PresentTrend Trend Following Strategy

The PresentTrend strategy is a unique custom trend-following strategy. This combination allows the strategy to take advantage of both short-term and long-term market trends, making it suitable for various market…

Pine ScriptTrend following Machine learning Mean reversion RSI SMA ATR

Author: ChaoZhang
Complexity: Starter · 71 lines
Parameters: 5
Backtest bar: 2h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

How it Works

The strategy consists of two parts:

Custom RSI or MFI indicator: This indicator calculates a PresentTrend value based on RSI or MFI, generating buy and sell signals based on its crossover and crossunder, indicating potential trend reversals.
ATR indicator: A popular trend-following indicator using Average True Range (ATR).

The strategy enters a long position when all buy signals from both strategies are true, and a short position when all sell signals are true. This ensures trades are entered only when both short-term and long-term trends align, potentially increasing the strategy's reliability.

Advantages

Combines short-term and long-term trends, adaptable to different market conditions
Uses custom indicator and ATR for increased signal reliability
Option for long-only, short-only or dual direction trading suits different trading styles
Default parameters optimized for balance of sensitivity and stability
Parameters can be adjusted based on personal preference for optimization

Risks and Solutions

Vulnerable to whipsaws like all trend-following strategies
Dual direction trading can increase number of trades and fees
Poor parameter tuning may generate excessive false signals
Can use shorter holding periods to reduce whipsaw risk
Option for long or short only reduces number of trades
Parameters should be thoroughly tested and tuned to ensure viability

Optimization Directions

Add stop loss mechanisms for better loss control
Filter signals with additional indicators to reduce false trades
Test different holding period parameters to find optimum
Explore machine learning for automated parameter optimization
Incorporate more data sources like order flow information
Optimize strategy code for improved execution efficiency

Conclusion

Overall, the PresentTrend strategy is a highly effective trend-following system. It combines short-term and long-term trend indicators to be sensitive while improving signal reliability. With adjustable direction, parameters, and additional logic, the strategy can adapt to different market environments and trader needs. While inherent trend-following risks remain, PresentTrend is a compelling option worth considering.

Parameters

Name	Default	What it controls
v_input_string_1	0	Trade Direction: Both \| Short \| Long
v_input_source_1_hlc3	0	(?PresentTrend)Source: hlc3 \| high \| low \| open \| hl2 \| close \| hlcc4 \| ohlc4
v_input_int_1	14	Length
v_input_float_1	1.618	Multiplier
v_input_bool_1	false	Whether to use RSI or MFI

Source Pine Script

/*backtest
start: 2023-08-21 00:00:00
end: 2023-09-20 00:00:00
period: 2h
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/
// © PresentTrading

//@version=5

// Define the strategy settings
strategy('PresentTrend - Strategy [presentTrading]' , overlay=true, precision=3, default_qty_type=strategy.cash, 
 commission_value= 0.1, commission_type=strategy.commission.percent, slippage= 1, 
  currency=currency.USD, default_qty_type = strategy.percent_of_equity, default_qty_value = 10, initial_capital= 10000)

// Define the input parameters
priceSource  = input.source(title='Source', defval=hlc3, group='PresentTrend') // The price source to use
lengthParam  = input.int(title='Length', defval=14, group='PresentTrend') // The length of the moving average
multiplier = input.float(title='Multiplier', defval=1.618, step=0.1, group='PresentTrend') // The multiplier for the ATR
indicatorChoice  = input.bool(title='Whether to use RSI or MFI', defval=false, group='PresentTrend') // Whether to use RSI or MFI

// Add a parameter for choosing Long or Short
tradeDirection = input.string(title="Trade Direction", defval="Both", options=["Long", "Short", "Both"])

// Calculate the ATR and the upT and downT values
ATR = ta.sma(ta.tr, lengthParam)
upperThreshold = low - ATR * multiplier 
lowerThreshold  = high + ATR * multiplier 

// Initialize the PresentTrend indicator
PresentTrend = 0.0

// Calculate the PresentTrend indicator
PresentTrend := (indicatorChoice ? ta.rsi(priceSource, lengthParam) >= 50 : ta.mfi(hlc3, lengthParam) >= 50) ? upperThreshold < nz(PresentTrend[1]) ? nz(PresentTrend[1]) : upperThreshold : lowerThreshold > nz(PresentTrend[1]) ? nz(PresentTrend[1]) : lowerThreshold

// Calculate the buy and sell signals
longSignal  = ta.crossover(PresentTrend, PresentTrend[2])
shortSignal  = ta.crossunder(PresentTrend, PresentTrend[2])

// Calculate the number of bars since the last buy and sell signals
barsSinceBuy = ta.barssince(longSignal)
barsSinceSell = ta.barssince(shortSignal)
previousBuy = ta.barssince(longSignal[1])
previousSell = ta.barssince(shortSignal[1])

// Initialize the direction variable
trendDirection = 0

// Calculate the direction of the trend
trendDirection := longSignal and previousBuy > barsSinceSell ? 1 : shortSignal and previousSell > barsSinceBuy ? -1 : trendDirection[1]

// Check the trade direction parameter before entering a trade
if (trendDirection == 1 and (tradeDirection == "Long" or tradeDirection == "Both"))
    strategy.entry("Buy", strategy.long) 
if (trendDirection == -1 and (tradeDirection == "Short" or tradeDirection == "Both"))
    strategy.entry("Sell", strategy.short) 

// Add a stop mechanism when the tradeDirection is one-sided
if (tradeDirection == "Long" and trendDirection == -1)
    strategy.close("Buy")
if (tradeDirection == "Short" and trendDirection == 1)
    strategy.close("Sell")

// Visualization
plot(PresentTrend, color=color.blue, title="PresentTrend")
plotshape(series=longSignal, location=location.belowbar, color=color.green, style=shape.labelup, title="Buy Signal")
plotshape(series=shortSignal, location=location.abovebar, color=color.red, style=shape.labeldown, title="Sell Signal")

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-21. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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