The Momentum Driven Triple Confirmation Trend Following Strategy

Pine ScriptMomentum Trend following Breakout RSI EMA ATR Supertrend

Author: ChaoZhang
Complexity: Intermediate · 108 lines
Parameters: 20
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy generates trading signals using a triple confirmation mechanism, i.e. the momentum indicator confirms strong market trend, the Supertrend indicator confirms trend direction, and the EMA indicator provides additional verification of trend direction. Only when all three indicators meet the criteria will the strategy generate long or short trading signals, thus ensuring only high probability trading opportunities are selected.

Strategy Principle

Momentum Indicator (Momentum RSI)
- The Momentum RSI indicator is used to determine the strength of the market trend. Readings above 60 indicate a strong market trend.
- Trading signals are only generated during intense bull or bear markets.
Supertrend Analysis
- The Supertrend line represents market trend direction. Positions are only considered when the price breaks through the Supertrend line.
- When the price breaks through the Supertrend line upwards, it is converted to an uptrend; when it breaks downwards it converts to a downtrend.
EMA Strategy
- The EMA and its auxiliary trend lines are used to confirm trend direction. Buy signals only appear when the EMA breaks upwards through the auxiliary trend line, and short signals are the opposite.

Only when all three indicators simultaneously meet the position opening conditions will genuine trading signals be issued. This greatly reduces the number of false signals and improves the stability of the strategy.

Advantage Analysis

The strategy has extremely high stability and profitability. The main advantages are:

Multiple confirmation mechanisms effectively filter noise and only select high probability trades.
The Supertrend line has a dynamic trailing stop loss to effectively control risk.
Combined with trend strength judgment, only trading in strong trends avoids additional risk.
EMA indicator provides additional verification to ensure trade direction is correct.
Fully parameterized so traders can customize as needed.

Risk Analysis

The main risks of this strategy come from abnormal breakouts causing erroneous trade signals. The main risks and solutions include:

False breakout risk: Increase breakout verification mechanisms.
Larger oscillation range risk: Appropriately adjust stop loss range.
Trend reversal risk: Shorten holding period, timely stop loss.

Optimization Directions

The main directions for optimizing this strategy include:

Parameter optimization: Adjust indicator parameters to suit more varieties.
Increased filtering: Combine more indicators to improve signal quality.
Composite strategies: Combine with other strategies to utilize complementary advantages.
Dynamic parameter adjustment: Automatically adjust parameters based on market conditions.
Machine learning: Use algorithms to automatically find optimal parameters.

Summary

This strategy achieves a high probability trading strategy with multiple confirmations by effectively combining momentum, Supertrend and EMA indicators. Its strict breakout verification mechanism also gives it extremely strong stability. At the same time, it has very high customizability and optimization potential. In summary, this strategy integrates the advantages of trend following and breakout trading, making it a very promising algorithmic trading strategy.

Parameters

Name	Default	What it controls
v_input_int_1	10	(?Rsi Of Momentum )Length Mom-Rsi
v_input_int_2	60	Mom-Rsi Limit Val
v_input_1	10	(?SuperTrend indicator)ATR Length SuperTrend
v_input_float_1	3	Factor SuperTrend
v_input_2_close	0	(?Ema indicator)Source Ema Ind: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_int_3	12	Length Ema Ind
v_input_float_2	true	Percent Ema Ind
v_input_3	timestamp(01 January 2000 13:30 +0000)	(?Settings of Strategy)Start Time of BackTest
v_input_4	timestamp(30 April 2030 19:30 +0000)	End Time of BackTest
v_input_float_3	50000	Dollar Cost Per Position*
v_input_string_1	0	Trade_direction: BOTH \| SHORT \| LONG
v_input_5	true	Version 1 - Uses SL/TP Dynamically
v_input_6	false	Version 2 - Uses SL/TP Statically
v_input_float_4	5	Static Stop.Loss % Val
v_input_float_5	10	Static Take.Prof % Val
v_input_bool_1	true	(?Line Settings) Show StopLoss - TakeProf Lines
v_input_bool_2	true	Show Trend Line
v_input_color_1	#ffff00	StopLoss Line Colour
v_input_color_2	#00ff00	Up Trend line Colour
v_input_color_3	#ff0000	Down Trend line Colour

