Ichimoku Kinko Hyo Cross Strategy

Pine ScriptTrend following Machine learning Breakout Ichimoku Volume Pivots / S&R

Author: ChaoZhang
Complexity: Intermediate · 55 lines
Parameters: 7
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

The Ichimoku Kinko Hyo Cross strategy generates trading signals by observing the crossovers between Tenkan-Sen and Kijun-Sen lines of the Ichimoku system, combined with the price level versus the Cloud. This strategy incorporates both trend following and reversal trading, making it a versatile and practical trading strategy.

Strategy Logic

Calculate the Ichimoku components:
- Tenkan-Sen: Midpoint of last 9 bars
- Kijun-Sen: Midpoint of last 26 bars
- Senkou Span A: Average of Tenkan-Sen and Kijun-Sen
- Senkou Span B: Midpoint of last 52 bars
Observe the combination of following trading signals:
- Crossover between Tenkan-Sen and Kijun-Sen (Golden Cross and Death Cross)
- Close price above or below the Cloud (Senkou Span A and B)
- Chikou Span compared to close price 26 bars ago
Entry signals:
- Long: Tenkan-Sen crosses above Kijun-Sen (Golden Cross) and close above Cloud and Chikou Span above close 26 bars ago
- Short: Tenkan-Sen crosses below Kijun-Sen (Death Cross) and close below Cloud and Chikou Span below close 26 bars ago
Exit signals when opposite signal occurs.

Advantages

Combines trend following and reversal trading.
Crossovers ensure signal reliability and avoid false breakouts.
Multiple signal confirmation filters out market noise.
Chikou Span avoids whipsaws.
Cloud provides support and resistance for entries and exits.

Risks

Improper parameters may cause overtrading or unclear signals.
Trend reversals can lead to large losses.
Fewer trading opportunities during range-bound markets.
Delayed entry signals if Cloud is too wide.
High signal complexity increases implementation difficulty.

Risks can be mitigated through parameter optimization, position sizing, stop losses, liquid products, etc.

Enhancements

Optimize moving average periods for ideal frequency and profitability.
Add trend filter to avoid trend reversal losses.
Add volatility filter to control risk.
Optimize entry size and stop loss placement.
Add volume filter to ensure liquidity.
Test parameters across different products.
Employ machine learning to auto-optimize parameters based on backtests.

Conclusion

The Ichimoku Kinko Hyo Cross strategy combines various technical analysis tools like moving average crossovers, delayed lines, and Cloud bands to identify high-probability entries in trending or reversal scenarios. Proper optimization and risk management can further improve its stability and profitability. The strategy is easy to understand and implement, making it worth live testing and application.

Parameters

Name	Default	What it controls
v_input_1	9	Tenkan-Sen Bars
v_input_2	26	Kijun-Sen Bars
v_input_3	52	Senkou-Span B Bars
v_input_4	26	Chikou-Span Offset
v_input_5	26	Senkou-Span Offset
v_input_6	true	Long Entry
v_input_7	true	Short Entry

Source Pine Script

/*backtest
start: 2023-09-30 00:00:00
end: 2023-10-30 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4
strategy("Ichimoku Kinko Hyo: Basic Strategy", overlay=true)

//Inputs
ts_bars = input(9, minval=1, title="Tenkan-Sen Bars")
ks_bars = input(26, minval=1, title="Kijun-Sen Bars")
ssb_bars = input(52, minval=1, title="Senkou-Span B Bars")
cs_offset = input(26, minval=1, title="Chikou-Span Offset")
ss_offset = input(26, minval=1, title="Senkou-Span Offset")
long_entry = input(true, title="Long Entry")
short_entry = input(true, title="Short Entry")

middle(len) => avg(lowest(len), highest(len))

// Ichimoku Components
tenkan = middle(ts_bars)
kijun = middle(ks_bars)
senkouA = avg(tenkan, kijun)
senkouB = middle(ssb_bars)

// Plot Ichimoku Kinko Hyo
plot(tenkan, color=#0496ff, title="Tenkan-Sen")
plot(kijun, color=#991515, title="Kijun-Sen")
plot(close, offset=-cs_offset+1, color=#459915, title="Chikou-Span")
sa=plot(senkouA, offset=ss_offset-1, color=green, title="Senkou-Span A")
sb=plot(senkouB, offset=ss_offset-1, color=red, title="Senkou-Span B")
fill(sa, sb, color = senkouA > senkouB ? green : red, title="Cloud color")

ss_high = max(senkouA[ss_offset-1], senkouB[ss_offset-1])
ss_low = min(senkouA[ss_offset-1], senkouB[ss_offset-1])

// Entry/Exit Signals
tk_cross_bull = tenkan > kijun
tk_cross_bear = tenkan < kijun
cs_cross_bull = mom(close, cs_offset-1) > 0
cs_cross_bear = mom(close, cs_offset-1) < 0
price_above_kumo = close > ss_high
price_below_kumo = close < ss_low

bullish = tk_cross_bull and cs_cross_bull and price_above_kumo
bearish = tk_cross_bear and cs_cross_bear and price_below_kumo

strategy.entry("Long", strategy.long, when=bullish and long_entry)
strategy.entry("Short", strategy.short, when=bearish and short_entry)

strategy.close("Long", when=bearish and not short_entry)
strategy.close("Short", when=bullish and not long_entry)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-10-31. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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