Trend Bull Bear Crossover Trading Strategy

This strategy uses the moving average crossover principle to determine the trend direction and generate buy and sell signals. It is simple and reliable, suitable for investors seeking steady returns.

Pine ScriptTrend following Breakout Mean reversion EMA SMA Volume

Author: ChaoZhang
Complexity: Intermediate · 63 lines
Parameters: 11
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy uses the moving average crossover principle to determine the trend direction and generate buy and sell signals. It is simple and reliable, suitable for investors seeking steady returns.

Principle

The strategy employs two moving averages, a 7-day MA as the fast line and a 5-month MA as the slow line. The fast line captures price changes swiftly while the slow line filters out noise and determines the trend direction. When the fast line breaks above the slow line from below, it is considered a bullish signal to go long. When the fast line breaks down the slow line from above, it is regarded as a bearish signal to go short.

Specifically, the strategy calculates the 7-day simple moving average (SMA) and 5-month SMA, plotting them on the price chart. When the 7-day line crosses above the 5-month line from below, a buy signal is generated. When the 7-day line crosses below the 5-month line from above, a sell signal is triggered. The strategy also visualizes the signal periods.

Advantages

The strategy has the following advantages:

Simple and reliable theoretical basis, based on the widely known moving average crossover principle.
Only two moving averages are used, with simple parameter selection and easy implementation.
The fast and slow lines work together effectively to identify trends and filter out market noise.
Different timeframes are captured through different period MAs, detecting trend changes on multiple scales.
Simple implementation with clear, easy-to-understand logic.
Visualized signals are clear and intuitive for deciding trades.

Risks

There are also some risks:

Prone to false signals relying solely on MA crosses.
Unable to judge trend strength effectively, causing frequent stop loss in ranging markets.
Fixed MA periods cannot adapt to market changes, requiring parameter optimization.
Entry and exit levels unclear, with some whipsaw risks.
Simplistic theoretical basis may compromise performance and profit potential.

Enhancement

The strategy can be improved in the following aspects:

Add other indicators to determine entry and exit levels, such as KDJ for overbought/oversold.
Implement stop loss mechanisms like trailing stop to limit losses.
Optimize MA periods to adapt to different market cycles.
Add volume filter to avoid false breakouts.
Evaluate trend strength, e.g. MA slope, to scale position size.
Incorporate multiple timeframes for better trend continuity.

Conclusion

The strategy identifies bull/bear trends simply and reliably based on MA crossover theory. The pros are simplicity and ease of use, while the cons are inherent trend-following risks. Fine-tuning parameters, adding auxiliary indicators etc. can improve strategy performance. Investors can choose to use it based on their risk appetite.

Parameters

Name	Default	What it controls
v_input_1_close	0	Kaynak: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_2	0	Hareketli Ortlama Tipi: SMA \| EMA \| WMA
v_input_3	7	Günlük Bar Sayısı
v_input_4	5	Aylık Bar Sayısı
v_input_5	2020	Backtest Başlangıç Tarihi
v_input_6	true	Str. Başlama Tarihi Gün
v_input_7	true	Str. Başlama Tarihi Ay
v_input_8	2015	Str. Başlama Tarihi Yıl
v_input_9	true	Str. Bitiş Tarihi Gün
v_input_10	true	Str. Bitiş Tarihi Ay
v_input_11	9999	Str. Bitiş Tarihi Yıl

Source Pine Script

/*backtest
start: 2022-09-30 00:00:00
end: 2023-10-06 00:00:00
period: 1d
basePeriod: 1h
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/
// © dadashkadir

//@version=4
strategy("Mount MaV - Day MaV CrossOver Strgty", shorttitle="Yusram Str.", overlay=true)
src = input(title= "Kaynak", type=input.source, defval=close)
mav = input(title="Hareketli Ortlama Tipi", defval="SMA", options=["SMA", "EMA", "WMA"])
Gbar = input(title="Günlük Bar Sayısı", defval=7, minval=1, maxval=999)
Abar = input(title="Aylık Bar Sayısı", defval=5, minval=1, maxval=999)
//displacement = input(20, minval=1, title="Displacement")
getMA(src, length) =>
    ma = 0.0
    if mav == "SMA"
        ma := sma(src, length)
        ma

    if mav == "EMA"
        ma := ema(src, length)
        ma

    if mav == "WMA"
        ma := wma(src, length)
        ma
    ma
long = "M" //Aylık
ln = security(syminfo.ticker, long, src)
lnma = getMA(ln, Abar)
gnma = getMA(src, Gbar)
col1= gnma>gnma[1]
col3= gnma<gnma[1]
colorM = col1 ? color.green : col3 ? color.navy : color.yellow
l1 = plot(lnma, title="MhO", trackprice = true, style=plot.style_line, color=color.red, linewidth=3)
l2 = plot(gnma, title="DhO", trackprice = true, style=plot.style_line, color=colorM, linewidth=3)
fill(l1, l2, color = lnma < gnma ? color.green : color.red, title="Gölgelendirme", transp=90)
zamanaralik = input (2020, title="Backtest Başlangıç Tarihi")
al  = crossover (gnma, lnma) and zamanaralik <= year
sat = crossover (lnma, gnma) and zamanaralik <= year
plotshape(al,  title = "Giriş",  text = 'Al',  style = shape.labelup,   location = location.belowbar, color= color.green, textcolor = color.white, transp = 0, size = size.tiny)
plotshape(sat, title = "Çıkış", text = 'Sat', style = shape.labeldown, location = location.abovebar, color= color.red,   textcolor = color.white, transp = 0, size = size.tiny)

FromDay    = input(defval = 1, title = "Str. Başlama Tarihi Gün", minval = 1, maxval = 31)
FromMonth  = input(defval = 1, title = "Str. Başlama Tarihi Ay", minval = 1, maxval = 12)
FromYear   = input(defval = 2015, title = "Str. Başlama Tarihi Yıl", minval = 2005)
ToDay      = input(defval = 1, title = "Str. Bitiş Tarihi Gün", minval = 1, maxval = 31)
ToMonth    = input(defval = 1, title = "Str. Bitiş Tarihi Ay", minval = 1, maxval = 12)
ToYear     = input(defval = 9999, title = "Str. Bitiş Tarihi Yıl", minval = 2006)
Start     = timestamp(FromYear, FromMonth, FromDay, 00, 00)
Finish    = timestamp(ToYear, ToMonth, ToDay, 23, 59)
Timerange() =>
    time >= Start and time <= Finish ? true : false
if al
    strategy.entry("Al", strategy.long, when=Timerange())
if sat
    strategy.entry("Sat", strategy.short, when=Timerange())

Published by ChaoZhang on the FMZ strategy square · last modified 2023-10-07. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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