Double Channel Kitchen Algorithm Trading Strategy Focusing on Wealth Growth

Pine ScriptMean reversion Trend following Multi-timeframe RSI SMA ATR Supertrend Stochastic

Author: ChaoZhang
Complexity: Intermediate · 154 lines
Parameters: 19
Backtest bar: 4h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

The "Double Channel Kitchen" strategy uses Supertrend and StochRSI indicators to analyze price trends and overbought/oversold conditions in different timeframes, in order to identify potential buy and sell signals. This strategy aims to trade along the major trend direction and capture the primary price movement over the medium to long term.

Strategy Logic

The strategy employs the Supertrend indicator in both 1-hour and 4-hour timeframes to determine the price trend direction. When the Supertrends in both timeframes point in the same direction, it signifies a relatively strong price trend.

In addition, the StochRSI indicator is used to detect overbought/oversold conditions. The StochRSI combines the strengths of both the RSI and Stochastic Oscillator indicators. When the StochRSI line crosses above the overbought threshold, it indicates a possible oversold condition in price. When the StochRSI line crosses below the oversold threshold, it flags a potential overbought condition.

Together with the dual Supertrend confirmation of the price trend, if the StochRSI also shows overbought/oversold signals, it presents a good opportunity to buy or sell. To further verify the signal, a lookback period is implemented where after the StochRSI overbought/oversold signal, the price movement in the past few bars is checked - if it confirms the StochRSI signal, then a buy or sell will be triggered.

In summary, this strategy uses the dual time frame Supertrend to determine the major trend, and StochRSI to identify local reversals, to carry out trend-following trades over the medium to long term.

Advantages of the Strategy

Using indicators across multiple timeframes helps to filter out false signals
Combines the strengths of Supertrend and StochRSI for trend and overbought/oversold analysis
Lookback verification avoids unnecessary trades
Medium to long term operations avoid excessive trading and slippage
Easy to understand dual-indicator setup, with flexible parameter tuning

Risks of the Strategy

Choppy markets without clear mid-long term trends can generate false signals
Excessive lookback period may cause missing good entry opportunities
Poor StochRSI parameter settings may lead to incorrect overbought/oversold signals
Improper Supertrend parameters can cause wrong trend direction judgement
Mechanical signals following overlooks major fundamental changes

Improvements:

Optimize combinations of StochRSI and Supertrend parameters
Adjust lookback period based on different market conditions
Add volume indicators for signal verification
Monitor key fundamental news events, manual intervention when necessary

Enhancement Areas

Add more Supertrend indicators across different timeframes for multi-stage screening
Replace StochRSI with other overbought/oversold indicators e.g. KD, RSI
Incorporate trailing stop loss strategies to ride trends
Combine key moving averages e.g. 30-period MA to determine major trends
Develop auto parameter optimization for robustness

Conclusion

The "Double Channel Kitchen" strategy effectively utilizes the Supertrend for major trend and StochRSI for local reversals, to implement a reliable trend following system. It focuses on medium-long term holdings to avoid excessive trading and slippage. Through parameter optimization, combining indicators, this strategy can achieve steady positive results. However investors should still watch out for major fundamental changes, instead of just mechanically following indicator signals. Overall, this strategy offers an effective technical analysis approach for active investors to generate positive returns with proper risk awareness.

Parameters

Name	Default	What it controls
v_input_1	timestamp(01 January 2017 13:30 +0000)	(? ################# BACKTEST DATE ################ )Start_Time
v_input_2	timestamp(30 April 2024 19:30 +0000)	End_Time
v_input_3	10	(? ################# Supertrend ################ )ATR Length
v_input_4	3	Factor
v_input_string_1	0	Short Time Period: 07 1h \| 02 3m \| 03 5m \| 04 15m \| 05 30m \| 06 45m \| 01 1m \| 08 2h \| 09 3h \| 10 4h \| 11 1D \| 12 1W
v_input_string_2	0	Long Time Period: 10 4h \| 02 3m \| 03 5m \| 04 15m \| 05 30m \| 06 45m \| 07 1h \| 08 2h \| 09 3h \| 01 1m \| 11 1D \| 12 1W
v_input_float_1	15	(? ################# Stoch RSI ################ )Stoch Rsi Low Limit
v_input_float_2	85	Stoch Rsi Up Limit
v_input_int_1	20	Stoch Rsi retroactive length
v_input_int_2	3	Stochastic RSI K
v_input_int_3	14	RSI Length
v_input_int_4	14	Stochastic Length
v_input_5_close	0	RSI Source: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_float_3	20000	(? ################# Strategy Settings ################ )Dollar Cost Per Position
v_input_string_3	0	Trade_direction: BOTH \| SHORT \| LONG
v_input_6	Long Open	Long Open Message
v_input_7	Short Open	Short Open Message
v_input_8	Long Close	Long Close Message
v_input_9	Short Close	Short Close Message

