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Strategy vault / Trend following

Double Inside Bar Trend Strategy

The Double Inside Bar & Trend strategy is a quantitative trading strategy that utilizes double inside bar patterns combined with moving average to determine the trend. It provides high probability trading signals…

Pine ScriptTrend followingBreakoutMean reversionEMASMAATR
Author
ChaoZhang
Complexity
Intermediate · 117 lines
Parameters
16
Backtest bar
1h · intraday
Tested on
BTC/USDT · futures
Jump to codeView in vaultOriginal on FMZ

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Double Inside Bar & Trend Strategy

Overview

The Double Inside Bar & Trend strategy is a quantitative trading strategy that utilizes double inside bar patterns combined with moving average to determine the trend. It provides high probability trading signals with double inside bars, and goes long or short according to the trend judged by the moving average line.

Strategy Logic

  1. Use Hull Moving Average (HMA) as an indicator for trend judgement.
  2. When a double inside bar pattern occurs, it is considered a high probability trading signal. An inside bar is a pattern where the high and low of the last bar is encompassed by the prior bar.
  3. If close price is above MA and a bullish inside bar forms, place a buy stop order around the high of the inside bar. If close is below MA and a bearish inside bar forms, place a sell stop order around the low of the inside bar.
  4. Once the stop order is triggered, set stop loss and take profit based on predefined stop loss percentage and take profit ratio.

Advantage Analysis

  1. Inside bars provide high probability reversal signals. The occurrence of double inside bars may indicate a short-term price reversal.
  2. Used with moving averages to follow the major trend direction, it improves the probability of profit.
  3. Using stop orders around breakthrough points in the trend enjoys good entry opportunities.

Risk Analysis

  1. In ranging markets, trading signals from inside bars may frequently lead to losses.
  2. The moving average as a trend indicator may also give false signals, resulting in losses from countertrend trading.
  3. If the stop loss is set too tight, it may be triggered by small price slips.

Optimization Directions

  1. Test different parameters of moving averages as the trend judging indicator.
  2. Combine other indicators to filter ranging markets, avoiding blind trading without a clear trend.
  3. Obtain more optimal parameter combinations through big data analysis, such as moving average period, stop loss multiplier, take profit ratio etc.
  4. Add filters on trading sessions and products to adapt to different timeframes and product characteristics.

Summary

The Double Inside Bar & Trend strategy utilizes the high probability trading signals from double inside bars, aided by moving averages to determine the major trend direction to go long or short, making it a relatively stable breakout strategy. Through parameter optimization and logic optimization, the adaptability and profitability of this strategy can be improved.

Parameters

NameDefaultWhat it controls
v_input_source_1_close0(?Entry Seettings)MA Source: close | high | low | open | hl2 | hlc3 | hlcc4 | ohlc4
v_input_string_10MA Type: HMA | EMA | SMA | SWMA | VWMA | WMA
v_input_int_145HMA Length
v_input_string_20(?Trade Seettings)Stop Loss Type: ATR | FIX
v_input_int_250ATR: Length
v_input_float_12.5Factor
v_input_float_22TP Ration
v_input_float_310FIX: Stop Loss
v_input_float_420Take Profit
v_input_bool_1true10useRiskMagmt
v_input_float_5trueRisk in %
v_input_bool_2false(?Filter Setings)Filter trades by dates
v_input_1timestamp(2022-01-01T00:00:00+0000)Start Date & Time
v_input_2timestamp(2099-12-31T23:59:00+0000)End Date & Time
v_input_bool_3falseFilter trades by session
v_input_30045-2245Session

Source Pine Script

/*backtest
start: 2023-12-01 00:00:00
end: 2023-12-31 23:59:59
period: 1h
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/
// © Kaspricci

//@version=5
strategy(
     title = "Double Inside Bar & Trend Strategy - Kaspricci", 
     shorttitle = "Double Inside Bar & Trend", 
     overlay=true, 
     initial_capital = 100000, 
     currency = currency.USD, 
     default_qty_type = strategy.percent_of_equity, 
     default_qty_value = 100, 
     calc_on_every_tick = true, 
     close_entries_rule = "ANY")

// ================================================ Entry Inputs ======================================================================
headlineEntry   = "Entry Seettings"

maSource        = input.source(defval = close,             group = headlineEntry, title = "MA Source")
maType          = input.string(defval = "HMA",             group = headlineEntry, title = "MA Type", options = ["EMA", "HMA", "SMA", "SWMA", "VWMA", "WMA"])
maLength        = input.int(   defval = 45,    minval = 1, group = headlineEntry, title = "HMA Length")

float ma = switch maType 
    "EMA"  => ta.ema(maSource,  maLength)
    "HMA"  => ta.hma(maSource,  maLength)
    "SMA"  => ta.sma(maSource,  maLength)
    "SWMA" => ta.swma(maSource)
    "VWMA" => ta.vwma(maSource, maLength)
    "WMA"  => ta.wma(maSource,  maLength)

plot(ma, "Trend MA", color.purple)

