Weekend Volatility Trading Strategy

This strategy sets long and short entry conditions based on Friday's closing price, and goes long or short after Saturday's and Sunday's opening, exiting all positions before Monday's opening. The strategy aims to…

Pine ScriptVolatility

Author: ChaoZhang
Complexity: Intermediate · 95 lines
Parameters: 9
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Principles

Record Friday's closing price as the reference price
On Saturday and Sunday's opening:
- If price is above 105% of Friday's close, go short
- If price is below 95% of Friday's close, go long
Take profit is set at 3% of initial capital
Close all positions before Monday's opening

Advantage Analysis

Trade on weekend's low volume and volatility to reduce market risk
Clear entry and exit rules simplify strategy execution
Pursue steady small profits with short-term trades
High capital turnover with short cycle

Risk Analysis

Weekend price fluctuation may be smaller than expected, unable to open positions
Excessive volatility may cause stop loss
Significant events on Monday may cause price gaps, unable to stop loss in time

Risk Solutions:

Adjust fluctuation range for entries
Set proper stop loss points
Close positions early, avoid holding over weekends

Optimization Guidelines

Adjust entry thresholds based on different products' characteristics
Optimize take profit rules based on backtest results
Select leverage based on capital size
Add indicator filters such as moving average to time entries

Summary

This short-term trading strategy has very clear logic and risk control measures. With proper parameter tuning and continuous testing and optimization, it can generate steady investment returns. At the same time, the risk of large weekend losses due to excessive volatility needs to be managed via proper risk control.

Parameters

Name	Default	What it controls
v_input_1	true	Leverage
v_input_2	0.03	Profit Taking Percent Threshold
v_input_3	2017	Backtest Start Year
v_input_4	12	Backtest Start Month
v_input_5	10	Backtest Start Day
v_input_6	2025	Backtest Stop Year
v_input_7	12	Backtest Stop Month
v_input_8	30	Backtest Stop Day
v_input_9	true	Color Background?

Source Pine Script

/*backtest
start: 2023-10-16 00:00:00
end: 2023-11-15 00:00:00
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=3
//Copyright Boris Kozak 
strategy("XBT Weekend Trade Strategy", overlay=true, default_qty_type=strategy.percent_of_equity,initial_capital=20000)
leverage = input(1,"Leverage")
profitTakingPercentThreshold = input(0.03,"Profit Taking Percent Threshold")

//****Code used for setting up backtesting.****///
testStartYear = input(2017, "Backtest Start Year")
testStartMonth = input(12, "Backtest Start Month")
testStartDay = input(10, "Backtest Start Day")
testPeriodStart = timestamp(testStartYear,testStartMonth,testStartDay,0,0)

testStopYear = input(2025, "Backtest Stop Year")
testStopMonth = input(12, "Backtest Stop Month")
testStopDay = input(30, "Backtest Stop Day")
testPeriodStop = timestamp(testStopYear,testStopMonth,testStopDay,0,0)

// A switch to control background coloring of the test period
testPeriodBackground = input(title="Color Background?", type=bool, defval=true)
testPeriodBackgroundColor = testPeriodBackground and (time >= testPeriodStart) and (time <= testPeriodStop) ? #00FFFF : na
bgcolor(testPeriodBackgroundColor, transp=50)

testPeriod() => true
    
//****END Code used for setting up backtesting.****///


//*** Main entry point is here***//
// Figure out how many days since the Friday close 
days_since_friday = if dayofweek == 6
    0
else 
    if dayofweek == 7
        1
    else
        if dayofweek == 1
            2
        else
            if dayofweek == 2
                3
            else
                if dayofweek == 3
                    4
                else
                    if dayofweek == 4
                        5
                    else
                        6
    
// Grab the Friday close price
fridaycloseprice = request.security(syminfo.tickerid,'D',close[days_since_friday])
plot(fridaycloseprice)
strategy.initial_capital = 50000
// Only perform backtesting during the window specified 
if testPeriod()
    // If we've reached out profit threshold, exit all positions 
    if ((strategy.openprofit/strategy.initial_capital) > profitTakingPercentThreshold)
        strategy.close_all()
    // Only execute this trade on saturday and sunday (UTC)
    if (dayofweek == 7.0 or dayofweek == 1.0)
        // Begin - Empty position (no active trades)
        if (strategy.position_size == 0)
            // If current close price > threshold, go short 
            if ((close>fridaycloseprice*1.045))
                strategy.entry("Short Entry", strategy.short, leverage)
            else
                // If current close price < threshold, go long
                if (close<(fridaycloseprice*0.955))
                    strategy.entry("Long Entry",strategy.long, leverage)
        // Begin - we already have a position
        if (abs(strategy.position_size) > 0)
            // We are short 
            if (strategy.position_size < 0)
                if ((close>strategy.position_avg_price*1.045))
                    // Add to the position
                    strategy.entry("Adding to Short Entry", strategy.short, leverage)
            else
                strategy.entry("Long Entry",strategy.long,leverage)
    // On Monday, if we have any open positions, close them 
    if (dayofweek==2.0)
        strategy.close_all()

Published by ChaoZhang on the FMZ strategy square · last modified 2023-11-16. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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