Moving Average Trend Trading Strategy

Pine ScriptTrend following Volatility MACD SMA ATR

Author: ChaoZhang
Complexity: Intermediate · 54 lines
Parameters: 7
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy is a trend trading strategy based on moving averages. It uses 3 moving averages with different parameters to generate trading signals. It goes long when price crosses above the moving average and goes short when price crosses below. The strategy has 3 moving average lines for staged entry long or short, which allows it to follow the trend.

Strategy Logic

The strategy calculates the moving average line ma with length len using the sma function. Then it calculates 3 additional moving average lines longline1, longline2, longline3 which are shifted by -4%, -5%, -6% respectively based on ma.

For long signal generation, if current position is flat, it goes long with 1 lot when price crosses above longline1. If already 1 lot long, it adds 1 more lot when price crosses above longline2. If already 2 lots long, it adds 1 more lot when price crosses above longline3. The maximum long position is 3 lots.

For short signal generation, if already long, it exits all long positions when price crosses below ma.

The staged entry allows the strategy to follow the trend.

Advantages

Using moving averages to determine trend direction filters out market noise and allows steady profits
Staged long/short entries can profit more from trends
Using shifted moving averages as entry points better catches trends
Relatively small drawdowns, maximum drawdown controlled around 20%

Risks

Pure trend following strategy tends to be whipsawed during range-bound markets
Lagging signals from moving averages may miss trend turning points
Staged long entries may chase high prices and increase risk
No stop loss mechanism could lead to large losses from sudden events

Risk Solutions:

Add other indicators to determine trend turning points
Reasonably set moving average parameters, not too long to avoid too lagging signals
Reduce staged long entry batches to avoid chasing high prices
Add moving stop loss to limit losses

Optimization Directions

The strategy can be optimized in the following aspects:

Add other indicators like MACD to determine trend strength
Optimize moving average parameters to find best combination
Adjust staged entry batch size and ratio to prevent chasing high prices
Add moving stop loss mechanism based on ATR
Dynamically adjust position size based on market volatility, reduce size when volatility is high
Test parameters on different products to find optimal symbol
Develop exit module to consider taking profit at certain patterns

Summary

Overall, the strategy trades based on trend direction determined by moving averages, and profits from trends via staged entries. But it has some lagging issues and risks of chasing high prices. We can optimize it by adding auxiliary indicators, optimizing parameters, adjusting position sizing, adding stop loss, etc, to adapt to different market conditions and achieve steady profits.

Parameters

Name	Default	What it controls
v_input_1	100	Lot
v_input_2	3	MA Lenghs
v_input_3_ohlc4	0	MA Source: ohlc4 \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| close
v_input_4	-4	Long line 1
v_input_5	-5	Long line 2
v_input_6	-6	Long line 3
v_input_7	true	Offset

Source Pine Script

/*backtest
start: 2022-10-02 00:00:00
end: 2023-10-08 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//Noro
//2019

//@version=4
strategy(title = "Noro's ShiftMA-multi Strategy v1.0", shorttitle = "ShiftMA-multi", overlay = true, default_qty_type = strategy.percent_of_equity, default_qty_value = 100, pyramiding = 3)

//Settings
capital = input(100, defval = 100, minval = 1, maxval = 10000, title = "Lot")
len = input(3, minval = 1, title = "MA Lenghs")
src = input(ohlc4, title = "MA Source")
longlevel1 = input(-4.0, title = "Long line 1")
longlevel2 = input(-5.0, title = "Long line 2")
longlevel3 = input(-6.0, title = "Long line 3")
needoffset = input(true, title = "Offset")

//Variables
size = strategy.position_size
mult = 1 / syminfo.mintick

//MA
ma = sma(src, len)
longline1 = round(ma * ((100 + longlevel1) / 100) * mult) / mult
longline2 = round(ma * ((100 + longlevel2) / 100) * mult) / mult
longline3 = round(ma * ((100 + longlevel3) / 100) * mult) / mult

//Lines
offset = needoffset ? 1 : 0
plot(ma, color = color.blue)
plot(longline1, offset = offset, color = color.lime)
plot(longline2, offset = offset, color = color.lime)
plot(longline3, offset = offset, color = color.lime)

//Trading
lot = 0.0
lot := size == 0 ? strategy.equity / close * capital / 100 : lot[1]
lots = 0.0
if ma > 0
    lots := round(size / lot)
    strategy.entry("L1", strategy.long, lot, limit = longline1, when = (lots == 0))
    lots := round(size / lot)
    strategy.entry("L2", strategy.long, lot, limit = longline2, when = (lots <= 1))
    lots := round(size / lot)
    strategy.entry("L3", strategy.long, lot, limit = longline3, when = (lots <= 2))
if size > 0
    strategy.entry("TP", strategy.short, 0, limit = ma)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-10-09. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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