ChaoZhang
Overview
This strategy adopts momentum rotation to determine market trends based on the Stoch RSI indicator, and implement stock rotation trading. It goes short when the indicator shows overbought and goes long when it shows oversold. At the same time, the position size is increased in the trend direction using pyramid trading.
Strategy Logic
- Calculate the RSI with length of 14 periods
- Calculate the Stoch RSI based on RSI, with Stochastic Length 14, Smooth K 3, and Smooth D 1
- Go long when Stoch RSI rises from oversold into overbought
- Go short when Stoch RSI falls from overbought into oversold
- Use pyramid trading to add position up to 5 times
- Set stop loss and trailing stop after each add
- Reduce position when stop loss is triggered
- Manage positions based on stop loss and trailing stop
Advantage Analysis
The advantages of this strategy are:
- Based on momentum indicator, it can capture trend reversal timely and adjust position direction accordingly.
- Pyramid trading allows taking early position with small size and adding to it as trend confirms, fully capturing trend profits.
- Stop loss controls risk. Initial stop filters noise and trailing stop locks profits.
- RSI optimization space is big, parameters can be adjusted for different markets.
- Flexible add times, size and stops adapts well to different market conditions.
Risk Analysis
Some risks to note:
- Relying solely on Stoch RSI leaves it vulnerable to sudden events. Confirm with other indicators.
- Only applies to strongly trending products. Avoid choppy sideways markets.
- Excessive adds may lead to amplified losses. Control add depth.
- Improper stop loss setting may cause overstop. Adjust stops based on market.
- Monitor transaction costs. High frequency trading generates heavy commissions.
Optimization Directions
Some ways to optimize the strategy:
- Optimize RSI Length parameter for best fit.
- Optimize Stoch K and D periods for smoother signals.
- Add other indicators to filter signals and avoid false trades.
- Dynamically adjust add times based on market conditions.
- Optimize stop loss logic to lower stop rate.
- Add position sizing module based on money management.
- Include commission control to limit high-frequency trading.
Conclusion
The strategy adopts a mature momentum rotation concept, with Stoch RSI as core trading indicator, complemented by pyramid trading and stop management for risk control. It is a reliable trend following strategy. Further optimizations on parameters and modules can enhance its stability and adaptability. But overall, it already has strong real-trading capabilities.
Strategy source code
/*backtest
start: 2023-09-11 00:00:00
end: 2023-09-13 13:00:00
period: 5m
basePeriod: 1m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
// This script was created for educational purposes only.
// © mcristianrios
// FEEL FREE TO DROP A COMMENT AND A LIKE IF YOU USE IT OR IT SERVES YOU WELL
//@version=4
//strategy(title="Pyramiding Strategy To Study [mcristianrios]", commission_type=strategy.commission.cash_per_contract, commission_value=0.0002, overlay=true, default_qty_value=1000, initial_capital=100, calc_on_order_fills=false, currency="USD", overlay=true, pyramiding=5)
// study(title="Pyramiding Strategy To Study [mcristianrios]", overlay=true)
int pyramiding = input(1, 'Pyramiding', minval=1, maxval=5)
int slPips = input(80, 'SL Pips')
int ttPips = input(60, 'Trail Trig')
int trailOffset = input(60, 'Trail Offset')
// === PYRAMIDING DECLARATION === {
var int longPyramiding = 0
var int shortPyramiding = 0
// To save init of operation price
var float close1 = na
var float close2 = na
var float close3 = na
var float close4 = na
var float close5 = na
// How far did the Trailing Stop Get?
