Starbucks Bullish Hammer Trading Strategy

This strategy identifies bullish hammer candlestick patterns and uses the MACD indicator to determine trend direction for trend following trades. During a bull market, go long when a bullish hammer appears while MACD…

Pine ScriptMean reversion Trend following RSI MACD SMA

Author: ChaoZhang
Complexity: Starter · 75 lines
Parameters: 0
Backtest bar: 3h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Strategy Logic

Identify bullish hammer by calculating body-to-range ratio. Use MACD to determine trend direction. When MACD is bullish, go long when a bullish hammer signal appears. Set stop loss and position sizing. Exit when MACD turns bearish.

Advantages

Bullish hammer recognition is simple and clear
MACD effectively identifies trend reversals
Following trends avoids whipsaws
Simple and straightforward logic, easy to implement

Risks

Pattern recognition is imperfect, signals can be missed
MACD trend reversal identification has lag
Low trade frequency unsuitable for high frequency trading
Exact reversal points cannot be determined, risks losses

Risks can be mitigated by relaxing pattern criteria, shortening MACD parameters, adding secondary indicators etc.

Enhancements

Optimize hammer pattern identification rules
Test different MACD parameter settings
Consider adding other indicators to determine reversals
Test robustness across different products

Conclusion

This strategy integrates pattern and indicator analysis for trend determination, enabling steady profits. Further refinements like parameter optimization can make it a practical quant trading strategy.

Source Pine Script

/*backtest
start: 2023-08-18 00:00:00
end: 2023-09-17 00:00:00
period: 3h
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/
// © FenixCapital

//@version=4
strategy("Starbux", overlay=true)


//VARIABLES

//Candlestick Variables
body=close-open
range=high-low
middle=(open+close)/2
abody=abs(body)
arange=abs(range)
ratio=abody/range
longcandle= (ratio>0.6)
bodytop=max(open, close)
bodybottom=min(open, close)
shadowtop=high-bodytop
shadowbottom=bodybottom-low

//Closing Variables

macd=macd(close,12,26,9)
[macdLine, signalLine, histLine] = macd(close, 12, 26, 9)
//plot(macdLine, color=color.blue)
//plot(signalLine, color=color.orange)
//plot(histLine, color=color.red, style=plot.style_histogram)

rsi=rsi(close,14)

sma50= sma(close,50)
sma200= sma(close,200)

exitrsi=rsi > 76
exitmacd=macdLine >0 and signalLine>0
//exitmacd=crossunder(macdLine,signalLine)
stopprice= crossunder(sma50,sma200)

//Candlestick Plotting
blh = (arange*0.33>=abody and close>open and shadowbottom>=abody*2 and shadowtop<=arange*0.1)
plotshape(blh, title= "Bullish Hammer", location=location.belowbar, color=color.lime, style=shape.arrowup, text="Bull\nHammer")

//beh = (arange*0.25>=abody and close<open and shadowtop>=abody*2 and shadowbottom<=arange*0.05)
//plotshape(beh, title= "Bearish Hammer", color=color.orange, style=shape.arrowdown, text="Bear\nHammer")

//bpu = (open>close and close>low and shadowbottom>2*abody)
//plotshape(bpu, title= "Black Paper Umbrella", color=color.red, style=shape.arrowdown, text="Black\nPaper\nUmbrella")

//Trend Signal
bull5= sma50 > sma200
bullmacd=macdLine>=0 and signalLine>=0
bearmacd=macdLine<= 0 and signalLine<=0

//Trading Algorithm
longCondition = blh and bearmacd and volume>volume[1]

if (longCondition)
    strategy.order("Buy", true, 1, when=longCondition)
strategy.risk.max_position_size(10)
//strategy.risk.max_drawdown(25,strategy.percent_of_equity)

exitlong = exitmacd
if (exitlong)
    strategy.close_all()

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-18. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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