Reversal Short term Breakout Trading Strategy

This strategy aims to capture short-term reversal trading opportunities. It will open short position after N consecutive up-bars and close position after M consecutive down-bars. It also incorporates time frame…

Pine ScriptBreakout Mean reversion Trend following

Author: ChaoZhang
Complexity: Intermediate · 83 lines
Parameters: 15
Backtest bar: 3h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Logic

Input parameters: Number of consecutive up-bars N, consecutive down-bars M
Definition:
- ups counts number of up-bars, price>price[1] then +1, otherwise reset to 0
- dns counts number of down-bars, price<price[1] then +1, otherwise reset to 0
Entry: short when ups≥N; close position when dns≥M
Exit: fixed stop loss/take profit or end of time frame

Pros

Capture reversal trading chances, suitable for short-term trading
Flexible time frame setting catering to different trading plans
Embedded stop loss/take profit facilitating risk management

Risks

Short-term reversal may fail and reverse again leading to loss
Reasonable N, M parameters needed, too large or small unfavourable
Improper stop time may unable to stop loss in time

Optimization Directions

Combine with trend indicator to avoid against trend trades
Dynamic adjustment of parameters N, M
Optimize stop loss mechanism

Conclusion

The strategy captures short-term trading opportunities through statistical K-line patterns. Reasonable parameter tuning and risk control measures are crucial for steady profits. Further improvements on combining trend analysis and dynamic parameter adjustment may lead to even better performance.

Parameters

Name	Default	What it controls
v_input_1	true	Consecutive Bars Up
v_input_2	true	Consecutive Bars Down
v_input_3	timestamp(2021-01-01T00:00:00)	Backtesting Start Date
v_input_4	timestamp(2021-12-31T00:00:00)	Backtesting End Date
v_input_5		Time Frame To Enter Trades
v_input_6	false	Enable Close Trade At End Of Time Frame
v_input_7	false	Enable Take Profit & Stop Loss
v_input_8	5	Stop Loss Ticks
v_input_9	10	Take Profit Ticks
v_input_10		Long Entry message
v_input_11		Short Entry message
v_input_12		Close Long message
v_input_13		Close Short message
v_input_14		Take Profit message
v_input_15		Stop Loss message

Source Pine Script

/*backtest
start: 2023-11-13 00:00:00
end: 2023-11-20 00:00:00
period: 3h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4

// Strategy
strategy("Up/Down Short Strategy", overlay=true, initial_capital = 10000, default_qty_value = 10000, default_qty_type = strategy.cash)

// There will be no short entries, only exits from long.
strategy.risk.allow_entry_in(strategy.direction.short)

consecutiveBarsUp = input(1, title='Consecutive Bars Up')
consecutiveBarsDown = input(1, title='Consecutive Bars Down')

price = close

ups = 0.0
ups := price > price[1] ? nz(ups[1]) + 1 : 0

dns = 0.0
dns := price < price[1] ? nz(dns[1]) + 1 : 0

// Strategy Backtesting
startDate  = input(timestamp("2021-01-01T00:00:00"), type = input.time, title='Backtesting Start Date')
finishDate = input(timestamp("2021-12-31T00:00:00"), type = input.time, title='Backtesting End Date')

time_cond  = true

//Time Restriction Settings
startendtime = input("", title='Time Frame To Enter Trades')
enableclose = input(false, title='Enable Close Trade At End Of Time Frame')
timetobuy = (time(timeframe.period, startendtime))
timetoclose = na(time(timeframe.period, startendtime))

// Stop Loss & Take Profit Tick Based
enablesltp = input(false, title='Enable Take Profit & Stop Loss')
stopTick = input(5.0, title='Stop Loss Ticks', type=input.float) / 100
takeTick = input(10.0, title='Take Profit Ticks', type=input.float) / 100

longStop = strategy.position_avg_price - stopTick
shortStop = strategy.position_avg_price + stopTick
shortTake = strategy.position_avg_price - takeTick
longTake = strategy.position_avg_price + takeTick

plot(strategy.position_size > 0 and enablesltp ? longStop : na, style=plot.style_linebr, color=color.red, linewidth=1, title="Long Fixed SL")
plot(strategy.position_size < 0 and enablesltp ? shortStop : na, style=plot.style_linebr, color=color.red, linewidth=1, title="Short Fixed SL")
plot(strategy.position_size > 0 and enablesltp ? longTake : na, style=plot.style_linebr, color=color.green, linewidth=1, title="Long Take Profit")
plot(strategy.position_size < 0 and enablesltp ? shortTake : na, style=plot.style_linebr, color=color.green, linewidth=1, title="Short Take Profit")

// Alert messages
message_enterlong  = input("", title="Long Entry message")
message_entershort = input("", title="Short Entry message")
message_closelong = input("", title="Close Long message")
message_closeshort = input("", title="Close Short message")
message_takeprofit = input("", title="Take Profit message")
message_stoploss = input("", title="Stop Loss message")

// Strategy Execution
if (ups >= consecutiveBarsUp) and time_cond and timetobuy
    strategy.entry("Long", strategy.long, stop = high + syminfo.mintick, alert_message = message_enterlong)
    
if (dns >= consecutiveBarsDown) and time_cond and timetobuy
    strategy.entry("Short", strategy.short, stop = low + syminfo.mintick, alert_message = message_entershort)
    
if strategy.position_size > 0 and timetoclose and enableclose
    strategy.close_all(alert_message = message_closelong)
if strategy.position_size < 0 and timetoclose and enableclose
    strategy.close_all(alert_message = message_closeshort)
    
if strategy.position_size > 0 and enablesltp and time_cond
    strategy.exit(id="Close Long", stop=longStop, limit=longTake, alert_message = message_takeprofit)
if strategy.position_size < 0 and enablesltp and time_cond
    strategy.exit(id="Close Short", stop=shortStop, limit=shortTake, alert_message = message_stoploss)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-11-21. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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