RSI MA Crossover Swing Trading Strategy with Trailing Stop System

Pine ScriptTrend following Machine learning Mean reversion RSI MACD EMA SMA Bollinger Bands ADX / DMI

Author: ianzeng123
Complexity: Intermediate · 147 lines
Parameters: 0
Backtest bar: 4h · intraday
Tested on: DOGE/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy is a swing trading approach based on the crossover between RSI (Relative Strength Index) and its moving average (MA), designed for 4-hour charts. It generates trading signals through RSI-MA crossovers and incorporates multiple risk management tools, including fixed stop-loss/take-profit, trailing stop-loss, and reversal exit mechanisms. The strategy also imposes a consecutive loss limit, pausing trading after two consecutive losses until a daily reset.

Strategy Logic

Timeframe Enforcement: The strategy operates exclusively on 4-hour charts to ensure signal alignment with the designed period.
Indicator Calculation: Uses RSI (default length 14) and its MA (SMA or EMA, default length 14) for signals.
- Golden cross (RSI above MA) triggers long entries.
- Death cross (RSI below MA) triggers short entries.
Position Sizing: Calculates position size based on allocated capital per trade and current price.
Exit Mechanisms:
- Fixed SL/TP: Percentage-based stop-loss (default 1.5%) and take-profit (default 2.5%).
- Trailing Stop-Loss: Exits when price retracts by a specified points (default 10) from the peak.
- Reversal Exit: Closes positions on opposing signals.
Risk Control:
- Pauses trading after two consecutive losses, with a daily reset at 9:15 AM.

Advantages

Multi-Layered Signal Validation: Combines RSI and MA for reduced false signals.
Dynamic Risk Management: Trailing stop-locks profits, fixed SL limits losses.
Strict Capital Allocation: Position sizing prevents over-leverage.
Disciplinary Control: Loss count mechanism avoids emotional trading.
Visual Markers: Clear chart annotations for quick signal identification.

Risks

Parameter Sensitivity: RSI and MA lengths significantly impact signal quality.
Trend Market Performance: RSI may lag in strong trends due to prolonged overbought/oversold conditions.
Timeframe Limitation: Requires revalidation for other periods.
Consecutive Loss Risk: May miss opportunities during pause periods.
Solutions:

Optimize parameters via backtesting.
Add trend filters (e.g., ADX).
Implement dynamic loss count thresholds.

Optimization Directions

Multi-Indicator Confirmation: Integrate MACD or Bollinger Bands.
Dynamic Parameters: Adjust RSI length and SL ratios based on market volatility.
Timeframe Expansion: Test performance on higher/lower timeframes (e.g., daily/1-hour).
Machine Learning: Train models to optimize entry/exit conditions.
Advanced Capital Management: Dynamically adjust capital allocation based on equity.

Conclusion

The strategy leverages RSI-MA crossovers for swing trading, balancing profitability and risk through multi-tiered management tools. Its strengths lie in clear logic and discipline, though further optimizations (e.g., multi-indicator integration) could enhance adaptability. Future improvements should focus on dynamic adjustments and broader market validation.

Source Pine Script

/*backtest
start: 2024-04-23 00:00:00
end: 2024-09-06 00:00:00
period: 4h
basePeriod: 4h
exchanges: [{"eid":"Futures_Binance","currency":"DOGE_USDT"}]
*/

//@version=5
strategy("? RX Swing ", overlay=true, default_qty_type=strategy.percent_of_equity, default_qty_value=1)


// === INPUTS ===
rsiLength     = input.int(14, title="RSI Length")
maLength      = input.int(14, title="RSI MA Length")
maType        = input.string("SMA", options=["SMA", "EMA"], title="MA Type for RSI")
sl_pct        = input.float(1.5, title="Stop Loss %", minval=0.0)
tp_pct        = input.float(2.5, title="Take Profit %", minval=0.0)
capitalPerTrade = input.float(15000, title="Capital Per Trade (INR)", minval=1)
lotSize       = input.int(50, title="Lot Size (Nifty Options Lot)", minval=1)
trail_points  = input.float(10, title="Trailing SL Points", minval=0.1)

// === CALCULATIONS ===
rsi    = ta.rsi(close, rsiLength)
rsiMA  = maType == "SMA" ? ta.sma(rsi, maLength) : ta.ema(rsi, maLength)

longSignal  = ta.crossover(rsi, rsiMA)
shortSignal = ta.crossunder(rsi, rsiMA)

// === TRADING WINDOW ===
canTrade = true
exitTime = false

// === STATE VARIABLES ===
var float entryPrice = na
var bool inTrade = false
var string tradeDir = ""
var int lossCount = 0
var float trailHigh = na
var float trailLow = na

