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Strategy vault / Trend following

TEMA Crossover Trading Strategy

This strategy trades the crossover between two TEMA lines of different periods to capture intermediate-term trends. TEMA filters noise well for identifying trend reversals. Strategy Logic: 1. Calculate fast and slow…

Pine ScriptTrend followingMean reversionEMA
Author
ChaoZhang
Complexity
Intermediate · 46 lines
Parameters
10
Backtest bar
1d · swing
Tested on
BTC/USDT · futures
Jump to codeView in vaultOriginal on FMZ

This strategy trades the crossover between two TEMA lines of different periods to capture intermediate-term trends. TEMA filters noise well for identifying trend reversals.

Strategy Logic:

  1. Calculate fast and slow TEMA lines, typically 5 and 8 periods.

  2. Go long when fast TEMA crosses above slow TEMA.

  3. Exit long when fast TEMA crosses below slow TEMA.

  4. Option to filter based on candle direction to avoid counter-trend trades.

  5. Backtest over specified period to simulate historical signals.

Advantages:

  1. TEMA strongly filters price noise.

  2. Fast/slow combo captures intermediate trends.

  3. Direction filter improves win rate by avoiding counter-trend entries.

Risks:

  1. TEMA still lags, potentially missing best entries.

  2. Parameter tuning needed for ideal match.

  3. Difficult to sustain signals in ranging markets.

In summary, this strategy crosses TEMA lines to trade trends with noise filtering for stability. But TEMA lag persists, requiring optimization to match market pace.

Parameters

NameDefaultWhat it controls
v_input_12017Start Year
v_input_212Start Month
v_input_317Start Day
v_input_49999End Year
v_input_5trueEnd Month
v_input_6trueEnd Day
v_input_75Fast TEMA
v_input_88Slow TEMA
v_input_9trueUse bar's direction ?
v_input_102direction bars

Source Pine Script

/*backtest
start: 2022-09-11 00:00:00
end: 2023-09-11 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=4
strategy("Tema",overlay=true, default_qty_type=strategy.percent_of_equity, default_qty_value=100, commission_type=strategy.commission.percent, commission_value=0.075)
startP = timestamp(input(2017, "Start Year"), input(12, "Start Month"), input(17, "Start Day"), 0, 0)
end   = timestamp(input(9999, "End Year"),   input(1, "End Month"),   input(1, "End Day"),   0, 0)
_testPeriod() =>
    iff(time >= startP and time <= end, true, false)

tema_length_1 = input(5, "Fast TEMA")
tema_length_2 = input(8, "Slow TEMA")
usedir       = input(true, "Use bar's direction ?" )
dirtime      = input(2,"direction bars")

tema(sec, length)=>
    tema1= ema(sec, length)
    tema2= ema(tema1, length)
    tema3= ema(tema2, length)
    tema = 3*tema1-3*tema2+tema3

tema1 = tema(hlc3, tema_length_1)
tema2 = tema(hlc3, tema_length_2)

dir=if close/close[dirtime] > 1
    1
else
    -1

plot(tema1, color=color.green, transp=50)
plot(tema2, color=color.red, transp=50)


up =  crossover(tema1, tema2) 
down = crossunder(tema1, tema2)

long_condition =  up and (usedir ? dir==1 : true) and _testPeriod()
strategy.entry('BUY', strategy.long, when=long_condition)  
 
short_condition =  down
strategy.close('BUY', when=short_condition)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-09-12. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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