Source Pine Script

/*backtest
start: 2023-09-09 00:00:00
end: 2023-10-09 00:00:00
period: 4h
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/
// © Baby_whale_to_moon

//@version=5
strategy('Kitchen [ilovealgotrading]', overlay=true, format=format.price, initial_capital = 1000)

// BACKTEST DATE
Start_Time = input(defval=timestamp('01 January 2017 13:30 +0000'), title='Start_Time', group = " ################# BACKTEST DATE ################ " )
End_Time = input(defval=timestamp('30 April 2024 19:30 +0000'), title='End_Time', group = " ################# BACKTEST DATE ################ " )

// supertrend 
atrPeriod = input(10, 'ATR Length', group = " #################  Supertrend  ################ ")
factor = input(3, 'Factor', group = " #################  Supertrend  ################ ")

time1 = input.string(title='Short Time Period', defval='07 1h', options=['01 1m','02 3m','03 5m',  '04 15m', '05 30m', '06 45m', '07 1h', '08 2h', '09 3h', '10 4h', '11 1D', '12 1W' ], group = " #################  Supertrend  ################ ",tooltip = "this timeframe is the value of our short-time supertrend indicator")
time2 = input.string(title='Long Time Period', defval='10 4h', options=[ '01 1m','02 3m','03 5m', '04 15m', '05 30m', '06 45m', '07 1h', '08 2h', '09 3h', '10 4h', '11 1D', '12 1W' ], group = " #################  Supertrend  ################ ",tooltip = "this timeframe is the value of our long-time supertrend indicator")


res(Resolution) =>
    if Resolution == '00 Current'
        timeframe.period
    else
        if Resolution == '01 1m'
            '1'
        else
            if Resolution == '02 3m'
                '3'
            else
                if Resolution == '03 5m'
                    '5'
                else
                    if Resolution == '04 15m'
                        '15'
                    else
                        if Resolution == '05 30m'
                            '30'
                        else
                            if Resolution == '06 45m'
                                '45'
                            else
                                if Resolution == '07 1h'
                                    '60'
                                else
                                    if Resolution == '08 2h'
                                        '120'
                                    else
                                        if Resolution == '09 3h'
                                            '180'
                                        else
                                            if Resolution == '10 4h'
                                                '240'
                                            else
                                                if Resolution == '11 1D'
                                                    '1D'
                                                else
                                                    if Resolution == '12 1W'
                                                        '1W'
                                                    else
                                                        if Resolution == '13 1M'
                                                            '1M'


// supertrend Long time period 
[supertrend2, direction2] = request.security(syminfo.tickerid, res(time2), ta.supertrend(factor, atrPeriod))
bodyMiddle4 = plot((open + close) / 2, display=display.none)
upTrend2 = plot(direction2 < 0 ? supertrend2 : na, 'Up Trend', color=color.new(color.green, 0), style=plot.style_linebr, linewidth=2)
downTrend2 = plot(direction2 < 0 ? na : supertrend2, 'Down Trend', color=color.new(color.red, 0), style=plot.style_linebr, linewidth=2)

// supertrend short time period 
[supertrend1, direction1] = request.security(syminfo.tickerid, res(time1), ta.supertrend(factor, atrPeriod))
bodyMiddle = plot((open + close) / 2, display=display.none)
upTrend = plot(direction1 < 0 ? supertrend1 : na, 'Up Trend', color=color.new(color.yellow, 0), style=plot.style_linebr)
downTrend = plot(direction1 < 0 ? na : supertrend1, 'Down Trend', color=color.new(color.orange, 0), style=plot.style_linebr)


