Hull Filter Moving Average Strategy

Pine ScriptTrend following Volatility RSI ATR

Author: ChaoZhang
Complexity: Intermediate · 98 lines
Parameters: 13
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy uses short-term and long-term Hull moving averages to generate and filter trading signals. The short-term Hull moving average is used to generate signals, while the long-term Hull moving average is used for filtering signals. Trades are only taken when the short-term Hull moving average changes direction and the long-term Hull moving average is moving in the same overall direction.

The strategy also uses the ATR indicator to dynamically set stop loss and take profit levels when entering trades.

Strategy Logic

The short-term Hull moving average captures short-term price trends and turning points. When it changes direction, it signals a shift in the short-term price trend.

The long-term Hull moving average determines the overall price trend. For example, when it is rising, prices are in an overall upward trend.

Trades are only taken when the short-term Hull moving average turns direction, and its new direction aligns with the direction of the long-term Hull moving average. This filters out signals that go against the overall trend and may just be short-term market noise.

After entering positions, stop loss and take profit levels are set based on the ATR indicator value. The ATR reflects market volatility and risk levels. The stop loss is placed below price lows while take profit targets price highs, with ranges tied to the current ATR reading.

Advantage Analysis

Combining short-term signals and long-term filters effectively identifies mid-term trends and turning points, avoiding false signals from market noise.

Dynamic stop loss and take profit based on ATR sets reasonable ranges based on current volatility, balancing profit taking and loss prevention.

The Hull moving average has flexibility and accuracy advantages over standard moving averages, with better trend tracking.

Risk Analysis

The strategy relies on crosses between the Hull moving averages to generate signals. False crosses can result in bad trades, requiring analysis of overall market structure.

In ranging, choppy markets with price oscillating in a trading range, signal errors and unnecessary trades may pile up. This can be avoided by filtering signals with wider conditions during such markets.

Stop loss and take profit reliance on ATR means inaccurate volatility reads will result in bad placement. Other volatility measures can augment ATR to correct this.

Optimization

Additional short-term indicators like RSI can improve signal accuracy through convergence.

The filter logic between the Hull moving averages can be enhanced to have more strict entry requirements, avoiding false signals.

Parameter tuning research can uncover stability and profitability improvements from changes to moving average lengths, ATR periods, etc.

Summary

This strategy combines short-term signal generation, long-term signal filtering, and ATR-based stop loss/take profit in a robust mid-term trend following framework. It capably identifies mid-term inflection points while filtering out short-term noise. With parametric optimizations and added filters, it can achieve even better performance.

Parameters

Name	Default	What it controls
v_input_1_close	0	Source: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_2	50	Period of signal HMA
v_input_3	200	Period of filter HMA
v_input_4	0	Strategy Direction: all \| short \| long
v_input_5	2	Stop Loss Factor
v_input_6	3	Take Profit Factor
v_input_7	14	ATR Period (SL/TP)
v_input_8	2010	Backtest Start Year
v_input_9	true	Backtest Start Month
v_input_10	true	Backtest Start Day
v_input_11	2030	Backtest Stop Year
v_input_12	12	Backtest Stop Month
v_input_13	31	Backtest Stop Day

Source Pine Script

/*backtest
start: 2023-12-04 00:00:00
end: 2024-01-03 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4
strategy("Hull Filtered Strategy", overlay=true, pyramiding=0, default_qty_type= strategy.percent_of_equity, default_qty_value = 10, calc_on_order_fills=false, slippage=0,commission_type=strategy.commission.percent,commission_value=0)

// Parameters for Hull Moving Averages
src = input(close, title="Source")
signal_period = input(50, title="Period of signal HMA")
filter_period = input(200, title="Period of filter HMA")

strat_dir_input = input(title="Strategy Direction", defval="all", options=["long", "short", "all"])

// Set allowed trading directions
strat_dir_value = strat_dir_input == "long" ? strategy.direction.long : strat_dir_input == "short" ? strategy.direction.short : strategy.direction.all
strategy.risk.allow_entry_in(strat_dir_value)

// stop loss and take profit
sl_factor = input(2,title="Stop Loss Factor")
tp_factor = input(3,title="Take Profit Factor")
atr_period = input(14, title="ATR Period (SL/TP)")

// Testing Start dates
testStartYear = input(2010, "Backtest Start Year")
testStartMonth = input(1, "Backtest Start Month")
testStartDay = input(1, "Backtest Start Day")
testPeriodStart = timestamp(testStartYear,testStartMonth,testStartDay,0,0)

//Stop date if you want to use a specific range of dates
testStopYear = input(2030, "Backtest Stop Year")
testStopMonth = input(12, "Backtest Stop Month")
testStopDay = input(31, "Backtest Stop Day")
testPeriodStop = timestamp(testStopYear,testStopMonth,testStopDay,0,0)


// -----------------------------------------------------------------------------
// Global variables
// -----------------------------------------------------------------------------
var float tp = na
var float sl = na
var float position = na


// -----------------------------------------------------------------------------
// Functions
// -----------------------------------------------------------------------------
testWindow() =>
    time >= testPeriodStart and time <= testPeriodStop ? true : false


// -----------------------------------------------------------------------------
// The engine
// -----------------------------------------------------------------------------
hma_signal = hma(src, signal_period)
hma_filter = hma(src, filter_period)

// Used to determine exits and stop losses
atr_e = atr(atr_period)

// if hma_filter increases hma_trend is set to 1, if it decreases hma_trend is set to -1. If no trend is available, hma_trend is set to ß0
trend = hma_filter > hma_filter[1]  ?  1 : hma_filter < hma_filter[1] ? -1 : 0
signal = hma_signal > hma_signal[1] ? 1 : hma_signal  < hma_signal[1] ? -1 : 0


// -----------------------------------------------------------------------------
// signals
// -----------------------------------------------------------------------------
if signal[0] == 1 and signal[1] != 1 and trend == 1 and testWindow()
    sl := close - sl_factor*atr_e
    tp := close + tp_factor*atr_e
    strategy.entry("HMA_LNG", strategy.long)
    strategy.exit("LE", "HMA_LNG", profit=100*tp_factor*atr_e, loss=100*sl_factor*atr_e)
    
if signal[0] == -1 and signal[1] != -1 and trend == -1 and testWindow()
    sl := close + sl_factor*atr_e
    tp := close - tp_factor*atr_e
    strategy.entry("HMA_SHRT", strategy.short)
    strategy.exit("SE", "HMA_SHRT", profit=100*tp_factor*atr_e, loss=100*sl_factor*atr_e)


if strategy.position_size != 0
    sl := sl[1]
    tp := tp[1]

// -----------------------------------------------------------------------------
// PLOT
// -----------------------------------------------------------------------------
hma_s = plot(hma_signal, title="SIGNAL", color = signal == 1 ? color.green : color.red)
hma_l = plot(hma_filter, title="TREND", color = trend == 1 ? color.green : color.red)

plot(tp, title="TAKE PROFIT", color= strategy.position_size != 0 ? color.blue: na, linewidth=1)  
plot(sl, title="STOP LOSS", color= strategy.position_size != 0 ? color.red: na, linewidth = 1)

Published by ChaoZhang on the FMZ strategy square · last modified 2024-01-04. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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