Average True Range Breakout Strategy with Golden Ratio

Pine ScriptBreakout Trend following Volatility EMA SMA Bollinger Bands ATR

Author: ChaoZhang
Complexity: Intermediate · 46 lines
Parameters: 9
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This is a breakout strategy that utilizes the ATR indicator to generate trading signals. The strategy employs a moving average system to produce entry signals and an amplified ATR channel based on the golden ratio to construct long and short positions. It could gain significantly in trends and obtain small but steady profits in range-bound markets.

Principles

The code calculates the ATR over a period of closing prices, amplifies it by 1.618 as the upper band and 2.618 as the lower band. Combined with the EMA, it forms a Bollinger channel breakout system. Go long when price breaks out the lower band upwards and go short when breaking the upper band downwards to follow trends.

Advantages

The ATR indicator effectively captures market volatility and constructs adaptive trading bands, avoiding overfitting caused by static parameters.
The amplified ATR bands by the golden ratio expand profit potential without increasing trading frequency.
The moving average system filters out short-term noises and cooperates with the ATR channel to identify mid-to-long term trends.

Risks

The ATR indicator may lag during extreme market conditions.
Improper magnification multiples would lead to excessively high trading frequency.
Switching signals from long-period moving averages have lags.

Optimization

The ATR can incorporate the VIX or adjust magnification.
Employ multiple time frame EMAs to construct adaptive systems.
Set stop losses to limit maximal loss per trade.

Summary

This strategy integrates moving average filtering, ATR channel tracking and the golden ratio methodology, which can effectively follow mid-to-long term trends with good stability. By tuning parameters, it can be adapted to different products across various frequencies, worthy of exploring for its excellent market adaptivity.

Parameters

Name	Default	What it controls
v_input_1	52	Length
v_input_2	1.618	Length
v_input_3	2.618	Length
v_input_4	8	From Month
v_input_5	18	From Day
v_input_6	2008	From Year
v_input_7	true	To Month
v_input_8	true	To Day
v_input_9	2020	To Year

Source Pine Script

/*backtest
start: 2024-01-01 00:00:00
end: 2024-01-31 23:59:59
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4
strategy("ATR Long Only Strategy lower band buy", overlay=true, default_qty_type=strategy.percent_of_equity, default_qty_value=100)

len = input(52, type=input.integer, minval=1, title="Length")
mul = input(1.618, type=input.float, minval=0, title="Length")
mullow = input(2.618, type=input.float, minval=0, title="Length")

price = sma(close, 1)
average = ema(close, len)
diff = atr(len) * mul
difflow = atr(len) * mullow

bull_level = average + diff
bear_level = average - difflow
bull_cross = crossunder(price, bear_level)
bear_cross = crossunder(bull_level, price)

FromMonth = input(defval = 8, title = "From Month", minval = 1, maxval = 12)
FromDay   = input(defval = 18, title = "From Day", minval = 1, maxval = 31)
FromYear  = input(defval = 2008, title = "From Year", minval = 2008)
ToMonth   = input(defval = 1, title = "To Month", minval = 1, maxval = 12)
ToDay     = input(defval = 1, title = "To Day", minval = 1, maxval = 31)
ToYear    = input(defval = 2020, title = "To Year", minval = 2019)

start     = timestamp(FromYear, FromMonth, FromDay, 00, 00)  
finish    = timestamp(ToYear, ToMonth, ToDay, 23, 59)       
startTimeOk()  => true

if (startTimeOk())
    strategy.entry("KOP", strategy.long, when=bull_cross)
    strategy.close("KOP", when=bear_cross)  //strategy.entry("Sell", strategy.short, when=bear_cross)

plot(price, title="price", color=color.black, transp=50, linewidth=2)
a0 = plot(average, title="average", color=color.red, transp=50, linewidth=1)
a1 = plot(bull_level, title="bull", color=color.green, transp=50, linewidth=1)
a2 = plot(bear_level, title="bear", color=color.red, transp=50, linewidth=1)
fill(a0, a1, color=color.green, transp=97)
fill(a0, a2, color=color.red, transp=97)

Published by ChaoZhang on the FMZ strategy square · last modified 2024-02-26. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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