Source Pine Script

/*backtest
start: 2022-12-29 00:00:00
end: 2024-01-04 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=5
strategy('The Flash-Strategy (Momentum-RSI, EMA-crossover, ATR)', shorttitle='The Flash-Strategy (Momentum-RSI, EMA-crossover, ATR)', overlay=true,initial_capital = 1000)
//// author -  Baby_whale_to_moon

// MOM Rsi indicator 
group_mom_rsi = "Rsi Of Momentum "
len = input.int(10, minval=1, title="Length Mom-Rsi", group =group_mom_rsi ,tooltip = 'This ind calculate Rsi value of Momentum we use this ind to determine power of trend')
src2 = close
mom = src2 - src2[len]
rsi_mom = ta.rsi(mom, len)
mom_rsi_val = input.int(60, minval=1, title="Mom-Rsi Limit Val", group =group_mom_rsi, tooltip = "When our Mom-Rsi value more then this we open LONG or Short, with help of this indicator we we determine the status of the trend")

// Super Trend Ind
group_supertrend = "SuperTrend indicator"
atrPeriod = input(10, "ATR Length SuperTrend", group = group_supertrend)
factor = input.float(3.0, "Factor SuperTrend", step = 0.01, group = group_supertrend)

[supertrend, direction] = ta.supertrend(factor, atrPeriod)

// Ema Indicator
group_most = "Ema indicator"
src = input(close, 'Source Ema Ind',group = group_most)
AP2 = input.int(defval=12, title='Length Ema Ind', minval=1,group = group_most)
Trail1 = ta.ema(src, AP2) //Ema func
AF2 = input.float(defval=1, title='Percent Ema Ind', minval=0.1,group = group_most) / 100
SL2 = Trail1 * AF2  // Stoploss Ema
Trail2 = 0.0
iff_1 = Trail1 > nz(Trail2[1], 0) ? Trail1 - SL2 : Trail1 + SL2
iff_2 = Trail1 < nz(Trail2[1], 0) and Trail1[1] < nz(Trail2[1], 0) ? math.min(nz(Trail2[1], 0), Trail1 + SL2) : iff_1
Trail2 := Trail1 > nz(Trail2[1], 0) and Trail1[1] > nz(Trail2[1], 0) ? math.max(nz(Trail2[1], 0), Trail1 - SL2) : iff_2

//Bull = ta.barssince(Trail1 > Trail2 and close > Trail2 and low > Trail2) < ta.barssince(Trail2 > Trail1 and close < Trail2 and high < Trail2)

//TS1 = plot(Trail1, 'ExMov', style=plot.style_line, color=Trail1 > Trail2 ? color.rgb(33, 149, 243, 100) : color.rgb(255, 235, 59, 100), linewidth=2)
//TS2 = plot(Trail2, 'ema', style=plot.style_line, color=Trail1 > Trail2 ? color.rgb(76, 175, 79, 30) : color.rgb(255, 82, 82, 30), linewidth=2)
//fill(TS1, TS2, Bull  ? color.green : color.red, transp=90)


// Strategy Sett
group_strategy = "Settings of Strategy"
Start_Time = input(defval=timestamp('01 January 2000 13:30 +0000'), title='Start Time of BackTest', group =group_strategy)
End_Time = input(defval=timestamp('30 April 2030 19:30 +0000'), title='End Time of BackTest', group =group_strategy)
dollar = input.float(title='Dollar Cost Per Position* ', defval=50000, group =group_strategy)
trade_direction = input.string(title='Trade_direction', group =group_strategy, options=['LONG', 'SHORT', 'BOTH'], defval='BOTH')
v1 = input(true, title="Version 1 - Uses SL/TP Dynamically ", group =group_strategy ,tooltip = 'With this settings our stoploss price increase or decrease with price to get better PNL score')

v2 = input(false, title="Version 2 -  Uses SL/TP Statically", group =group_strategy)
v2stoploss_input = input.float(5, title='Static Stop.Loss % Val', minval=0.01, group =group_strategy)/100
v2takeprofit_input = input.float(10, title='Static Take.Prof % Val', minval=0.01, group =group_strategy)/100

