Breakout Day Trading Strategy

This is a simple day trading strategy based on moving averages, suitable for GBPUSD 1-hour timeframe. It only enters at the London open and exits at the London close, making it ideal for trend breakout trading during…

Pine ScriptBreakout Trend following Volatility RSI EMA SMA Bollinger Bands

Author: ChaoZhang
Complexity: Intermediate · 152 lines
Parameters: 25
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Strategy Logic

The strategy uses two moving averages, one very fast and one very slow. The logic is as follows:

Only enter at the London open (8 AM) when price breaks the fast MA. Go long if close or high breaks above fast MA, go short if close or low breaks below fast MA.
Require previous bar's close to be above slow MA for long, below slow MA for short, to filter out non-trending moves.
Use a very small stop loss of 50-100 points.
No take profit, exits unconditionally at the London close (15:00).

Advantage Analysis

This is a very simple breakout strategy, but by properly utilizing the London session trend characteristics, it has the following advantages:

Only enters in clear trends, avoiding choppy market risks.
Trades breakouts only during London high volatility period.
Small stop loss can withstand some retracement.
Unconditional exit avoids overnight risks.

Risk Analysis

The strategy also has some risks:

May stay flat for long periods when London has no clear trend.
Stop loss risks of being stopped out on retracements.
Early exit risks when strong trends require extended holding periods.

Mitigations include widening entry rules, using trailing stops to lock in profits, and dynamically adjusting exit time based on market conditions.

Optimization Directions

The strategy can be improved in several areas:

Add other filters like RSI, Bollinger Bands to further avoid choppy markets.
Optimize moving average combinations by testing different parameters.
Test different stop loss sizes to find optimal range.
Dynamically adjust exit time based on price action rather than fixed time.
Test other currency pairs and timeframes.
Add risk management like position sizing based on account size.

Summary

Overall this is a very simple and practical London session breakout strategy. It benefits from avoiding certain trading risks by properly utilizing session characteristics. There are also areas for further optimizations to improve robustness and profitability. The strategy provides a useful framework and template for effectively trading London session breakouts.

Parameters

Name	Default	What it controls
v_input_1	false	NY Open On
v_input_2	false	NY Session On
v_input_3	false	NY Close On
v_input_4	false	Aussie Open On
v_input_5	false	Aussie Session On
v_input_6	false	Aussie Close On
v_input_7	false	Asia Open On
v_input_8	false	Asia Session On
v_input_9	false	Asia Close On
v_input_10	true	Euro Open On
v_input_11	true	Euro Session On
v_input_12	true	Euro Close On
v_input_13	true	Show On Chart
v_input_14	true	From Day
v_input_15	true	From Month
v_input_16	2020	From Year
v_input_17	31	To Day
v_input_18	12	To Month
v_input_19	2020	To Year
v_input_20	2	len
v_input_21_close	0	Source: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_22	200	Length slow
v_input_23_close	0	Source: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_24	66	sl
v_input_25	true	Risk % of equity

Source Pine Script

/*backtest
start: 2023-09-08 00:00:00
end: 2023-10-08 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4

// strategy(title="2 ma breakout",shorttitle="2 ma breakout", initial_capital=10000,overlay=true, commission_type = strategy.commission.cash_per_contract, commission_value = 0.00008 )
timeinrange(res, sess) => time(res, sess) != 0

//Change false to false = You have to turn on, won't show up by default
//****Always use lowercase letters

doNYOpen = input(defval=false, type = input.bool, title="NY Open On")
doNYSession = input(defval=false, type = input.bool, title="NY Session On")
doNYClose = input(defval=false, type = input.bool, title="NY Close On")

doAussieOpen = input(defval=false, type = input.bool, title="Aussie Open On")
doAussieSession = input(defval=false, type = input.bool, title="Aussie Session On")
doAussieClose = input(defval=false, type = input.bool, title="Aussie Close On")

doAsiaOpen = input(defval=false, type = input.bool, title="Asia Open On")
doAsiaSession = input(defval=false, type = input.bool, title="Asia Session On")
doAsiaClose = input(defval=false, type = input.bool, title="Asia Close On")

doEurOpen = input(defval=true, type = input.bool, title="Euro Open On")
doEurSession = input(defval=true, type = input.bool, title="Euro Session On")
doEurClose = input(defval=true, type = input.bool, title="Euro Close On")

//You can copy and paste these colors. white - silver - gray - maroon - red - purple - fuchsia - green - lime
//   olive - yellow - navy - blue - teal - aqua - orange 

nySessionStart = color.olive
nySession = color.olive
nySessionEnd = color.olive
asiaSessionStart = color.blue
asiaSession = color.blue
asiaSessionEnd = color.blue
europeSessionStart = color.red
europeSession = color.red
europeSessionEnd = color.red
colorwhite = color.white