// === EXIT TRIGGER ===
exitNow = false
exitReason = ""

// === POSITION SIZE BASED ON CAPITAL ===
positionSize = (capitalPerTrade / close) * lotSize

// === ENTRY LOGIC (AFTER CLOSE OF CANDLE) ===
if (canTrade and lossCount < 2)
    if (longSignal and not inTrade and barstate.isconfirmed)  // Ensure the signal happens after candle close
        strategy.entry("Buy Call", strategy.long, qty=positionSize)
        entryPrice := close
        trailHigh := close
        inTrade := true
        tradeDir := "CALL"

    else if (shortSignal and not inTrade and barstate.isconfirmed)  // Ensure the signal happens after candle close
        strategy.entry("Buy Put", strategy.short, qty=positionSize)
        entryPrice := close
        trailLow := close
        inTrade := true
        tradeDir := "PUT"

// === TRAILING STOP-LOSS LOGIC ===
if (inTrade)
    if (tradeDir == "CALL")
        trailHigh := math.max(trailHigh, close)
        if (close <= trailHigh - trail_points)
            strategy.close("Buy Call", comment="CALL Trailing SL Hit")
            exitNow := true
            exitReason := "Trail SL"
            inTrade := false
            lossCount := lossCount + 1

    if (tradeDir == "PUT")
        trailLow := math.min(trailLow, close)
        if (close >= trailLow + trail_points)
            strategy.close("Buy Put", comment="PUT Trailing SL Hit")
            exitNow := true
            exitReason := "Trail SL"
            inTrade := false
            lossCount := lossCount + 1

// === REVERSAL EXIT LOGIC ===
if (inTrade)
    if (tradeDir == "CALL" and shortSignal)
        strategy.close("Buy Call", comment="CALL Exit on Reversal")
        exitNow := true
        exitReason := "Reversal"
        inTrade := false
        if (strategy.position_size < 0)
            lossCount := lossCount + 1

    if (tradeDir == "PUT" and longSignal)
        strategy.close("Buy Put", comment="PUT Exit on Reversal")
        exitNow := true
        exitReason := "Reversal"
        inTrade := false
        if (strategy.position_size > 0)
            lossCount := lossCount + 1

// === TP/SL EXIT LOGIC ===
if (inTrade)
    tpLevel = entryPrice * (1 + tp_pct / 100)
    slLevel = entryPrice * (1 - sl_pct / 100)

    if (strategy.position_size > 0)
        if (close >= tpLevel)
            strategy.close("Buy Call", comment="CALL TP Hit")
            exitNow := true
            exitReason := "TP"
            inTrade := false
        else if (close <= slLevel)
            strategy.close("Buy Call", comment="CALL SL Hit")
            exitNow := true
            exitReason := "SL"
            inTrade := false
            lossCount := lossCount + 1

    if (strategy.position_size < 0)
        tpLevel = entryPrice * (1 - tp_pct / 100)
        slLevel = entryPrice * (1 + sl_pct / 100)

        if (close <= tpLevel)
            strategy.close("Buy Put", comment="PUT TP Hit")
            exitNow := true
            exitReason := "TP"
            inTrade := false
        else if (close >= slLevel)
            strategy.close("Buy Put", comment="PUT SL Hit")
            exitNow := true
            exitReason := "SL"
            inTrade := false
            lossCount := lossCount + 1

// === RESET LOSS COUNT ON NEW DAY ===
if (hour == 9 and minute == 15)
    lossCount := 0

// === MARKUPS ===
plotshape(longSignal and canTrade and lossCount < 2 and barstate.isconfirmed, title="? CALL Entry", location=location.belowbar, style=shape.triangleup, color=color.green, size=size.small, text="CALL")
plotshape(shortSignal and canTrade and lossCount < 2 and barstate.isconfirmed, title="? PUT Entry", location=location.abovebar, style=shape.triangledown, color=color.red, size=size.small, text="PUT")
plotshape(exitNow and exitReason == "TP", location=location.belowbar, style=shape.xcross, color=color.green, size=size.tiny, title="✅ TP Exit", text="TP")
plotshape(exitNow and exitReason == "SL", location=location.abovebar, style=shape.xcross, color=color.red, size=size.tiny, title="❌ SL Exit", text="SL")
plotshape(exitNow and exitReason == "Reversal", location=location.abovebar, style=shape.circle, color=color.fuchsia, size=size.tiny, title="? Reversal Exit", text="REV")
plotshape(exitNow and exitReason == "Trail SL", location=location.abovebar, style=shape.square, color=color.yellow, size=size.tiny, title="? Trailing SL Exit", text="Trail")

Published by ianzeng123 on the FMZ strategy square · last modified 2025-04-24. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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