YinYang RSI Volume Trend Trading Strategy

This strategy is a trend following strategy that utilizes a combination of Relative Strength Index (RSI) and volume to identify trend direction and follow trends. Key points include: 1. Using Volume Weighted Moving…

Pine ScriptTrend following Machine learning Breakout RSI EMA SMA Volume

Author: ChaoZhang
Complexity: Intermediate · 140 lines
Parameters: 7
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy is a trend following strategy that utilizes a combination of Relative Strength Index (RSI) and volume to identify trend direction and follow trends. Key points include:

Using Volume Weighted Moving Average to calculate midline and incorporate volume information to determine trend midpoint
Setting up buy zone and sell zone based on midline
Using RSI information to adjust range of buy zone and sell zone
Setting stop loss and take profit after entering buy/sell zones
Having re-entry mechanism

Strategy Logic

This strategy uses the following indicators and parameters:

Midline: Volume Weighted Moving Average of highest and lowest prices in certain periods to determine midpoint of the trend
RSI: Relative Strength Index calculated over certain periods, converted into 0-1 range
Buy Zone: Midline plus RSI adjusted amount at certain ratio, long entry when price enters
Sell Zone: Midline minus RSI adjusted amount at certain ratio, short entry when price enters
Take Profit Line: Midline
Stop Loss Line: Certain percentage below buy zone/above sell zone

When price enters buy or sell zone, a corresponding direction order will be opened. Stop loss and take profit lines are then set. When take profit or stop loss is triggered, position will be closed. A re-entry mechanism is also set so that new orders can be opened when signal triggers again if configured.

Advantages

The advantages of this strategy include:

Using both RSI and volume to identify trends, improving accuracy
RSI parameterized adjustment makes buy/sell zone adapt better to actual trend
Volume information assigns higher weight to price actions, making midline more accurate
Having stop loss mechanism to control risks
Allows re-entry, reducing risks of false breakouts

Risks

There are also some risks:

Improper RSI and volume parameters may affect buy/sell zone accuracy
Midline may fail to accurately determine trend, causing false breakout
Stop loss too wide may lead to higher losses
Re-entry may cause over-trading

Solutions:

Adjust RSI and volume cycle to fit market conditions
Use other indicators to verify buy/sell signals
Tighten stop loss to limit losses
Limit trades per day to prevent over-trading

Optimization

This strategy can be optimized by:

Trying other indicators to verify signals e.g. candlestick, volatility indicators etc
Adding position sizing mechanisms e.g. pyramiding winners
Using machine learning algorithms to improve buy/sell zone accuracy
Evaluating optimum parameters for stop loss and take profit
Parameters need separate test and optimization for different products

Conclusion

In conclusion, this is a quantitative trend following strategy utilizing RSI and volume indicators. It has dual verification system to identify signals, stop loss/profit take to control risks, and re-entry mechanism to improve profitability. With parameter tuning and algorithm optimization, it can become a very practical trend trading strategy.

Parameters

Name	Default	What it controls
v_input_int_1	80	Trend Length:
v_input_source_1_close	0	Purchase Source (Long and Short):: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_source_2_close	0	Exit Source (Long and Short):: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_bool_1	true	Use Take Profit
v_input_bool_2	true	Use Stop Loss
v_input_float_1	0.1	Stoploss Multiplier %:
v_input_string_1	0	Reset Purchase Availability After:: Entry \| Stop Loss \| None

Source Pine Script

/*backtest
start: 2023-11-21 00:00:00
end: 2023-12-21 00:00:00
period: 1h
basePeriod: 15m
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/
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// © YinYangAlgorithms

//@version=5
strategy("YinYang RSI Volume Trend Strategy", shorttitle="YinYang RSVT Strategy", overlay=true )
// ~~~~~~~~~~~ INPUTS ~~~~~~~~~~~ //
len = input.int(80, "Trend Length:", tooltip="How far back should we span this indicator?\nThis length effects all lengths of the indicator")
purchaseSrc = input.source(close, "Purchase Source (Long and Short):", tooltip="What source needs to exit the purchase zone for a purchase to happen?")
exitSrc = input.source(close, "Exit Source (Long and Short):", tooltip="What source needs to hit a exit condition to stop the trade (Take profit, Stop Loss or hitting the other sides Purchase Zone)?")
useTakeProfit = input.bool(true, "Use Take Profit", tooltip="Should we take profit IF we cross the basis line and then cross it AGAIN?")
useStopLoss = input.bool(true, "Use Stop Loss", tooltip="Stop loss will ensure you don't lose too much if its a bad call")
stopLossMult = input.float(0.1, "Stoploss Multiplier %:", tooltip="How far from the purchase lines should the stop loss be")
resetCondition = input.string("Entry", "Reset Purchase Availability After:", options=["Entry", "Stop Loss", "None"],
 tooltip="If we reset after a condition is hit, this means we can purchase again when the purchase condition is met. \n" +
 "Otherwise, we will only purchase after an opposite signal has appeared.\n" +
 "Entry: means when the close enters the purchase zone (buy or sell).\n" +
 "Stop Loss: means when the close hits the stop loss location (even when were out of a trade)\n" +
 "This allows us to get more trades and also if our stop loss initally was hit but it WAS a good time to purchase, we don't lose that chance.")

