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Multi-Level Multi-Period EMA Crossover Dynamic Take-Profit Optimization Strategy

Author: ChaoZhang, Date: 2025-01-06 10:50:38
Tags: EMATPSLRSIMACDCCIATRROCMFIOBV

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Overview

This strategy is a trading system based on Exponential Moving Averages (EMA), primarily utilizing the crossover of EMA20 and EMA50 to identify market trend changes. The strategy features dynamic multi-level take-profit points combined with a stop-loss mechanism for risk control. The system visually displays market trend direction through background color changes, helping traders better grasp market movements.

Strategy Principles

The core logic of the strategy is based on the following aspects:

  1. Using EMA20 and EMA50 crossovers to determine trend direction: generating buy signals when EMA20 crosses above EMA50, and sell signals when it crosses below
  2. Dynamically setting four take-profit targets based on the previous candle’s range:
    • TP1 set at 0.5x range
    • TP2 set at 1.0x range
    • TP3 set at 1.5x range
    • TP4 set at 2.0x range
  3. Setting a 3% stop-loss point for risk control
  4. Displaying trend direction through candle background colors: green for uptrend and red for downtrend

Strategy Advantages

  1. Dynamic take-profit settings: automatically adjusts profit targets based on real-time market volatility
  2. Multi-level profit mechanism: ensures profit locking while allowing trends to develop fully
  3. Outstanding visualization: trend direction clearly displayed through background colors
  4. Comprehensive risk control: fixed stop-loss effectively controls maximum loss per trade
  5. Flexible parameters: traders can adjust profit multipliers and stop-loss percentage based on market conditions

Strategy Risks

  1. EMA lag: inherent delay in EMA signals may lead to delayed entry points
  2. Sideways market risk: may generate frequent false signals in ranging markets
  3. Fixed stop-loss: percentage-based stops may not suit all market conditions
  4. Take-profit spacing: profit target intervals may be too wide or narrow in volatile markets

Strategy Optimization Directions

  1. Introduce auxiliary indicators: add RSI or MACD for signal confirmation
  2. Optimize stop-loss mechanism: consider using ATR for dynamic stop-loss distances
  3. Add time filtering: implement trading time windows to avoid highly volatile periods
  4. Improve position management: dynamically adjust position size based on market volatility
  5. Enhance signal confirmation: add volume indicators as auxiliary confirmation conditions

Summary

This is a well-structured trend-following strategy with clear logic. It captures trends through EMA crossovers, manages profits with dynamic take-profit points, and controls risk with stop-losses. The strategy’s visualization design is intuitive and effective, with flexible parameter settings. While it has inherent EMA lag issues, optimization and refinement can further enhance the strategy’s stability and profitability.

/*backtest
start: 2019-12-23 08:00:00
end: 2025-01-04 08:00:00
period: 1d
basePeriod: 1d
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=5
strategy("EMA Crossover Strategy with Take Profit and Candle Highlighting", overlay=true)

// Define the EMAs
ema200 = ta.ema(close, 200)
ema50 = ta.ema(close, 50)
ema20 = ta.ema(close, 20)

// Plot the EMAs
plot(ema200, color=#c204898e, title="EMA 200", linewidth=2)
plot(ema50, color=color.blue, title="EMA 50", linewidth=2)
plot(ema20, color=color.orange, title="EMA 20", linewidth=2)

// Define Buy and Sell conditions based on EMA crossover
buySignal = ta.crossover(ema20, ema50)  // EMA 20 crosses above EMA 50 (Bullish)
sellSignal = ta.crossunder(ema20, ema50) // EMA 20 crosses below EMA 50 (Bearish)