var float far1 = na
var float far2 = na
var float far3 = na
var float far4 = na
var float far5 = na
// }
// === STOCHASTIC RSI === {
smoothK = input(3, minval=1)
smoothD = input(1, minval=1)
lengthRSI = input(14, minval=1)
lengthStoch = input(14, minval=1)
src = input(close, title="RSI Source")
rsi1 = rsi(src, lengthRSI)
k = sma(stoch(rsi1, rsi1, rsi1, lengthStoch), smoothK)
d = sma(k, smoothD)
// }
// === SOME CONDITION TO TAKE A POSITION === {
goLong = k[1] < 80 and k >= 80 and longPyramiding < pyramiding
goShort = k[1] > 20 and k <= 20 and shortPyramiding < pyramiding
// }
// === PYRAMIDING SIMULATION === {
var string lastOperation = ''
if (goLong and lastOperation != 'LONG') or (goShort and lastOperation != 'SHORT')
// RESET
longPyramiding := 0
shortPyramiding := 0
far1 := na
far2 := na
far3 := na
far4 := na
far5 := na
close1 := na
close2 := na
close3 := na
close4 := na
close5 := na
// === SUM ONE INTO 'LONG' OR 'SHORT' PYRAMIDING AND REMEMBER LAST OPERATION TYPE === {
isCallOrShort = if goLong and longPyramiding < pyramiding
lastOperation := 'LONG'
longPyramiding := longPyramiding + 1
true
else
isShort = if goShort and shortPyramiding < pyramiding
lastOperation := 'SHORT'
shortPyramiding := shortPyramiding + 1
true
else
false
isShort
// }
// === SAVE CURRENT PRICE === {
if isCallOrShort
if na(close1)
close1 := close
else
if na(close2)
close2 := close
else
if na(close3)
close3 := close
else
if na(close4)
close4 := close
else
if na(close5)
close5 := close
// }
if longPyramiding > 0
// If Trail Stop was not triggered and distance is achieved saved it
if na(far1) and high > close1 + syminfo.mintick * 10 * ttPips
far1 := high
if na(far2) and high > close2 + syminfo.mintick * 10 * ttPips
far2 := high
if na(far3) and high > close3 + syminfo.mintick * 10 * ttPips
far3 := high
if na(far4) and high > close4 + syminfo.mintick * 10 * ttPips
far4 := high
if na(far5) and high > close5 + syminfo.mintick * 10 * ttPips
far5 := high
// Update how far our position went
if not na(far1) and high > far1
far1 := high
if not na(far2) and high > far2
far2 := high
if not na(far3) and high > far3
far3 := high
if not na(far4) and high > far4
far4 := high
if not na(far5) and high > far5
far5 := high
/// === SL not na(trailing stop) ? Use Trailing Stop : Use Default Stop Loss === {
if not na(close1) and (not na(far1) ? low <= far1 - syminfo.mintick * 10 * trailOffset : low <= close1 - syminfo.mintick * 10 * slPips)
longPyramiding := longPyramiding - 1
close1 := na
far1 := na
if not na(close2) and (not na(far2) ? low <= far2 - syminfo.mintick * 10 * trailOffset : low <= close2 - syminfo.mintick * 10 * slPips)
longPyramiding := longPyramiding - 1
close2 := na
far2 := na
if not na(close3) and (not na(far3) ? low <= far3 - syminfo.mintick * 10 * trailOffset : low <= close3 - syminfo.mintick * 10 * slPips)
longPyramiding := longPyramiding - 1
close3 := na
far3 := na
if not na(close4) and (not na(far4) ? low <= far4 - syminfo.mintick * 10 * trailOffset : low <= close4 - syminfo.mintick * 10 * slPips)
longPyramiding := longPyramiding - 1
close4 := na
far4 := na
if not na(close5) and (not na(far5) ? low <= far5 - syminfo.mintick * 10 * trailOffset : low <= close5 - syminfo.mintick * 10 * slPips)
longPyramiding := longPyramiding - 1
close5 := na
far5 := na
// }
// Log when long pyramiding changed
if longPyramiding[1] != longPyramiding[2]
label.new(bar_index, high, tostring(longPyramiding[1]), xloc.bar_index, yloc.price, size = size.normal, color=color.blue, textcolor=color.white)
if shortPyramiding > 0
