Octa EMA and Ichimoku Cloud Quantitative Trading Strategy

This strategy uses 8 exponential moving averages (EMAs) of different periods and the Ichimoku cloud as the main trading signals, which can run effectively in hourly, 4-hour or daily timeframes.

Pine ScriptMachine learning Trend following Multi-timeframe MACD EMA Ichimoku Donchian Pivots / S&R

Author: ChaoZhang
Complexity: Intermediate · 131 lines
Parameters: 22
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy uses 8 exponential moving averages (EMAs) of different periods and the Ichimoku cloud as the main trading signals, which can run effectively in hourly, 4-hour or daily timeframes.

Strategy Principles

The core principles of this strategy are based on the following two parts:

8 Exponential Moving Averages (Octa-EMA)

This strategy uses 8 EMAs with different periods, specifically 5-day, 11-day, 15-day, 18-day, 21-day, 24-day, 28-day and 34-day. These 8 EMAs are referred to as "Octa-EMA". When shorter period EMAs are above longer period EMAs, it indicates an uptrend, and vice versa for a downtrend.
Ichimoku Cloud

The Ichimoku cloud contains the conversion line, base line, lagging span and leading spans A/B. The cloud mainly judges trend direction and provides support/resistance. When price is above the cloud, it indicates an uptrend, and when below the cloud, it indicates a downtrend.

The trading signals for this strategy come from the combination of the above two components. A buy signal is generated when all 8 EMAs are in an uptrend arrangement (shorter EMA above longer EMA) and the price is above the Ichimoku cloud. A sell signal is generated when the EMA arrangement flips to a downtrend (shorter EMA crossing below longer EMA).

Advantage Analysis

The main advantages of this strategy are:

Reduces false signals through double indicator filtering
Ichimoku cloud judges trend direction, avoiding counter-trend trading
8 EMA crossovers combine to determine trends with higher accuracy
Can run on multiple timeframes
Large parameter tuning space, can customize for different products

Risk Analysis

This strategy also has some risks:

May generate more false sell signals during range-bound markets
Strict buy conditions may miss some buying opportunities
May fail when short-term and mid-term trends conflict
Poor EMA parameter tuning can cause signal lag

To address these risks, parameters can be adjusted or entry conditions optimized to reduce risk. Other indicators can also be incorporated for confirmation.

Optimization Directions

This strategy can be optimized in several aspects:

Adjust EMA parameters to find optimal periods
Add trend-determining indicators to ensure accurate trend judgement
Incorporate additional indicators like MACD, KDJ to improve entry timing
Add stop loss/take profit to control per trade risk
Test parameters across different products to find best fit
Use machine learning to auto-optimize parameters

Conclusion

Overall, the Octa-EMA and Ichimoku cloud strategy is a relatively stable and reliable trend following system. It uses EMA crossovers to determine trends and Ichimoku to filter signals, providing low false signals when optimized. This strategy can be widely applied on indices, forex, metals etc. at multiple timeframes. By incorporating stop loss/take profit and confirming indicators, win rate and profitability can be further improved.

Parameters

Name	Default	What it controls
v_input_1	true	Show Ribbon (EMA)
v_input_2	5	EMA 1 Length
v_input_3	11	EMA 2 Length
v_input_4	15	EMA 3 Length
v_input_5	18	EMA 4 Length
v_input_6	21	EMA 5 Length
v_input_7	24	EMA 6 Length
v_input_8	28	EMA 7 Length
v_input_9	34	EMA 8 Length
v_input_10	false	Chikou
v_input_11	false	Tenkan
v_input_12	false	Kijun
v_input_int_1	9	conversionPeriods
v_input_int_2	26	basePeriods
v_input_int_3	52	laggingSpan2Periods
v_input_int_4	26	displacement
v_input_int_5	2017	Start Year
v_input_int_6	true	Start Month
v_input_int_7	true	Start Day
v_input_int_8	2023	End Year
v_input_int_9	12	End Month
v_input_int_10	31	End Day

Source Pine Script

/*backtest
start: 2022-12-04 00:00:00
end: 2023-12-10 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=5
//Fukuiz

strategy(title='Fukuiz Octa-EMA + Ichimoku', shorttitle='Fuku octa strategy', overlay=true, process_orders_on_close=true, 
     default_qty_type= strategy.cash , default_qty_value=1000, currency=currency.USD, initial_capital=10000 ,commission_type = strategy.commission.percent,commission_value=0.25)


//OCTA EMA ##################################################


// Functions
f_emaRibbon(_src, _e1, _e2, _e3, _e4, _e5, _e6, _e7, _e8) =>
    _ema1 = ta.ema(_src, _e1)
    _ema2 = ta.ema(_src, _e2)
    _ema3 = ta.ema(_src, _e3)
    _ema4 = ta.ema(_src, _e4)
    _ema5 = ta.ema(_src, _e5)
    _ema6 = ta.ema(_src, _e6)
    _ema7 = ta.ema(_src, _e7)
    _ema8 = ta.ema(_src, _e8)
    [_ema1, _ema2, _ema3, _ema4, _ema5, _ema6, _ema7, _ema8]

showRibbon = input(true, 'Show Ribbon (EMA)')
ema1Len = input(5, title='EMA 1 Length')
ema2Len = input(11, title='EMA 2 Length')
ema3Len = input(15, title='EMA 3 Length')
ema4Len = input(18, title='EMA 4 Length')
ema5Len = input(21, title='EMA 5 Length')
ema6Len = input(24, title='EMA 6 Length')
ema7Len = input(28, title='EMA 7 Length')
ema8Len = input(34, title='EMA 8 Length')