v2stoploss_level_long = strategy.position_avg_price * (1 - v2stoploss_input)
v2takeprofit_level_long = strategy.position_avg_price * (1 + v2takeprofit_input)

v2stoploss_level_short = strategy.position_avg_price * (1 + v2stoploss_input)
v2takeprofit_level_short = strategy.position_avg_price * (1 - v2takeprofit_input)

group_line = "Line Settings"
show_sl_tp = input.bool(title='  Show StopLoss - TakeProf Lines',inline = "1", defval=true, group =group_line)
show_trend_line = input.bool(title='  Show Trend Line',inline = '3' ,defval=true, group =group_line)
stoploss_colour = input.color(title='StopLoss Line Colour',inline = '2' ,defval=color.rgb(255, 255, 0), group =group_line)
up_trend_line_colour = input.color(title='Up Trend line Colour',inline = '4' ,defval=color.rgb(0, 255, 0, 30), group =group_line)
down_trend_line_colour = input.color(title='Down Trend line Colour',inline = '4' ,defval=color.rgb(255, 0, 0, 30), group =group_line)

//plot(supertrend ,color = strategy.position_size > 0 and show_sl_tp ? color.rgb(255, 0, 0) :show_sl_tp ? color.rgb(0, 255, 0) : na , style = plot.style_steplinebr,linewidth = 2)
// plot(supertrend ,color = show_sl_tp and v1 ? stoploss_colour : na , style = plot.style_steplinebr,linewidth = 2)

// plot(v2stoploss_level_long ,color = strategy.position_size > 0 and show_sl_tp and v2 ? stoploss_colour : na , style = plot.style_steplinebr,linewidth = 2)
// plot(v2stoploss_level_short ,color = strategy.position_size < 0 and show_sl_tp and v2 ? stoploss_colour : na , style = plot.style_steplinebr,linewidth = 2)
// plot(v2takeprofit_level_long  ,color = strategy.position_size > 0 and show_sl_tp and v2 ? up_trend_line_colour : na , style = plot.style_steplinebr,linewidth = 2)
// plot(v2takeprofit_level_short ,color = strategy.position_size < 0 and show_sl_tp and v2 ? up_trend_line_colour : na , style = plot.style_steplinebr,linewidth = 2)


TS2 = plot(Trail2, 'Ema Strategy', style=plot.style_line, color=show_trend_line and Trail1 < Trail2 ? down_trend_line_colour : show_trend_line ? up_trend_line_colour  : na, linewidth=2)

// bgcolor(buy_signal ? color.rgb(0, 230, 119, 80) : na)
// bgcolor(sell_signal ? color.rgb(255, 82, 82, 80) : na)

Time_interval = true
buy_signal = Trail1 > Trail2 and direction < 0 and rsi_mom > mom_rsi_val and Time_interval
sell_signal =Trail1 < Trail2 and direction > 0 and rsi_mom > mom_rsi_val and Time_interval


// Strategy entries 
if strategy.opentrades == 0 and buy_signal and ( trade_direction == 'LONG' or trade_direction == 'BOTH')
    strategy.entry('Long_0', strategy.long, qty=dollar / close)

if strategy.opentrades == 0 and sell_signal and ( trade_direction == 'SHORT' or trade_direction == 'BOTH')
    strategy.entry('Short_0', strategy.short, qty=dollar / close)


if close < supertrend and v1
    strategy.exit('Long_Close',from_entry = "Long_0", stop=supertrend, qty_percent=100)
if  v2 and strategy.position_size > 0
    strategy.exit('Long_Close',from_entry = "Long_0", stop=v2stoploss_level_long,limit= v2takeprofit_level_long  , qty_percent=100)
    
if close > supertrend and v1
    strategy.exit('Short_Close',from_entry = "Short_0", stop=supertrend, qty_percent=100)
if  v2 and strategy.position_size < 0
    strategy.exit('Short_Close',from_entry = "Short_0", stop=v2stoploss_level_short,limit= v2takeprofit_level_short ,qty_percent=100)

Published by ChaoZhang on the FMZ strategy square · last modified 2024-01-05. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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