// ~~~~~~~~~~~ VARIABLES ~~~~~~~~~~~ //
var bool longStart = na
var bool longAvailable = na
var bool longTakeProfitAvailable = na
var bool longStopLoss = na
var bool shortStart = na
var bool shortAvailable = na
var bool shortTakeProfitAvailable = na
var bool shortStopLoss = na

resetAfterStopLoss = resetCondition == "Stop Loss"
resetAfterEntry = resetCondition == "Entry"

// ~~~~~~~~~~~ CALCULATIONS ~~~~~~~~~~~ //
// Mid Line
midHigh = ta.vwma(ta.highest(high, len), len)
midLow = ta.vwma(ta.lowest(low, len), len)
mid = math.avg(midHigh, midLow)
midSmoothed = ta.ema(mid, len)

//Volume Filtered
avgVol = ta.vwma(volume, len)
volDiff = volume / avgVol
midVolSmoothed = ta.vwma(midSmoothed * volDiff, 3)

//RSI Filtered
midDifference = ta.sma(midHigh - midLow, len)
midRSI = ta.rsi(midVolSmoothed, len) * 0.01
midAdd = midRSI * midDifference

//Calculate Zones
purchaseZoneHigh = midSmoothed + midAdd
purchaseZoneLow = midSmoothed - midAdd
purchaseZoneBasis = math.avg(purchaseZoneHigh, purchaseZoneLow)

//Create Stop Loss Locations
stopLossHigh = purchaseZoneHigh * (1 + (stopLossMult * 0.01))
stopLossLow = purchaseZoneLow * (1 - (stopLossMult * 0.01))

// ~~~~~~~~~~~ PURCHASE CALCULATIONS ~~~~~~~~~~~ //
//Long
longEntry = ta.crossunder(purchaseSrc, purchaseZoneLow)
longStart := ta.crossover(purchaseSrc, purchaseZoneLow) and longAvailable
longAvailable := ta.crossunder(purchaseSrc, purchaseZoneHigh) or (resetAfterStopLoss and longStopLoss) or (resetAfterEntry and longEntry) ? true : longStart ? false : longAvailable[1]
longEnd = ta.crossover(exitSrc, purchaseZoneHigh)
longStopLoss := ta.crossunder(exitSrc, stopLossLow)
longTakeProfitAvailable := ta.crossover(exitSrc, purchaseZoneBasis) ? true : longEnd ? false : longTakeProfitAvailable[1]
longTakeProfit = ta.crossunder(exitSrc, purchaseZoneBasis) and longTakeProfitAvailable

//Short
shortEntry = ta.crossover(purchaseSrc, purchaseZoneHigh)
shortStart := ta.crossunder(purchaseSrc, purchaseZoneHigh) and shortAvailable
shortAvailable := ta.crossover(purchaseSrc, purchaseZoneLow) or (resetAfterStopLoss and shortStopLoss) or (resetAfterEntry and shortEntry)? true : shortStart ? false : shortAvailable[1]
shortEnd = ta.crossunder(exitSrc, purchaseZoneLow)
shortStopLoss := ta.crossover(exitSrc, stopLossHigh)
shortTakeProfitAvailable := ta.crossunder(exitSrc, purchaseZoneBasis) ? true : shortEnd ? false : shortTakeProfitAvailable[1]
shortTakeProfit = ta.crossover(exitSrc, purchaseZoneBasis) and shortTakeProfitAvailable

// ~~~~~~~~~~~ PLOTS ~~~~~~~~~~~ //
shortLine = plot(purchaseZoneHigh, color=color.green)
shortStopLossLine = plot(stopLossHigh, color=color.green) //color=color.rgb(0, 97, 3)
fill(shortLine, shortStopLossLine, color = color.new(color.green, 90))
plot(purchaseZoneBasis, color=color.white)
longLine = plot(purchaseZoneLow, color=color.red)
longStopLossLine = plot(stopLossLow, color=color.red) //color=color.rgb(105, 0, 0)
fill(longLine, longStopLossLine, color=color.new(color.red, 90))

// ~~~~~~~~~~~ STRATEGY ~~~~~~~~~~~ //
if (longStart)
    strategy.entry("buy", strategy.long)
else if (longEnd or (useStopLoss and longStopLoss) or (useTakeProfit and longTakeProfit))
    strategy.close("buy")

if (shortStart)
    strategy.entry("sell", strategy.short)
else if (shortEnd or (useStopLoss and shortStopLoss) or (useTakeProfit and shortTakeProfit))
    strategy.close("sell")

// ~~~~~~~~~~~ ALERTS ~~~~~~~~~~~ //
if longStart or (longEnd or (useStopLoss and longStopLoss) or (useTakeProfit and longTakeProfit)) or shortStart or (shortEnd or (useStopLoss and shortStopLoss) or (useTakeProfit and shortTakeProfit))
    alert("{{strategy.order.action}} | {{ticker}} | {{close}}", alert.freq_once_per_bar)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-12-22. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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