[ema1, ema2, ema3, ema4, ema5, ema6, ema7, ema8] = f_emaRibbon(close, ema1Len, ema2Len, ema3Len, ema4Len, ema5Len, ema6Len, ema7Len, ema8Len)

//Plot

ribbonDir = ema8 < ema2
p1 = plot(ema1, color=showRibbon ? ribbonDir ? #1573d4 : color.new(#5d606b, 15) : na, linewidth=2, title='EMA 1')
p2 = plot(ema2, color=showRibbon ? ribbonDir ? #3096ff : color.new(#5d606b, 15) : na, linewidth=2, title='EMA 2')
plot(ema3, color=showRibbon ? ribbonDir ? #57abff : color.new(#5d606b, 15) : na, linewidth=2, title='EMA 3')
plot(ema4, color=showRibbon ? ribbonDir ? #85c2ff : color.new(#5d606b, 15) : na, linewidth=2, title='EMA 4')
plot(ema5, color=showRibbon ? ribbonDir ? #9bcdff : color.new(#5d606b, 30) : na, linewidth=2, title='EMA 5')
plot(ema6, color=showRibbon ? ribbonDir ? #b3d9ff : color.new(#5d606b, 30) : na, linewidth=2, title='EMA 6')
plot(ema7, color=showRibbon ? ribbonDir ? #c9e5ff : color.new(#5d606b, 30) : na, linewidth=2, title='EMA 7')
p8 = plot(ema8, color=showRibbon ? ribbonDir ? #dfecfb : color.new(#5d606b, 30) : na, linewidth=2, title='EMA 8')
fill(p1, p2, color.new(#1573d4, 85))
fill(p2, p8, color.new(#1573d4, 85))

//ichimoku##################################################

//color
colorblue = #3300CC
colorred = #993300
colorwhite = #FFFFFF
colorgreen = #CCCC33
colorpink = #CC6699
colorpurple = #6633FF

//switch
switch1 = input(false, title='Chikou')
switch2 = input(false, title='Tenkan')
switch3 = input(false, title='Kijun')

middleDonchian(Length) =>
    lower = ta.lowest(Length)
    upper = ta.highest(Length)
    math.avg(upper, lower)

//Functions
conversionPeriods = input.int(9, minval=1)
basePeriods = input.int(26, minval=1)
laggingSpan2Periods = input.int(52, minval=1)
displacement = input.int(26, minval=1)
Tenkan = middleDonchian(conversionPeriods)
Kijun = middleDonchian(basePeriods)
xChikou = close
SenkouA = middleDonchian(laggingSpan2Periods)
SenkouB = (Tenkan[basePeriods] + Kijun[basePeriods]) / 2

//Plot
A = plot(SenkouA[displacement], color=color.new(colorpurple, 0), title='SenkouA')
B = plot(SenkouB, color=color.new(colorgreen, 0), title='SenkouB')
plot(switch1 ? xChikou : na, color=color.new(colorpink, 0), title='Chikou', offset=-displacement)
plot(switch2 ? Tenkan : na, color=color.new(colorred, 0), title='Tenkan')
plot(switch3 ? Kijun : na, color=color.new(colorblue, 0), title='Kijun')
fill(A, B, color=color.new(colorgreen, 90), title='Ichimoku Cloud')

//Buy and Sell signals
fukuiz = math.avg(ema2, ema8)
white = ema2 > ema8
gray = ema2 < ema8
buycond = white and white[1] == 0
sellcond = gray and gray[1] == 0
bullish = ta.barssince(buycond) < ta.barssince(sellcond)
bearish = ta.barssince(sellcond) < ta.barssince(buycond)
buy = bearish[1] and buycond and fukuiz > SenkouA[displacement] and fukuiz > SenkouB
sell = bullish[1] and sellcond and fukuiz > SenkouA[displacement] and fukuiz > SenkouB
sell2=ema2 < ema8
buy2 = white and fukuiz > SenkouA[displacement] and fukuiz > SenkouB

//$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
//Back test

startYear = input.int(defval=2017, title='Start Year', minval=2000, maxval=3000)
startMonth = input.int(defval=1, title='Start Month', minval=1, maxval=12)
startDay = input.int(defval=1, title='Start Day', minval=1, maxval=31)
endYear = input.int(defval=2023, title='End Year', minval=2000 ,maxval=3000)
endMonth = input.int(defval=12, title='End Month', minval=1, maxval=12)
endDay = input.int(defval=31, title='End Day', minval=1, maxval=31)

start = timestamp(startYear, startMonth, startDay, 00, 00)
end = timestamp(endYear, endMonth, endDay, 23, 59)
period() => time >= start and time <= end ? true : false

if buy2 
    strategy.entry(id='long', direction=strategy.long, when=period(), comment='BUY')

if sell2
    strategy.close(id='long', when=period(), comment='SELL')

Published by ChaoZhang on the FMZ strategy square · last modified 2023-12-11. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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