Adaptive Trading Strategy Based on Multiple EMA Crossovers

This strategy implements adaptive long/short trading using multiple sets of EMA indicators. It adopts EMAs with different parameters for entry and exit based on market long-term and short-term trends. The strategy…

Pine ScriptTrend following Machine learning EMA ATR

Author: ChaoZhang
Complexity: Intermediate · 111 lines
Parameters: 18
Backtest bar: 12h · swing
Tested on: BTC/USDT · futures

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Overview

Strategy Logic

The strategy mainly utilizes the crossover principle of EMA indicators. Long when fast EMA crosses above slow EMA, and short when crossing below. It sets up multiple EMAs and chooses different parameters based on market trends. Specifically, when judging long-term trend is bullish, a set of longer period EMAs are used for long signal; when bearish, another set of shorter period EMAs are used for short. Exits also adopt different period EMAs. Stop loss uses fixed percentage trailing stop based on position direction.

Advantage Analysis

Multiple adaptive EMA sets work flexibly across different markets.
Distinguishing bull and bear makes signals clearer.
Independent entry/exit parameters enables precise positioning.
Fixed percentage stop loss effectively controls risk.
Strategy logic is intuitive and easy to understand and implement.

Risks and Improvements

EMAs can generate false signals, parameter tuning is key.
Fixed stop loss may fail to track large fluctuations.
Should add filters like volume to enhance robustness.
Parameters can be auto optimized with machine learning algorithms.
Consider using dynamic stop loss like ATR instead of fixed.

Summary

The strategy achieves adaptive effect leveraging multiple EMA crossovers, keeping EMA's advantages and making the strategy more flexible. With proper filters and dynamic stops added, it can become a highly practical automated trading system.

Parameters

Name	Default	What it controls
v_input_1	true	Start Date
v_input_2	true	Start Month
v_input_3	2020	Start Year
v_input_4	true	End Date
v_input_5	12	End Month
v_input_6	2021	End Year
v_input_7	11	Long Open - Fast
v_input_8	33	Long Open - Slow
v_input_9	3	Long Close - Fast
v_input_10	40	Long Close - Slow
v_input_11	5	Short Open - Fast
v_input_12	11	Short Open - Slow
v_input_13	4	Short Close - Fast
v_input_14	7	Short Close - Slow
v_input_15	1.7	Long Stop Loss (%)
v_input_16	0.4	Short Stop Loss (%)
v_input_17	144	Long-term trend - Longs
v_input_18	89	Long-term trend - Shorts

Source Pine Script

/*backtest
start: 2023-08-26 00:00:00
end: 2023-09-07 00:00:00
period: 12h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © str1nger
//@version=4

// strategy(title="BTC - 4hr - Long/Short", shorttitle="BTC - 4hr - Long/Short", overlay=true, initial_capital=1000, default_qty_type=strategy.percent_of_equity, default_qty_value=75,commission_type=strategy.commission.percent, commission_value=0.075)//////<---Uses a percentage of starting equity

//DATE RANGE//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
startDate = input(title="Start Date", type=input.integer,
     defval=1, minval=1, maxval=31)
startMonth = input(title="Start Month", type=input.integer,
     defval=1, minval=1, maxval=12)
startYear = input(title="Start Year", type=input.integer,
     defval=2020, minval=2000, maxval=2100)
endDate = input(title="End Date", type=input.integer,
     defval=1, minval=1, maxval=31)
endMonth = input(title="End Month", type=input.integer,
     defval=12, minval=1, maxval=12)
endYear = input(title="End Year", type=input.integer,
     defval=2021, minval=2000, maxval=2100)

inDateRange =  true


//EMAs//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//LONG
//11,33,3,40
lof= input(11, title="Long Open - Fast", step=1)
los= input(33, title="Long Open - Slow", step=1)
lcf= input(3, title="Long Close - Fast", step=1)
lcs= input(40, title="Long Close - Slow", step=1)
ema_long_open_fast = ema(close, lof)
ema_long_open_slow = ema(close, los)
ema_long_close_fast= ema(close, lcf)
ema_long_close_slow = ema(close, lcs)
//SHORT
//5,11,4,7
sof= input(5, title="Short Open - Fast", step=1)
sos= input(11, title="Short Open - Slow", step=1)
scf= input(4, title="Short Close - Fast", step=1)
scs= input(7, title="Short Close - Slow", step=1)
ema_short_open_fast = ema(close, sof)
ema_short_open_slow = ema(close, sos)
ema_short_close_fast = ema(close, scf)
ema_short_close_slow = ema(close, scs)


//CONDITIONS///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//LONG
openlong = crossover(ema_long_open_fast, ema_long_open_slow)
closelong = crossover(ema_long_close_slow, ema_long_close_fast)
//1.7%
long_loss_percent = input(title="Long Stop Loss (%)", type=input.float, minval=0.0, step=0.1, defval=1.7) * 0.01
long_stop_price = strategy.position_avg_price * (1 - long_loss_percent)
//SHORT
openshort = crossover(ema_short_open_slow, ema_short_open_fast)
closeshort = crossover(ema_short_close_fast, ema_short_close_slow)
//0.4%
short_loss_percent = input(title="Short Stop Loss (%)", type=input.float, minval=0.0, step=0.1, defval=0.4) * 0.01
short_stop_price = strategy.position_avg_price * (1 + short_loss_percent)


//PLOT EMAs////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//LONG
plot(ema_long_open_fast, "Long EMA open lower", linewidth=1, color=color.green)
plot(ema_long_open_slow, "Long EMA close upper", linewidth=1, color=color.green)
plot(ema_long_close_fast, "Long close lower", linewidth=1, color=color.red)
plot(ema_long_close_slow, "Long close upper", linewidth=1, color=color.red)
//SHORT
plot(ema_short_open_fast, "Short open fast", linewidth=1, color=color.green)
plot(ema_short_open_slow, "Short open slow", linewidth=1, color=color.green)
plot(ema_short_close_fast, "Short close fast", linewidth=1, color=color.red)
plot(ema_short_close_slow, "Short close slow", linewidth=1, color=color.red)


//LONG-TERM TRENDS
//LONG 144
long_term_trend_longs= input(144, title="Long-term trend - Longs", step=1)
lttl= ema(close, long_term_trend_longs)
plot(lttl, "Long-term trend - Longs", linewidth=2, color=color.blue)
//SHORT 89
long_term_trend_shorts= input(89, title="Long-term trend - Shorts", step=1)
ltts = ema(close, long_term_trend_shorts)
plot(ltts, "Long-term trend - Shorts", linewidth=2, color=color.blue)


//STRATEGY//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
//LONG
if (inDateRange and openlong and (close > lttl))
    strategy.entry("OL", long=true, comment="##insert open long comment here##")
if (inDateRange and closelong)
    strategy.close("OL", comment="##insert close long comment here##")
if strategy.position_size > 0
    strategy.exit("L-SL", stop=long_stop_price, comment="##insert long stop-loss comment here##")
//SHORT  
if (inDateRange and openshort and (close < ltts))
    strategy.entry("OS", long=false, comment="##insert open short comment here##")
if (inDateRange and closeshort)
    strategy.close("OS", comment="##insert close short comment here##")
if strategy.position_size < 0
    strategy.exit("S-SL", stop=short_stop_price, comment="##inster short stop-loss comment here##")

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-26. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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