// Define input values for Take Profit multipliers
tp1_multiplier = input.float(0.5, title="TP1 Multiplier", minval=0.1, maxval=5.0, step=0.1)
tp2_multiplier = input.float(1.0, title="TP2 Multiplier", minval=0.1, maxval=5.0, step=0.1)
tp3_multiplier = input.float(1.5, title="TP3 Multiplier", minval=0.1, maxval=5.0, step=0.1)
tp4_multiplier = input.float(2.0, title="TP4 Multiplier", minval=0.1, maxval=5.0, step=0.1)

// Define Take Profit Levels as float variables initialized with na
var float takeProfit1 = na
var float takeProfit2 = na
var float takeProfit3 = na
var float takeProfit4 = na

// Calculate take profit levels based on the multipliers
if buySignal
    takeProfit1 := high + (high - low) * tp1_multiplier  // TP1: Set TP at multiplier of previous range above the high
    takeProfit2 := high + (high - low) * tp2_multiplier  // TP2: Set TP at multiplier of previous range above the high
    takeProfit3 := high + (high - low) * tp3_multiplier  // TP3: Set TP at multiplier of previous range above the high
    takeProfit4 := high + (high - low) * tp4_multiplier  // TP4: Set TP at multiplier of previous range above the high

if sellSignal
    takeProfit1 := low - (high - low) * tp1_multiplier  // TP1: Set TP at multiplier of previous range below the low
    takeProfit2 := low - (high - low) * tp2_multiplier  // TP2: Set TP at multiplier of previous range below the low
    takeProfit3 := low - (high - low) * tp3_multiplier  // TP3: Set TP at multiplier of previous range below the low
    takeProfit4 := low - (high - low) * tp4_multiplier  // TP4: Set TP at multiplier of previous range below the low

// Plot Take Profit Levels on the chart
plot(takeProfit1, color=#b4b4b8, style=plot.style_line, linewidth=1, title="Take Profit 1")
plot(takeProfit2, color=#b4b4b8, style=plot.style_line, linewidth=1, title="Take Profit 2")
plot(takeProfit3, color=#b4b4b8, style=plot.style_line, linewidth=1, title="Take Profit 3")
plot(takeProfit4, color=#b4b4b8, style=plot.style_line, linewidth=1, title="Take Profit 4")

// Create buy and sell signals on the chart
plotshape(series=buySignal, location=location.belowbar, color=color.green, style=shape.labelup, title="Buy Signal", text="BUY")
plotshape(series=sellSignal, location=location.abovebar, color=color.red, style=shape.labeldown, title="Sell Signal", text="SELL")

// Highlight the candles based on trend direction
uptrend = ta.crossover(ema20, ema50)  // EMA 20 crosses above EMA 50 (Bullish)
downtrend = ta.crossunder(ema20, ema50)  // EMA 20 crosses below EMA 50 (Bearish)

// Highlighting candles based on trend
bgcolor(color = ema20 > ema50 ? color.new(color.green, 80) : ema20 < ema50 ? color.new(color.red, 80) : na)

// Execute buy and sell orders on the chart
strategy.entry("Buy", strategy.long, when=buySignal)
strategy.entry("Sell", strategy.short, when=sellSignal)

// Exit conditions based on Take Profit levels
strategy.exit("Take Profit 1", "Buy", limit=takeProfit1)
strategy.exit("Take Profit 2", "Buy", limit=takeProfit2)
strategy.exit("Take Profit 3", "Buy", limit=takeProfit3)
strategy.exit("Take Profit 4", "Buy", limit=takeProfit4)

strategy.exit("Take Profit 1", "Sell", limit=takeProfit1)
strategy.exit("Take Profit 2", "Sell", limit=takeProfit2)
strategy.exit("Take Profit 3", "Sell", limit=takeProfit3)
strategy.exit("Take Profit 4", "Sell", limit=takeProfit4)

// Optionally, add a stop loss
stopLoss = 0.03  // Example: 3% stop loss
strategy.exit("Stop Loss", "Buy", stop=close * (1 - stopLoss))
strategy.exit("Stop Loss", "Sell", stop=close * (1 + stopLoss))
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