Bollinger Band Awesome Oscillator Breakout Trading Strategy

This strategy combines the Bollinger Bands indicator and the Awesome Oscillator (AO) indicator to implement a breakout trading model. It generates buy and sell signals when the fast EMA breaks through the BB channel…

Pine ScriptBreakout Trend following EMA SMA Bollinger Bands

Author: ChaoZhang
Complexity: Intermediate · 93 lines
Parameters: 13
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Strategy Logic

Use the middle, upper and lower bands of Bollinger Bands to determine the price channel.
Judge a channel breakout when fast EMA crosses the middle band.
AO indicator determines the direction of uptrend or downtrend.
When fast EMA breaks through middle band upward and AO is positive, a buy signal is generated.
When fast EMA breaks through middle band downward and AO is negative, a sell signal is generated.

Advantage Analysis

BB channel avoids wrong signals.
AO indicator improves accuracy of signals.
Captures greater profit at the beginning of a trend.

Risk Analysis

Improper BB parameters may cause too wide or too narrow channel.
AO parameters affect the accuracy.
Breakout signal may be false breakout.

Solutions

Optimize parameters of BB and AO to find best combination.
Add strength condition to avoid false breakout.
Combine with other indicators to ensure reliability.

Optimization Directions

Optimize BB parameters to find suitable channel range.
Optimize long and short term periods of AO to improve accuracy.
Add volume or other filters to ensure breakout reliability.
Optimize strength condition to lower false breakout rate.

Conclusion

This strategy comprehensively considers the price channel, trend direction and breakout model. It can be more robust and profitable through parameter optimization and indicator combinations. Its breakout model captures early trend opportunities and is very practical.

Parameters

Name	Default	What it controls
v_input_1	6	From Month
v_input_2	true	From Day
v_input_3	2018	From Year
v_input_4	true	To Month
v_input_5	true	To Day
v_input_6	9999	To Year
v_input_7	false	Use EMA for Bollinger Band
v_input_8	5	Bollinger Length
v_input_9_close	0	Bollinger Source: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_10	2	Base Multiplier
v_input_11	2	Fast EMA length
v_input_12	34	Awesome Length Slow
v_input_13	5	Awesome Length Fast

Source Pine Script

/*backtest
start: 2022-12-05 00:00:00
end: 2023-12-11 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=3

strategy(shorttitle="BB+AO STRAT", title="BB+AO STRAT", overlay=true)


// === BACKTEST RANGE ===
FromMonth = input(defval = 6, title = "From Month", minval = 1)
FromDay   = input(defval = 1, title = "From Day", minval = 1)
FromYear  = input(defval = 2018, title = "From Year", minval = 2014)
ToMonth   = input(defval = 1, title = "To Month", minval = 1)
ToDay     = input(defval = 1, title = "To Day", minval = 1)
ToYear    = input(defval = 9999, title = "To Year", minval = 2014)

// Bollinger Bands Inputs
bb_use_ema = input(false, title="Use EMA for Bollinger Band")
bb_length = input(5, minval=1, title="Bollinger Length")
bb_source = input(close, title="Bollinger Source")
bb_mult = input(2.0, title="Base Multiplier", minval=0.5, maxval=10)
// EMA inputs
fast_ma_len = input(2, title="Fast EMA length", minval=2)
// Awesome Inputs
nLengthSlow = input(34, minval=1, title="Awesome Length Slow")
nLengthFast = input(5, minval=1, title="Awesome Length Fast")




// Breakout Indicator Inputs
bb_basis = bb_use_ema ? ema(bb_source, bb_length) : sma(bb_source, bb_length)
fast_ma  = ema(bb_source, fast_ma_len)

// Deviation

dev = stdev(bb_source, bb_length)
bb_dev_inner = bb_mult * dev

// Upper bands
inner_high = bb_basis + bb_dev_inner
// Lower Bands
inner_low = bb_basis - bb_dev_inner

// Calculate Awesome Oscillator
xSMA1_hl2 = sma(hl2, nLengthFast)
xSMA2_hl2 = sma(hl2, nLengthSlow)
xSMA1_SMA2 = xSMA1_hl2 - xSMA2_hl2
// Calculate direction of AO
AO = xSMA1_SMA2>=0? xSMA1_SMA2 > xSMA1_SMA2[1] ? 1 : 2 : xSMA1_SMA2 > xSMA1_SMA2[1] ? -1 : -2



// === PLOTTING ===

// plot BB basis
plot(bb_basis, title="Basis Line", color=red, transp=10, linewidth=2)
// plot BB upper and lower bands
ubi = plot(inner_high, title="Upper Band Inner", color=blue, transp=10, linewidth=1)
lbi = plot(inner_low, title="Lower Band Inner", color=blue, transp=10, linewidth=1)
// center BB channel fill
fill(ubi, lbi, title="Center Channel Fill", color=silver, transp=90)

// plot fast ma
plot(fast_ma, title="Fast EMA", color=black, transp=10, linewidth=2)

// Calc breakouts
break_down =   crossunder(fast_ma, bb_basis) and close < bb_basis and abs(AO)==2
break_up   =  crossover(fast_ma, bb_basis) and close > bb_basis and abs(AO)==1

// Show Break Alerts
plotshape(break_down, title="Breakout Down", style=shape.arrowdown, location=location.abovebar, size=size.auto, text="Sell", color=red, transp=0)
plotshape(break_up, title="Breakout Up", style=shape.arrowup, location=location.belowbar, size=size.auto, text="Buy", color=green, transp=0)
// === ALERTS ===



strategy.entry("L", strategy.long, when=(break_up and (time > timestamp(FromYear, FromMonth, FromDay, 00, 00)) and (time < timestamp(ToYear, ToMonth, ToDay, 23, 59))))


strategy.close("L", when=(break_down and (time < timestamp(ToYear, ToMonth, ToDay, 23, 59))))

// === /PLOTTING ===
barcolor(AO == 2 ? red: AO == 1 ? green : blue )



// eof

Published by ChaoZhang on the FMZ strategy square · last modified 2023-12-12. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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