Enhanced Moving Average Convergence Trend Strategy

This trend following strategy utilizes an enhanced MACD indicator. It calculates fast EMA, slow EMA, their difference, and EMA of that difference to generate signals. The logic is: 1. Compute fast EMA period, e.g…

Pine ScriptTrend following MACD EMA

Author: ChaoZhang
Complexity: Intermediate · 46 lines
Parameters: 9
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Strategy Logic

This trend following strategy utilizes an enhanced MACD indicator. It calculates fast EMA, slow EMA, their difference, and EMA of that difference to generate signals.

The logic is:

Compute fast EMA period, e.g. 12-day
Compute slow EMA period, e.g. 26-day
Subtract fast from slow EMA to get MACD
Take EMA of MACD as signal line, e.g. 9-day
EMA of MACD minus signal gives enhanced signal
Go long when enhanced signal crosses above zero line
Close long when enhanced signal crosses below zero line

The strategy taps into MACD's trend following ability, and optimizes it further for quality mid- to long-term trend signals.

Advantages

Enhanced MACD reduces noise and improves signals
Fast/slow EMA combo gauges direction and strength
Slower parameters focus on mid- to long-term trends

Risks

Careful optimization of EMA periods needed
LONG only unable to use short opportunities
Less frequent signal occurrence

Summary

This strategy leverages enhanced MACD for improved mid- to long-term trend identification. But optimization and risk controls are key. Combining with other factors can improve performance.

Parameters

Name	Default	What it controls
v_input_1	2018	Backtest Start Year
v_input_2	4	Backtest Start Month
v_input_3	true	Backtest Start Day
v_input_4	2018	Backtest Stop Year
v_input_5	12	Backtest Stop Month
v_input_6	31	Backtest Stop Day
v_input_7	12	fastperiod
v_input_8	26	slowperiod
v_input_9	9	signalperiod

Source Pine Script

/*backtest
start: 2022-09-07 00:00:00
end: 2023-09-13 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=3
//study("MACDAS")
// strategy("macdas",shorttitle="macdas",overlay=true,default_qty_value=10000,initial_capital=10000,currency=currency.USD)

// Date range filter
testStartYear = input(2018, "Backtest Start Year")
testStartMonth = input(4, "Backtest Start Month")
testStartDay = input(1, "Backtest Start Day")
testPeriodStart = timestamp(testStartYear, testStartMonth, testStartDay, 0, 0)

testStopYear = input(2018, "Backtest Stop Year")
testStopMonth = input(12, "Backtest Stop Month")
testStopDay = input(31, "Backtest Stop Day")
testPeriodStop = timestamp(testStopYear, testStopMonth, testStopDay, 0, 0)

inTimeRange = true


fastperiod = input(12,title="fastperiod",minval=1,maxval=500)
slowperiod = input(26,title="slowperiod",minval=1,maxval=500)
signalperiod = input(9,title="signalperiod",minval=1,maxval=500)
fastMA = ema(close, fastperiod)
slowMA = ema(close, slowperiod)
macd = fastMA - slowMA
signal = ema(macd, signalperiod)
macdAS = macd - signal
signalAS = ema(macdAS, signalperiod)
plot(macdAS, color=blue, linewidth=2)
plot(signalAS, color=red, linewidth=2)
plot(0, color=black)

strategy.entry("LONG", strategy.long, when =inTimeRange and crossover(macdAS,signalAS))
strategy.close("LONG", when= inTimeRange and crossunder(macdAS,signalAS))

plotshape(crossover(macdAS, signalAS) , style = shape.arrowup, text="Long",color=green,size=size.huge)
plotshape(crossover(signalAS,macdAS) , style = shape.arrowdown, text="End Long",color=red,size=size.huge)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-14. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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