// ================================================ Trade Inputs ======================================================================
headlineTrade   = "Trade Seettings"

stopLossType    = input.string(defval = "ATR",                         group = headlineTrade,                 title = "Stop Loss Type",            options = ["ATR", "FIX"])
atrLength       = input.int(   defval = 50,   minval = 1,              group = headlineTrade, inline = "ATR", title = "   ATR: Length                 ")
atrFactor       = input.float( defval =  2.5, minval = 0, step = 0.05, group = headlineTrade, inline = "ATR", title = "Factor       ",             tooltip = "multiplier for ATR value")
takeProfitRatio = input.float( defval =  2.0, minval = 0, step = 0.05, group = headlineTrade,                 title = "            TP Ration",     tooltip = "Multiplier for Take Profit calculation")
fixStopLoss     = input.float( defval = 10.0, minval = 0, step = 0.5,  group = headlineTrade, inline = "FIX", title = "   FIX: Stop Loss             ") * 10 // need this in ticks
fixTakeProfit   = input.float( defval = 20.0, minval = 0, step = 0.5,  group = headlineTrade, inline = "FIX", title = "Take Profit",               tooltip = "in pips") * 10 // need this in ticks
useRiskMagmt    = input.bool(  defval = true,                          group = headlineTrade, inline = "RM",  title = "")
riskPercent     = input.float( defval = 1.0,  minval = 0., step = 0.5, group = headlineTrade, inline = "RM",  title = "Risk in %                ", tooltip = "This will overwrite quantity from startegy settings and calculate the trade size based on stop loss and risk percent") / 100

// ================================================ Filter Inputs =====================================================================
headlineFilter  = "Filter Setings"

// date filter
filterDates     = input.bool(defval = false,                                 group = headlineFilter, title = "Filter trades by dates")
startDateTime   = input(defval = timestamp("2022-01-01T00:00:00+0000"), group = headlineFilter, title = "       Start Date & Time")
endDateTime     = input(defval = timestamp("2099-12-31T23:59:00+0000"), group = headlineFilter, title = "       End Date & Time  ")

dateFilter      = not filterDates or (time >= startDateTime and time <= endDateTime)

// session filter
filterSession   = input.bool(title = "Filter trades by session", defval = false, group = headlineFilter)
session         = input(title = "       Session", defval = "0045-2245", group = headlineFilter)

sessionFilter   = not filterSession or time(timeframe.period, session, timezone = "CET")

// ================================================ Trade Entries and Exits =====================================================================

// calculate stop loss
stopLoss        = switch stopLossType
    "ATR" => nz(math.round(ta.atr(atrLength) * atrFactor / syminfo.mintick, 0), 0)
    "FIX" => fixStopLoss

// calculate take profit
takeProfit      = switch stopLossType
    "ATR" => math.round(stopLoss * takeProfitRatio, 0)
    "FIX" => fixTakeProfit


doubleInsideBar = high[2] > high[1] and high[2] > high[0] and low[2] < low[1] and low[2] < low[0]

// highlight mother candel and inside bar candles
bgcolor(doubleInsideBar ? color.rgb(33, 149, 243, 80) : na)
bgcolor(doubleInsideBar ? color.rgb(33, 149, 243, 80) : na, offset = -1)
bgcolor(doubleInsideBar ? color.rgb(33, 149, 243, 80) : na, offset = -2)

var float buyStopPrice  = na
var float sellStopPrice = na

if (strategy.opentrades == 0 and doubleInsideBar and barstate.isconfirmed)
    buyStopPrice  := high[0] // high of recent candle (second inside bar)
    sellStopPrice := low[0] // low of recent candle (second inside bar)

    tradeID = str.tostring(strategy.closedtrades + strategy.opentrades + 1)

    quantity = useRiskMagmt ? math.round(strategy.equity * riskPercent / stopLoss, 2) / syminfo.mintick : na

    commentTemplate = "{0} QTY: {1,number,#.##} SL: {2} TP: {3}"

    if (close > ma)
        longComment = str.format(commentTemplate, tradeID + "L", quantity, stopLoss / 10, takeProfit / 10)
        strategy.entry(tradeID + "L", strategy.long, qty = quantity, stop = buyStopPrice, comment = longComment)
        strategy.exit(tradeID + "SL", tradeID + "L", profit = takeProfit, loss = stopLoss, comment_loss = "SL", comment_profit = "TP")

    if (close < ma)
        shortComment = str.format(commentTemplate, tradeID + "S", quantity, stopLoss / 10, takeProfit / 10)
        strategy.entry(tradeID + "S", strategy.short, qty = quantity, stop = sellStopPrice, comment = shortComment)
        strategy.exit(tradeID + "SL", tradeID + "S", profit = takeProfit, loss = stopLoss, comment_loss = "SL", comment_profit = "TP")

// as soon as the first pending order has been entered the remaing pending order shall be cancelled 
if strategy.opentrades > 0
    currentTradeID = str.tostring(strategy.closedtrades + strategy.opentrades)
    strategy.cancel(currentTradeID + "S")
    strategy.cancel(currentTradeID + "L")

Published by ChaoZhang on the FMZ strategy square · last modified 2024-01-30. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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