Multi Factor Strategy Combination

This strategy combines multiple factors to form a comprehensive trading strategy. It aims to leverage the advantages of different factors, including: 1. Stoch.RSI - Stochastic RSI 2. RSI - Relative Strength Index 3…

Pine ScriptMean reversion Trend following Volatility RSI SMA Bollinger Bands Stochastic ADX / DMI

Author: ChaoZhang
Complexity: Intermediate · 111 lines
Parameters: 18
Backtest bar: 1m · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Here is a detailed strategy analysis article I wrote based on the trading strategy code you provided:

Overview

This strategy combines multiple factors to form a comprehensive trading strategy. It aims to leverage the advantages of different factors, including:

Stoch.RSI - Stochastic RSI
RSI - Relative Strength Index
Double Strategy - Combination of Stochastic and RSI
CM Williams Vix Fix - Finds market bottoms
DMI - Directional Movement Index

By combining multiple factors, it seeks to capitalize on the strengths of each factor and reduce the risks associated with relying on a single factor.

Strategy Logic

The main technical indicators used in this strategy are:

Stoch.RSI - A stochastic oscillator applied to RSI values rather than price. It identifies overbought/oversold levels.
RSI - Relative Strength Index, gauges overbought/oversold conditions. Above 70 is overbought, below 30 is oversold.
Double Strategy - Combines Stochastic and RSI for trading signals. Buy when Stochastic %K crosses below %D and RSI crosses below oversold level. Sell when the opposite occurs.
CM Williams Vix Fix - Calculates percentile range of price volatility over lookback period. Signals potential reversals when threshold is breached.
DMI - Directional Movement Index. Uses +DI/-DI differential to determine trend direction/strength.

By integrating signals from these indicators, the strategy provides a more robust system to identify trends and turning points.

Advantages

Diversification through multiple factors, offset individual weaknesses
Provides both trend-following and mean-reversion signals
Identifies overbought/oversold extremes and reversals
Optimized parameters tailored for different market regimes
Incorporates trend direction/strength filter

Risks

Overall robustness of multifactor systems remains unproven
Potential redundancy between some indicators
Unclear priority between conflicting signals
Parameter tuning requires rigorous backtesting
Long holding periods may underperform

Enhancement

Further filter/optimize the indicator set
Fine-tune parameters to fit target markets
Establish clear entry/exit rules
Incorporate stop loss, profit taking to control risk
Test impact of holding period on performance

Summary

This strategy combines strengths of Stoch.RSI, RSI, Double Strategy, CM Williams Vix Fix and DMI. It provides more comprehensive signals but also complicates parameter optimization. Further enhancements around optimizing parameters, filtering unique factors, and defining trading rules can improve robustness. Long-term viability and robustness still require rigorous validation. Overall it provides a good example of multifactor systems worth learning from.

Parameters

Name	Default	What it controls
v_input_1	3	Stochastic %K Smoothing
v_input_2	3	Stochastic %K Moving Average
v_input_3	14	RSI Lenght
v_input_4	14	Stochastic Lenght
v_input_5	80	Stochastic overbought condition
v_input_6	20	Stochastic oversold condition
v_input_7	70	RSI overbought condition
v_input_8	30	RSI oversold condition
v_input_9	22	LookBack Period Standard Deviation High
v_input_10	20	Bollinger Band Length
v_input_11	2	Bollinger Band Standard Devaition Up
v_input_12	50	Look Back Period Percentile High
v_input_13	0.85	Highest Percentile - 0.90=90%, 0.95=95%, 0.99=99%
v_input_14	1.01	Lowest Percentile - 1.10=90%, 1.05=95%, 1.01=99%
v_input_15	false	Show High Range (Based on Percentile and LookBack Period)?
v_input_16	false	Show Standard Deviation Line?
v_input_17	14	DI Length
v_input_18	14	ADX Smoothing

Source Pine Script

/*backtest
start: 2023-10-18 00:00:00
end: 2023-10-25 00:00:00
period: 1m
basePeriod: 1m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/


     //////////////////////////////////////////////////////////////////////
    ////  STOCHASTIC_RSI+RSI+DOUBLE_STRATEGY+CM_WILLIAMS_VIX_FIX+DMI  ////
   //////////////////////////////////////////////////////////////////////


//  This is a simple combination of integrated and published scripts, useful 
//  if you don't have a PRO account and want to bypass the 3 indicator limit. 
//  It includes:
//  1) Stoch.RSI
//  2) Relative strenght index
//  3) Stochastic + RSI, Double Strategy (by ChartArt)
//  4) CM_Williams_Vix_Fix Finds Market Bottoms (by ChrisMoody)
//  5) Directional Movement Index (DMI)
//  For more details about 3) and 4) check the original scripts.


