Dual direction Volatility Swallowing Strategy

This strategy is a dual-direction trading strategy that tracks volatility. It uses the Average True Range (ATR) indicator to set stop losses and determines the trend direction based on the price breaking through the…

Pine ScriptVolatility Trend following ATR

Author: ChaoZhang
Complexity: Intermediate · 68 lines
Parameters: 9
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Strategy Logic

The strategy uses 3-day ATR to calculate volatility. The ATR value multiplied by a coefficient is used as the stop loss level. When the price is above the stop loss level, it judges it as an uptrend and closes long positions when the price falls below the stop loss level. When the price is below the stop loss level, it judges it as a downtrend and closes short positions when the price rises above the stop loss level. It opens reverse positions when the trend changes. The stop loss level is optimized during trends and reset when trends change.

Advantage Analysis

Uses ATR to dynamically track market volatility and lower the chance of stop loss being hit
Dual-direction trading profits from market fluctuation
Opens reverse positions early in trend changes for higher win rate

Risk Analysis

Extreme volatility may cause stop loss fails as ATR lags
GAP risk exists for long positions
May trade small profits frequently

To mitigate risks: increase ATR coefficient for wider stop levels, limit trade frequency, set minimum take profit levels, etc.

Optimization Directions

Combine other indicators for trend change signals
Optimize ATR parameters
Add trade sizing control

Summary

This is an overall stable dual-direction trailing stop strategy. ATR sets dynamic stop levels to control drawdowns. Dual-direction trading also increases profit chances. Further optimizations can make the strategy more robust, enhancing trend following capabilities.

Parameters

Name	Default	What it controls
v_input_1	true	From Month
v_input_2	true	From Day
v_input_3	2017	From Year
v_input_4	10	To Month
v_input_5	true	To Day
v_input_6	2020	To Year
v_input_7	3	length
v_input_8	true	mult
v_input_9	true	Strategy Direction

Source Pine Script

/*backtest
start: 2022-11-14 00:00:00
end: 2023-11-20 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=2
strategy("BCH Swinger v1", overlay=true, commission_value = 0.25, default_qty_type=strategy.percent_of_equity, default_qty_value = 100)

/////////////////////////////////////////////////////////////
//START - SET DATE RANGE

// === BACKTEST RANGE ===
FromMonth = input(defval = 1, title = "From Month", minval = 1)
FromDay   = input(defval = 1, title = "From Day", minval = 1)
FromYear  = input(defval = 2017, title = "From Year")
ToMonth   = input(defval = 10, title = "To Month", minval = 1)
ToDay     = input(defval = 01, title = "To Day", minval = 1)
ToYear    = input(defval = 2020, title = "To Year")

startDate = time > timestamp(FromYear, FromMonth, FromDay, 1, 1)
endDate = time < timestamp(ToYear, ToMonth, ToDay, 23, 59)
withinTimeRange = true

/////////////////////////////////////////////////////////////
//END - SET DATE RANGE



/////////////////////////////////////////////////////////////
//START - INDICATORS

length = input(3)
mult = input(1, minval = 0.01)
atr_ = atr(length)
max1 = max(nz(max_[1]), close)
min1 = min(nz(min_[1]), close)
is_uptrend_prev = nz(is_uptrend[1], true)
stop = is_uptrend_prev ? max1 - mult * atr_ : min1 + mult * atr_
vstop_prev = nz(vstop[1])
vstop1 = is_uptrend_prev ? max(vstop_prev, stop) : min(vstop_prev, stop)
is_uptrend = close - vstop1 >= 0
is_trend_changed = is_uptrend != is_uptrend_prev
max_ = is_trend_changed ? close : max1
min_ = is_trend_changed ? close : min1
vstop = is_trend_changed ? is_uptrend ? max_ - mult * atr_ : min_ + mult * atr_ : vstop1
plot(vstop, color = is_uptrend ? yellow : red, style=circles, linewidth=2)

/////////////////////////////////////////////////////////////
//END - INDICATORS



/////////////////////////////////////////////////////////////
//START - TRADING RULES
direction = input(defval=1, title = "Strategy Direction",  minval=-1, maxval=1)
strategy.risk.allow_entry_in(direction == 0 ? strategy.direction.all : (direction < 0 ? strategy.direction.short : strategy.direction.long))

condition1 = close > vstop and withinTimeRange
condition2 = close < vstop and withinTimeRange

strategy.entry("BUY", strategy.long, when = condition1)
strategy.entry("SELL", strategy.short, when = condition2)

/////////////////////////////////////////////////////////////
//END - TRADING RULES

Published by ChaoZhang on the FMZ strategy square · last modified 2023-11-21. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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