// If Trail Stop was not triggered and distance is achieved saved it
if na(far1) and low < close1 - syminfo.mintick * 10 * ttPips
far1 := low
if na(far2) and low < close2 - syminfo.mintick * 10 * ttPips
far2 := low
if na(far3) and low < close3 - syminfo.mintick * 10 * ttPips
far3 := low
if na(far4) and low < close4 - syminfo.mintick * 10 * ttPips
far4 := low
if na(far5) and low < close5 - syminfo.mintick * 10 * ttPips
far5 := low
// Update how far our position went
if not na(far1) and low < far1
far1 := low
if not na(far2) and low < far2
far2 := low
if not na(far3) and low < far3
far3 := low
if not na(far4) and low < far4
far4 := low
if not na(far5) and low < far5
far5 := low
/// === SL not na(trailing stop) ? Use Trailing Stop : Use Default Stop Loss === {
if not na(close1) and (not na(far1) ? high >= far1 + syminfo.mintick * 10 * trailOffset : high >= close1 + syminfo.mintick * 10 * slPips)
shortPyramiding := shortPyramiding - 1
close1 := na
far1 := na
if not na(close2) and (not na(far2) ? high >= far2 + syminfo.mintick * 10 * trailOffset : high >= close2 + syminfo.mintick * 10 * slPips)
shortPyramiding := shortPyramiding - 1
close2 := na
far2 := na
if not na(close3) and (not na(far3) ? high >= far3 + syminfo.mintick * 10 * trailOffset : high >= close3 + syminfo.mintick * 10 * slPips)
shortPyramiding := shortPyramiding - 1
close3 := na
far3 := na
if not na(close4) and (not na(far4) ? high >= far4 + syminfo.mintick * 10 * trailOffset : high >= close4 + syminfo.mintick * 10 * slPips)
shortPyramiding := shortPyramiding - 1
close4 := na
far4 := na
if not na(close5) and (not na(far5) ? high >= far5 + syminfo.mintick * 10 * trailOffset : high >= close5 + syminfo.mintick * 10 * slPips)
shortPyramiding := shortPyramiding - 1
close5 := na
far5 := na
// }
// Log when long pyramiding changed
if shortPyramiding[1] != shortPyramiding[2]
label.new(bar_index, high + syminfo.mintick * 10 * 22, tostring(shortPyramiding[1]), xloc.bar_index, yloc.price, size = size.normal, color=color.red, textcolor=color.white)
// }
// === COMMENT IF STUDY === {
strategy.entry("Long", strategy.long, when = goLong and longPyramiding <= pyramiding)
strategy.entry("Short", strategy.short, when = goShort and shortPyramiding <= pyramiding)
strategy.exit("Exit Long", "Long", loss=slPips * 10, trail_points=ttPips * 10, trail_offset=trailOffset * 10)
strategy.exit("Exit Short", "Short", loss=slPips * 10, trail_points=ttPips * 10, trail_offset=trailOffset * 10)
// }
// === UNCOMMENT IF STUDY === {
// plot(ttPips, title='TrailTrig', color=na, display=display.none)
// plot(trailOffset, title='TrailOffset', color=na, display=display.none)
// plot(slPips, title='LossPips', color=na, display=display.none)
// string longTradeId = 'tradeid=long{{ticker}}_PYRAMIDING_[MCRISTIANRIOS]'
// string shortTradeId = 'tradeid=short{{ticker}}_PYRAMIDING_[MCRISTIANRIOS]'
// string basicTrade = 'tradesymbol={{ticker}} sl={{plot("LossPips")}} trailtrig={{plot("TrailTrig")}} traildist={{plot("TrailOffset")}}'
// alertcondition(goLong and longPyramiding <= pyramiding, title='Long', message='long ' + basicTrade + ' ' + longTradeId)
// alertcondition(goShort and shortPyramiding <= pyramiding, title='Short', message='short ' + basicTrade + ' ' + shortTradeId)
// alertcondition(goLong and longPyramiding <= pyramiding, title='XShort', message='closepart part=1 ' + shortTradeId)
// alertcondition(goShort and shortPyramiding <= pyramiding, title='XLong', message='closepart part=1 ' + longTradeId)
// }
// Background color for backtest
bgcolor(goLong[1] ? color.lime : goShort[1] ? color.red : na, transp=70)