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Strategy vault / Trend following

Long Term Hedging Strategy

This strategy determines asset allocation and hedging based on long-term trends. The logic is: 1. Select a base asset, moving average period and resolution 2. Compute simple moving average of the asset 3. Price…

Pine ScriptTrend followingSMA
Author
ChaoZhang
Complexity
Starter · 39 lines
Parameters
4
Backtest bar
1h · intraday
Tested on
BTC/USDT · futures
Jump to codeView in vaultOriginal on FMZ

Strategy Logic

This strategy determines asset allocation and hedging based on long-term trends.

The logic is:

  1. Select a base asset, moving average period and resolution

  2. Compute simple moving average of the asset

  3. Price crossing above MA signals long-term bullishness, go long the asset

  4. Price crossing below MA signals long-term bearishness, go short the asset

  5. Can also go long-only or short-only

  6. Judge long-term trend using asset price versus its MA

  7. Take opposing position for hedging short-term fluctuations

The strategy hedges near-term risks and focuses on the asset's secular trend, allowing steady gains.

Advantages

  • Simple MA system to determine long-term trend

  • Long/short pairing effectively hedges systemic risks

  • Clear long and short signals

Risks

  • MA lags price movements

  • Holding costs of long-term positions

  • Needs risk management across multiple legs

Summary

This strategy hedges using long-term and short-term asset combinations, emphasizing risk management. But MA lag and holding costs require consideration.

Parameters

NameDefaultWhat it controls
v_input_1BMFBOVESPA:IBOVbase
v_input_25SMA Period
v_input_3MSMA Resolution
v_input_40Strategy: Long/Short | Long Only | Short Only

Source Pine Script

/*backtest
start: 2023-08-14 00:00:00
end: 2023-09-13 00:00:00
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/
// © danilogalisteu

//@version=4
strategy("Long Term L/S", overlay=true, default_qty_type=strategy.percent_of_equity, default_qty_value=100)

base = input("BMFBOVESPA:IBOV")
period = input(5, 'SMA Period', input.integer)
resolution = input(title="SMA Resolution", type=input.resolution, defval='M')
strat = input(title="Strategy", defval="Long/Short", options=["Long Only", "Long/Short", "Short Only"])
strat_val = strat == "Long Only" ? 1 : strat == "Long/Short" ? 0 : -1

base_cl = security((base), resolution, close)
base_ma = sma(base_cl, period)

longCondition = crossover(base_cl, base_ma)
if (longCondition)
    if strat_val > -1
        strategy.entry("LONG", strategy.long)
    if strat_val < 1
        strategy.close("SHORT")

shortCondition = crossunder(base_cl, base_ma)
if (shortCondition)
    if strat_val > -1
        strategy.close("LONG")
    if strat_val < 1
        strategy.entry("SHORT", strategy.short)

//plot(longCondition?1:0, 'L', color.blue)
//plot(shortCondition?-1:0, 'S', color.red)

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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