Moving Average Band Breakout Strategy

This strategy uses moving averages to form a price channel and generate signals when the price breaks out of the channel bands. It is a typical trend following strategy that can achieve simple long/short positions…

Pine ScriptBreakout Trend following Volatility EMA SMA

Author: ChaoZhang
Complexity: Starter · 82 lines
Parameters: 6
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Strategy Logic

Calculate moving averages, with options like SMA/EMA/WMA/RMA.
Upper band is certain percentage increment of moving average. Lower band is certain percentage decrement.
Go long on breaking above upper band, go short on breaking below lower band. Options for long-only, short-only or dual directional trading.
Set stop loss and take profit points. Take profit point is certain percentage increment of entry price. Stop loss point is certain percentage decrement of entry price.

Advantage Analysis

Simple to implement trend determination using moving averages.
Adjustable parameters accommodate different holding periods and risk preferences.
Optional long/short directions adapt to various market conditions.
Fixed percentage stop loss and take profit allows controllability.

Risk Analysis

Prone to being trapped when trend changes abruptly.
Improper parameter tuning risks over-trading or lagging.
Fixed percentage stop loss/profit lacks flexibility.
Increased trade frequency and commission costs with dual directional trading.

Optimization Directions

Optimize moving average parameters to balance lagging and noise.
Optimize channel bandwidth to match market volatility frequency.
Test different stop loss and take profit configurations. Dynamic stops more effective.
Add trend and oscillation indicators to gauge overall market conditions.
Implement time filters to avoid significant event impacts.

Summary

The strategy achieves simple trend following through moving average channels, but needs stronger parameter optimization and risk control. More technical indicators can then be introduced to further improve strategy logic.

Parameters

Name	Default	What it controls
v_input_1_close	0	Source: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_2	0	Moving Average Type: RMA \| EMA \| SMA \| WMA
v_input_3	10	MA Period : 10
v_input_4	0.6	Band Gap : 0.6
v_input_5	500	# Stop Loss %
v_input_6	500	# Take Profit %

Source Pine Script

/*backtest
start: 2023-08-17 00:00:00
end: 2023-09-16 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/
// © TaylorTneh
//@version=4

// strategy("Moving Average Band Taylor V1",shorttitle="MA Band+",overlay=true,default_qty_type=strategy.cash,default_qty_value=1000,initial_capital=1000,currency=currency.USD,commission_value=.1)

price = input(close, title="Source")
mabtype = input(title="Moving Average Type", defval="RMA", options=["SMA", "EMA", "RMA", "WMA"])
malen = input(10, "MA Period : 10")
magap = input(0.6, "Band Gap : 0.6", minval = -10, maxval = 10, step = 0.1)
mabup = if mabtype == "SMA"
    sma(high, malen)
else
    if mabtype == "EMA"
        ema(high, malen)
    else
        if mabtype == "WMA"
            wma(high, malen)
        else
            if mabtype == "RMA"
                rma(high, malen)
                    
mabdn = if mabtype == "SMA"
    sma(low, malen)
else
    if mabtype == "EMA"
        ema(low, malen)
    else
        if mabtype == "WMA"
            wma(low, malen)
        else
            if mabtype == "RMA"
                rma(low, malen)
                    
upex = mabup * (1 + magap/100)
dnex = mabdn * (1 - magap/100)
plot(upex, "Upper MA Band", color.orange)
plot(dnex, "Lower MA Band", color.orange)


//-------------------------------------------- (Strategy)
strategy.entry("Long", strategy.long, stop = upex)
strategy.entry("Short", strategy.short, stop = dnex)
//Long Only//strategy.entry("Long", strategy.long, stop = upex)
//Long Only//strategy.exit("Short", stop = dnex)
//Short Only//strategy.entry("Short", strategy.short, stop = dnex)
//Short Only//strategy.exit("Long", stop = upex)


//-------------------------------------------- (Take Profit & Stop Lose)
stopPer = input(500.0, title='# Stop Loss %', type=input.float) / 100
takePer = input(500.0, title='# Take Profit %', type=input.float) / 100
//Determine where you've entered and in what direction
longStop = strategy.position_avg_price * (1 - stopPer)
shortStop = strategy.position_avg_price * (1 + stopPer)
shortTake = strategy.position_avg_price * (1 - takePer)
longTake = strategy.position_avg_price * (1 + takePer)
if strategy.position_size > 0 
    strategy.exit(id="L-TP/SL", stop=longStop, limit=longTake)
if strategy.position_size < 0 
    strategy.exit(id="S-TP/SL", stop=shortStop, limit=shortTake)


//-------------------------------------------- (Sample Time Filter Strategy)
//fromyear = input(2018, defval = 1900, minval = 1900, maxval = 2100, title = "From Year")
//toyear = input(2100, defval = 2100, minval = 1900, maxval = 2100, title = "To Year")
//frommonth = input(01, defval = 01, minval = 01, maxval = 12, title = "From Month")
//tomonth = input(10, defval = 10, minval = 01, maxval = 12, title = "To Month")
//fromday = input(01, defval = 01, minval = 01, maxval = 31, title = "From day")
//today = input(31, defval = 31, minval = 01, maxval = 31, title = "To day")
//strategy.entry("Long", strategy.long, stop = upex, when = (time > timestamp(fromyear, frommonth, fromday, 00, 00) and time < timestamp(toyear, tomonth, today, 23, 59)))
//strategy.entry("Short", strategy.short, stop = dnex, when = (time > timestamp(fromyear, frommonth, fromday, 00, 00) and time < timestamp(toyear, tomonth, today, 23, 59)))
//--------------------------------------------

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-17. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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