Support Level and Trend EMA Based Long Strategy

Pine ScriptTrend following Breakout Mean reversion EMA ATR

Author: ianzeng123
Complexity: Starter · 52 lines
Parameters: 0
Backtest bar: 2d · swing
Tested on: ETH/USDT · spot

Jump to code View in vault Original on FMZ

Overview

This is a long-only strategy based on support levels and trend EMA. The strategy identifies optimal entry points by recognizing market trends and key support levels, combining ATR-based dynamic stop-loss and staged profit-taking for risk management. It focuses on price pullbacks to support levels during uptrends and aims to achieve high success rates through reasonable risk-reward ratios.

Strategy Principle

The strategy uses a 100-period EMA as a trend indicator, confirming an uptrend when price is above EMA. It calculates 10-period lows as short-term support levels and looks for entry opportunities when price pulls back near support (support + 0.5*ATR). After entry, it implements staged profit-taking, closing 50% position at 5x ATR and the remainder at 10x ATR, with a 1x ATR dynamic stop-loss. Risk is controlled within 3% of account equity per trade through dynamic position sizing.

Strategy Advantages

Trend-following characteristics: Uses EMA for trend identification, avoiding counter-trend trades
Dynamic support levels: Uses recent 10-period lows as support, better reflecting current market conditions
Flexible risk management: ATR-based dynamic stop-loss and profit targets, adapting to market volatility
Staged profit-taking: Gradual position closure at different price levels, securing profits while maintaining upside potential
Precise position sizing: Dynamic calculation based on stop-loss distance, achieving quantified risk management

Strategy Risks

False breakout risk: Potential false signals near support levels, additional confirmation indicators recommended
Trend reversal risk: EMA lag may cause losses at trend turning points
Overtrading risk: Frequent support level triggers may lead to excessive trading
Slippage risk: Significant slippage possible during volatile periods Solutions:

Add trend confirmation indicators
Optimize entry conditions
Set trading interval restrictions
Adjust stop-loss ranges

Strategy Optimization Directions

Multi-dimensional trend analysis: Incorporate multiple timeframe trend indicators for improved accuracy
Entry condition optimization: Add volume, volatility, and other auxiliary indicators as entry filters
Dynamic parameter optimization: Adaptive parameter adjustment based on market conditions
Market sentiment integration: Include VIX and other sentiment indicators to optimize timing
Enhanced profit-taking: Dynamic adjustment of profit targets based on market volatility

Summary

The strategy establishes a complete trading system by combining trend following and support level pullbacks, implementing risk management through staged profit-taking and dynamic stop-loss. Its core strengths lie in comprehensive risk control mechanisms and clear trading logic, but continuous optimization of parameters and entry conditions is needed for different market environments. Traders are advised to conduct thorough backtesting before live implementation and make personalized adjustments based on market experience.

Source Pine Script

/*backtest
start: 2024-02-22 00:00:00
end: 2024-05-30 00:00:00
period: 2d
basePeriod: 2d
exchanges: [{"eid":"Binance","currency":"ETH_USDT"}]
*/

//@version=5
strategy("Ultra-Profitable SMC Long-Only Strategy", shorttitle="Ultra_Profit_SMC", overlay=true)

// User Inputs
emaTrendLength = input.int(100, title="Trend EMA Length")  // Faster EMA to align with aggressive trends
supportLookback = input.int(10, title="Support Lookback Period")  // Short-term support zones
atrLength = input.int(14, title="ATR Length")
atrMultiplierSL = input.float(1.0, title="ATR Multiplier for Stop-Loss")
atrMultiplierTP1 = input.float(5.0, title="ATR Multiplier for TP1")
atrMultiplierTP2 = input.float(10.0, title="ATR Multiplier for TP2")
riskPercent = input.float(3.0, title="Risk per Trade (%)", step=0.1)

// Calculate Indicators
emaTrend = ta.ema(close, emaTrendLength)  // Trend EMA
supportLevel = ta.lowest(low, supportLookback)  // Support Level
atr = ta.atr(atrLength)  // ATR

// Entry Conditions
isTrendingUp = close > emaTrend  // Price above Trend EMA
nearSupport = close <= supportLevel + (atr * 0.5)  // Price near support zone
longCondition = isTrendingUp and nearSupport

// Dynamic Stop-Loss and Take-Profit Levels
longStopLoss = supportLevel - (atr * atrMultiplierSL)
takeProfit1 = close + (atr * atrMultiplierTP1)  // Partial Take-Profit at 5x ATR
takeProfit2 = close + (atr * atrMultiplierTP2)  // Full Take-Profit at 10x ATR

// Position Sizing
capital = strategy.equity
tradeRisk = riskPercent / 100 * capital
positionSize = tradeRisk / (close - longStopLoss)

// Execute Long Trades
if (longCondition)
    strategy.entry("Ultra Long", strategy.long, qty=positionSize)

// Exit Conditions
strategy.exit("Partial Exit", from_entry="Ultra Long", limit=takeProfit1, qty_percent=50)  // Exit 50% at TP1
strategy.exit("Full Exit", from_entry="Ultra Long", limit=takeProfit2, qty_percent=100, stop=longStopLoss)  // Exit the rest at TP2

// Plot Indicators
plot(emaTrend, color=color.blue, title="Trend EMA")
plot(supportLevel, color=color.green, title="Support Level", linewidth=2)

Published by ianzeng123 on the FMZ strategy square · last modified 2025-02-21. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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