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Strategy vault / Breakout

Quantitative Trading Strategy Based on Gann Swing Oscillator

This article explains in detail a quantitative trading strategy using the Gann Swing Oscillator. It determines market trend by calculating price extrema to generate trading signals. I. Strategy Logic The core…

Pine ScriptBreakoutMean reversionTrend following
Author
ChaoZhang
Complexity
Starter · 36 lines
Parameters
2
Backtest bar
3h · intraday
Tested on
BTC/USDT · futures
Jump to codeView in vaultOriginal on FMZ

This article explains in detail a quantitative trading strategy using the Gann Swing Oscillator. It determines market trend by calculating price extrema to generate trading signals.

I. Strategy Logic

The core indicator is the Gann Swing Oscillator. The main calculation steps are:

  1. Calculate highest high and lowest low over a period.

  2. Compare the last two bars' highest high with the latest bar to identify bullish extremum.

  3. Compare the last two bars' lowest low with the latest bar to identify bearish extremum.

  4. Calculate Gann Oscillator value based on extreme relationships.

  5. Determine trend direction and generate signals according to the indicator value.

This identifies market reversal points and trends effectively through judging price extrema.

II. Advantages of the Strategy

The biggest advantage is the simplicity of the indicator, utilizing price extreme comparisons directly to determine trend direction.

Another advantage is the minimal parameter requirement of just one variable.

Lastly, trade signals are unambiguous being either long or short, avoiding overlapping positions.

III. Potential Risks

However, some potential issues exist:

Firstly, the indicator has lag in detecting breakout signals, causing missed best entries.

Secondly, the lack of stop loss and take profit fails to control risk per trade.

Finally, frequent signals require proper money management to limit losses.

IV. Summary

In summary, this article has explained a quantitative trading strategy using the Gann Swing Oscillator. It identifies market trends and reversals by judging price extrema. But improvements can be made such as adding stops and managing signal lag. Overall it provides a unique approach of using price comparisons to determine trends.

Parameters

NameDefaultWhat it controls
v_input_13Length
v_input_2falseTrade reverse

Source Pine Script

/*backtest
start: 2023-08-15 00:00:00
end: 2023-08-26 00:00:00
period: 3h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=2
////////////////////////////////////////////////////////////
//  Copyright by HPotter v1.0 19/06/2017
// The Gann Swing Oscillator has been adapted from Robert Krausz's book, 
// "A W.D. Gann Treasure Discovered". The Gann Swing Oscillator helps 
// define market swings. 
//
// You can change long to short in the Input Settings
// Please, use it only for learning or paper trading. Do not for real trading.
////////////////////////////////////////////////////////////
strategy(title="Gann Trend Oscillator")
Length = input(3, minval=1)
reverse = input(false, title="Trade reverse")
hline(0, color=gray, linestyle=hline.style_dashed)
xHH = highest(close, Length)
xLL = lowest(close, Length)
xGSO = iff(xHH[2] > xHH[1] and xHH[0] > xHH[1], -1,
         iff(xLL[2] < xLL[1] and xLL[0] < xLL[1], 1, nz(xGSO[1],0)))
pos = iff(xGSO > 0, 1,
	     iff(xGSO < 0, -1, nz(pos[1], 0))) 
possig = iff(reverse and pos == 1, -1,
          iff(reverse and pos == -1, 1, pos))	   
if (possig == 1) 
    strategy.entry("Long", strategy.long)
if (possig == -1)
    strategy.entry("Short", strategy.short)	   	    
barcolor(possig == -1 ? red: possig == 1 ? green : blue )        
plot(xGSO, color=blue, title="GTO")

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-15. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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