//****Note ---- Use Military Times --- So 3:00PM = 1500


bgcolor(doAsiaSession and timeinrange(timeframe.period, "1800-0400") ? asiaSession : na, transp=75)
//bgcolor(timeinrange(timeframe.period, "0000-0300") ? color.white  : na, transp=75)
bgcolor(doEurSession and timeinrange(timeframe.period, "0300-1100") ? europeSession : na, transp=75)
bgcolor(doNYSession and timeinrange(timeframe.period, "0800-1600") ? nySession : na, transp=75)

active = input(true, title="Show On Chart")
pricehigh = security(syminfo.tickerid, '60', high[0])
pricelow = security(syminfo.tickerid, '60', low[0])
//Daily Plots
offs_daily = 0 
hiHighs = 0
loLows = 0
//plot(timeinrange(timeframe.period, "0000-0300") and pricehigh ? pricehigh  : na, title="Previous Daily High", style=plot.style_line, linewidth=2, color=color.gray)
//plot(timeinrange(timeframe.period, "0000-0300") and pricelow ? pricelow : na, title="Previous Daily Low", style=plot.style_linebr, linewidth=2, color=color.gray)

if(timeinrange(timeframe.period, "0000-0300"))
    hiHighs = highest(high, 3)
    loLows = lowest(low, 3)
    

// From Date Inputs
fromDay = input(defval = 1, title = "From Day", minval = 1, maxval = 31)
fromMonth = input(defval = 1, title = "From Month", minval = 1, maxval = 12)
fromYear = input(defval = 2020, title = "From Year", minval = 1970)
 
// To Date Inputs
toDay = input(defval = 31, title = "To Day", minval = 1, maxval = 31)
toMonth = input(defval = 12, title = "To Month", minval = 1, maxval = 12)
toYear = input(defval = 2020, title = "To Year", minval = 1970)
 
// Calculate start/end date and time condition
startDate = timestamp(fromYear, fromMonth, fromDay, 00, 00)
finishDate = timestamp(toYear, toMonth, toDay, 00, 00)
time_cond = true


len = input(2)
src = input(close, title="Source")
out = sma(src, len)

lena = input(200, minval=1, title="Length slow")
srca = input(close, title="Source")
outa = ema(srca, lena)

//tp = input(100, title="tp")
sl = input(66, title="sl")
// if(smabool)
//     out := sma(src, len)
// else if(emabool)
//     out := ema(src, len)
// else if(hmabool)
//     out := hma(src, len)
// else if(vmabool)
//     out := wma(src, len)  
// else if(vwmabool)
//     out := vwma(src, len)   
// else if(smmabool)
//     out := sma(src, len)  
 
plot(out, color=color.white, title="MA")
plot(outa, color=color.white, title="MA")

longC = timeinrange(timeframe.period, "0300-0400") and (crossover(close,out) or crossover(high,out)) and close[1] > outa and time_cond
shortC = timeinrange(timeframe.period, "0300-0400") and (crossunder(close,out) or crossunder(low,out)) and close[1] < outa and time_cond



//inputlondon = input(false, title="london session")
//inputny = input(false, title="new york session")

//if(inputlondon==true)

strategy.initial_capital = 50000

//MONEY MANAGEMENT--------------------------------------------------------------
balance = strategy.netprofit + strategy.initial_capital //current balance
floating = strategy.openprofit          //floating profit/loss
risk = input(1,type=input.float,title="Risk % of equity ")/100           //risk % per trade

temp01 = balance * risk     //Risk in USD
temp02 = temp01/sl        //Risk in lots
temp03 = temp02*100      //Convert to contracts
size = temp03 - temp03%1 //Normalize to 1000s (Trade size)
if(size < 1)
    size := 1         //Set min. lot size


strategy.entry("long",1,when=longC)
//strategy.close("long", when = crossunder(close,out) or not (timeinrange(timeframe.period, "0300-1000")))
strategy.close("long", when =  not (timeinrange(timeframe.period, "0300-0945")))
strategy.exit("x_long","long", loss = sl)
     
    
strategy.entry("short",0,when=shortC)
//strategy.close("short",when = crossover(close,out) or not (timeinrange(timeframe.period, "0300-1000")))
strategy.close("short",when = not (timeinrange(timeframe.period, "0300-0945")))

strategy.exit("x_short","short", loss = sl)

//strategy.exit("closelong", "RSI_BB_LONG" , profit = close * 0.01 / syminfo.mintick, loss = close * 0.01 / syminfo.mintick, alert_message = "closelong")
//strategy.exit("closeshort", "RSI_BB_SHORT" , profit = close * 0.01 / syminfo.mintick, loss = close * 0.01 / syminfo.mintick, alert_message = "closeshort")

Published by ChaoZhang on the FMZ strategy square · last modified 2023-10-09. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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