//@version=3

strategy(title="Stoch.RSI+RSI+DoubleStrategy+CMWilliamsVixFix+DMI", shorttitle="Stoch.RSI+RSI+DoubleStrategy+CMWilliamsVixFix+DMI")


///STOCH.RSI///
smoothK = input(3, minval=1, title="Stochastic %K Smoothing")
smoothD = input(3, minval=1, title="Stochastic %K Moving Average")
lengthRSI = input(14, minval=1, title="RSI Lenght")
lengthStoch = input(14, minval=1, title="Stochastic Lenght")
RSIprice = close
rsi1 = rsi(RSIprice, lengthRSI)
k = sma(stoch(rsi1, rsi1, rsi1, lengthStoch), smoothK)
d = sma(k, smoothD)
plot(k, color=blue, linewidth=2)
plot(d, color=silver, linewidth=2)
h0 = hline(80)
h1 = hline(20)
fill(h0, h1, color=purple, transp=78)


///RSI///
up = rma(max(change(RSIprice), 0), lengthRSI)
down = rma(-min(change(RSIprice), 0), lengthRSI)
rsi2 = down == 0 ? 100 : up == 0 ? 0 : 100 - (100 / (1 + up / down))
plot(rsi2, color=fuchsia, linewidth=2)
// band0 = hline(70, linestyle=dotted)
// band1 = hline(30, linestyle=dotted)
// fill(band0, band1, color=purple, transp=100)


///OVERBOUGHT-OVERSOLD STRATEGY///
StochOverBought = input(80, title="Stochastic overbought condition")
StochOverSold = input(20, title="Stochastic oversold condition")
ks = sma(stoch(close, high, low, lengthStoch), smoothK)
ds = sma(k, smoothD)
RSIOverBought = input( 70  , title="RSI overbought condition")
RSIOverSold = input( 30  , title="RSI oversold condition")
vrsi = rsi(RSIprice, lengthRSI)
if (not na(ks) and not na(ds))
    if (crossover(ks,ds) and k < StochOverSold)
        if (not na(vrsi)) and (crossover(vrsi, RSIOverSold))
            strategy.entry("LONG", strategy.long, comment="LONG")
if (crossunder(ks,ds) and ks > StochOverBought)
    if (crossunder(vrsi, RSIOverBought))
        strategy.entry("SHORT", strategy.short, comment="SHORT")
 
 
///CM WILLIAMS VIX FIX///
pd = input(22, title="LookBack Period Standard Deviation High")
bbl = input(20, title="Bollinger Band Length")
mult = input(2.0    , minval=1, maxval=5, title="Bollinger Band Standard Devaition Up")
lb = input(50  , title="Look Back Period Percentile High")
ph = input(.85, title="Highest Percentile - 0.90=90%, 0.95=95%, 0.99=99%")
pl = input(1.01, title="Lowest Percentile - 1.10=90%, 1.05=95%, 1.01=99%")
hp = input(false, title="Show High Range (Based on Percentile and LookBack Period)?")
sd = input(false, title="Show Standard Deviation Line?")
wvf = ((highest(close, pd)-low)/(highest(close, pd)))*100
sDev = mult * stdev(wvf, bbl)
midLine = sma(wvf, bbl)
lowerBand = midLine - sDev
upperBand = midLine + sDev
rangeHigh = (highest(wvf, lb)) * ph
rangeLow = (lowest(wvf, lb)) * pl
col = wvf >= upperBand or wvf >= rangeHigh ? lime : gray
plot(hp and rangeHigh ? rangeHigh : na, title="Range High Percentile", style=line, linewidth=4, color=orange)
plot(hp and rangeLow ? rangeLow : na, title="Range High Percentile", style=line, linewidth=4, color=orange)
plot(wvf, title="Williams Vix Fix", style=columns, linewidth = 4, color=col, transp=85)
plot(sd and upperBand ? upperBand : na, title="Upper Band", style=line, linewidth = 3, color=aqua)


///DIRECTIONAL MOVEMENT INDEX///
len3 = input(14, minval=1, title="DI Length")
lensig3 = input(14, title="ADX Smoothing", minval=1, maxval=50)
up3 = change(high)
down3 = -change(low)
plusDM3 = na(up3) ? na : (up3 > down3 and up3 > 0 ? up3 : 0)
minusDM3 = na(down3) ? na : (down3 > up3 and down3 > 0 ? down3 : 0)
trur3 = rma(tr, len3)
plus3 = fixnan(100 * rma(plusDM3, len3) / trur3)
minus3 = fixnan(100 * rma(minusDM3, len3) / trur3)
sum3 = plus3 + minus3
adx3 = 100 * rma(abs(plus3 - minus3) / (sum3 == 0 ? 1 : sum3), lensig3)
plot(plus3, color=green, style=circles, linewidth=2, title="+DI")
plot(minus3, color=red, style=circles, linewidth=2, title="-DI")
plot(adx3, color=aqua, style=circles, linewidth=3, title="ADX")

Published by ChaoZhang on the FMZ strategy square · last modified 2023-10-26. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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