// Stochastic RSI
low_limit_stoch_rsi = input.float(title = 'Stoch Rsi Low Limit', step=0.5, defval=15, group = " #################  Stoch RSI   ################ ", tooltip = "when Stock rsi value crossover Low Limit value we get Long")
up_limit_stoch_rsi = input.float(title = 'Stoch Rsi Up Limit', step=0.5, defval=85, group = " #################  Stoch RSI   ################ ", tooltip = "when Stock rsi value crossunder Up Limit value we get Short")
stocrsi_back_length = input.int(20, 'Stoch Rsi retroactive length', minval=1, group = " #################  Stoch RSI   ################ ", tooltip = "How many candles are left behind, even if there is a buy or sell signal, it will be valid now")
smoothK = input.int(3, 'Stochastic RSI K', minval=1, group = " #################  Stoch RSI   ################ ")
lengthRSI = input.int(14, 'RSI Length', minval=1, group = " #################  Stoch RSI   ################ ")
lengthStoch = input.int(14, 'Stochastic Length', minval=1, group = " #################  Stoch RSI   ################ ")
src_rsi = input(close, title='RSI Source', group = " #################  Stoch RSI   ################ ")
rsi1 = request.security(syminfo.tickerid, '240', ta.rsi(src_rsi, lengthRSI))
k = request.security(syminfo.tickerid, '240', ta.sma(ta.stoch(rsi1, rsi1, rsi1, lengthStoch), smoothK))

// Strategy settings 
dollar = input.float(title='Dollar Cost Per Position ', defval=20000, group = " #################  Strategy Settings  ################ ")
trade_direction = input.string(title='Trade_direction', group = " #################  Strategy Settings  ################ ", options=['LONG', 'SHORT', 'BOTH'], defval='BOTH')
Long_message_open = input('Long Open', title = "Long Open Message", group = " #################  Strategy Settings  ################ ", tooltip = "if you write your alert window this code {{strategy.order.alert_message}} .When trigger Long signal you will get dynamically what you pasted here for Long Open Message ")
Short_message_open = input('Short Open', title = "Short Open Message", group = " #################  Strategy Settings  ################ ", tooltip = "if you write your alert window this code {{strategy.order.alert_message}} .When trigger Long signal you will get dynamically what you pasted here for Short Open Message ")
Long_message_close = input('Long Close', title = "Long Close Message", group = " #################  Strategy Settings  ################ ", tooltip = "if you write your alert window this code {{strategy.order.alert_message}} .When trigger Long signal you will get dynamically what you pasted here for Long Close Message ")
Short_message_close = input('Short Close', title = "Short Close Message", group = " #################  Strategy Settings  ################ ", tooltip = "if you write your alert window this code {{strategy.order.alert_message}} .When trigger Long signal you will get dynamically what you pasted here for Short Close Message ")

Time_interval = true
bgcolor(Time_interval ? color.rgb(255, 235, 59, 95) : na)

back_long = 0
back_short = 0

for i = 1 to stocrsi_back_length by 1
    if ta.crossover(k, low_limit_stoch_rsi)[i] == true 
        back_long += i
        back_long
    if ta.crossunder(k, up_limit_stoch_rsi)[i] == true 
        back_short += i
        back_short

// bgcolor(back_long>0?color.rgb(153, 246, 164, 54):na)
// bgcolor(back_short>0?color.rgb(246, 153, 153, 54):na)

buy_signal = false
sell_signal = false

if direction2 < 0 and direction1 < 0 and back_long > 0
    buy_signal := true
    buy_signal

if direction2 > 0 and direction1 > 0 and back_short > 0
    sell_signal := true
    sell_signal


//bgcolor(buy_signal  ? color.new(color.lime,90) : na ,title="BUY bgcolor")
plotshape( buy_signal[1] == false and  strategy.opentrades == 0 and Time_interval and buy_signal  ? supertrend2 : na, title="Buy", text="Buy", location=location.absolute, style=shape.labelup, size=size.tiny, color=color.green, textcolor=color.white)

//bgcolor(sell_signal  ? color.new(color.red,90) : na ,title="SELL bgcolor")
plotshape(sell_signal[1] == false and strategy.opentrades == 0 and Time_interval and sell_signal  ? supertrend2 : na , title="Sell", text="Sell", location=location.absolute, style=shape.labeldown, size=size.tiny, color=color.red, textcolor=color.white)


// Strategy entries 
if strategy.opentrades == 0 and Time_interval and buy_signal and ( trade_direction == 'LONG' or trade_direction == 'BOTH')
    strategy.entry('Long_Open', strategy.long, qty=dollar / close, alert_message=Long_message_open)

if strategy.opentrades == 0 and Time_interval and sell_signal and ( trade_direction == 'SHORT' or trade_direction == 'BOTH')
    strategy.entry('Short_Open', strategy.short, qty=dollar / close, alert_message=Short_message_open)


// Strategy Close
if close < supertrend1 and strategy.position_size > 0 
    strategy.exit('Long_Close',from_entry = "Long_Open", stop=close, qty_percent=100, alert_message=Long_message_close)

if close > supertrend1 and strategy.position_size < 0 
    strategy.exit('Short_Close',from_entry = "Short_Open", stop=close, qty_percent=100, alert_message=Short_message_close)

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

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