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Strategy vault / Mean reversion

Moving Average AO Indicator Trading Strategy

This strategy combines moving averages and the AO oscillator to identify trends and trade pullbacks. It aims to capture short-term reversals in price oscillation. Strategy Logic: 1. Calculate fast EMA and slow SMA to…

Pine ScriptMean reversionTrend followingEMASMA
Author
ChaoZhang
Complexity
Intermediate · 43 lines
Parameters
10
Backtest bar
30m · intraday
Tested on
BTC/USDT · futures
Jump to codeView in vaultOriginal on FMZ

This strategy combines moving averages and the AO oscillator to identify trends and trade pullbacks. It aims to capture short-term reversals in price oscillation.

Strategy Logic:

  1. Calculate fast EMA and slow SMA to construct a moving average system.

  2. Calculate fast and slow AO lines and the difference between them.

  3. Go long when fast MA crosses above slow MA, close is above slow MA, and AO rises.

  4. Go short when fast MA crosses below slow MA, close is below slow MA, and AO falls.

  5. AO compares differences to avoid false signals.

Advantages:

  1. MAs determine main trend, AO times reversals.

  2. AO difference filters false signals.

  3. Combining indicators improves accuracy.

Risks:

  1. Tuning required to match MA and AO with market conditions.

  2. Both MAs and AO lag, potentially missing best entries.

  3. Hard to set stops in ranging markets, increasing loss risks.

In summary, this strategy combines the strengths of MAs and AO for trading. This can improve signal quality to some extent but proper stops are still required to manage risks for steady returns.

Parameters

NameDefaultWhat it controls
v_input_12017Start Year
v_input_212Month
v_input_317Day
v_input_49999End Year
v_input_5trueMonth
v_input_6trueDay
v_input_78Fast EMA
v_input_820Slow SMA
v_input_95Awesome Length Fast
v_input_108Awesome Length Slow

Source Pine Script

/*backtest
start: 2023-09-04 00:00:00
end: 2023-09-11 00:00:00
period: 30m
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4
strategy("MA&AO", overlay = true, default_qty_type=strategy.percent_of_equity, default_qty_value=100, commission_type=strategy.commission.percent, commission_value=0.075, currency='USD')
startP = timestamp(input(2017, "Start Year"), input(12, "Month"), input(17, "Day"), 0, 0)
end   = timestamp(input(9999, "End Year"),   input(1, "Month"),   input(1, "Day"),   0, 0)
_testPeriod() =>
    true

//Inputs
fast_ma = input(8, title="Fast EMA", minval=2)
slow_ma = input(20, minval=1, title="Slow SMA")
AO_fast = input(5, minval=1, title="Awesome Length Fast")
AO_slow = input(8, minval=1, title="Awesome Length Slow")

//MA
fast  = ema(close, fast_ma)
slow =  sma(close, slow_ma)

//AO
AO_1 = sma(hl2, AO_fast)
AO_2 = sma(hl2, AO_slow)
dif = AO_1 - AO_2
AO = dif>=0? dif > dif[1] ? 1 : 2 : dif > dif[1] ? -1 : -2

long   =  crossover(fast, slow) and close > slow and abs(AO)==1
short =   fast < slow and close < slow and abs(AO)==2

long_condition =  long and _testPeriod() 
strategy.entry('BUY', strategy.long, when=long_condition)  
 
short_condition = short 
strategy.close('BUY', when=short_condition)


plot(fast, color=color.green)
plot(slow, color=color.red)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-12. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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