
start: 2024-01-01 00:00:00
end: 2024-12-10 08:00:00
period: 2d
basePeriod: 2d
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=5
strategy("Candle Close Strategy", overlay=true)

// Define conditions for bullish and bearish candlesticks
isBullish = close > open
isBearish = close < open

// Track the number of bars since the trade was opened and the number of trades per day
var int barsSinceTrade = na
var int tradesToday = 0

// Define a fixed position size for testing
fixedPositionSize = 1

// Entry condition: buy after the close of a bullish candlestick
if (isBullish and tradesToday < 200)  // Limit to 200 trades per day
    strategy.entry("Buy", strategy.long, qty=fixedPositionSize)
    barsSinceTrade := 0
    tradesToday := tradesToday + 1

// Entry condition: sell after the close of a bearish candlestick
if (isBearish and tradesToday < 200)  // Limit to 200 trades per day
    strategy.entry("Sell", strategy.short, qty=fixedPositionSize)
    barsSinceTrade := 0
    tradesToday := tradesToday + 1

// Update barsSinceTrade if a trade is open
if (strategy.opentrades > 0)
    barsSinceTrade := nz(barsSinceTrade) + 1

// Reset tradesToday at the start of a new day
if (dayofmonth != dayofmonth[1])
    tradesToday := 0

// Exit condition: close the trade after the next candlestick closes
if (barsSinceTrade == 2)
    strategy.close("Buy")
    strategy.close("Sell")

// Plot bullish and bearish conditions
plotshape(series=isBullish, location=location.belowbar, color=color.green, style=shape.labelup, text="BUY")
plotshape(series=isBearish, location=location.abovebar, color=color.red, style=shape.labeldown, text="SELL")

// Plot the candlesticks
plotcandle(open, high, low, close, title="Candlesticks")
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