ChaoZhang
Overview
This strategy uses Average True Range (ATR) to capture price trends and sets stops based on ATR for trend following.
How it Works
Calculate ATR value.
Determine stop loss level based on ATR.
Enter long/short when price breaks stop level.
Lock in profits by adjusting stops dynamically.
Advantages
- ATR automatically adjusts stops, no manual intervention needed
- Simple and intuitive logic, easy to implement
- Helps avoid being trapped, timely stop loss
- Profits from riding trends
- Trade frequency controlled via ATR parameters
Risks
- Poor ATR parameters can cause stops to be too Loose or Tight
- Unable to effectively identify trend end
- Some time lag exists
- Reversals may cut profits
Optimization Directions
- Optimize ATR period parameter
- Test different ATR multiples for stop distance
- Add filters to detect trend reversal
- Explore machine learning for parameter optimization
- Consider additional profit taking mechanisms
Conclusion
The strategy effectively catches trends using ATR and locks in profits with dynamic stops. Fine tuning parameters can improve performance. But ATR lag cannot be completely eliminated. Overall a simple and practical trend following solution.
Strategy source code
/*backtest
start: 2022-09-14 00:00:00
end: 2023-09-20 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
strategy(title="ATR Strategy", overlay = true, commission_type=strategy.commission.percent,commission_value=0.075)
//credits to HPotter for the orginal code
nATRPeriod = input(5)
nATRMultip = input(3.5)
xATR = ta.atr(nATRPeriod)
nLoss = nATRMultip * xATR
xATRTrailingStop = iff(close > nz(xATRTrailingStop[1], 0) and close[1] > nz(xATRTrailingStop[1], 0), math.max(nz(xATRTrailingStop[1]), close - nLoss),
iff(close < nz(xATRTrailingStop[1], 0) and close[1] < nz(xATRTrailingStop[1], 0), math.min(nz(xATRTrailingStop[1]), close + nLoss),
iff(close > nz(xATRTrailingStop[1], 0), close - nLoss, close + nLoss)))
pos = iff(close[1] < nz(xATRTrailingStop[1], 0) and close > nz(xATRTrailingStop[1], 0), 1,
iff(close[1] > nz(xATRTrailingStop[1], 0) and close < nz(xATRTrailingStop[1], 0), -1, nz(pos[1], 0)))
color = pos == -1 ? color.red: pos == 1 ? color.green : color.blue
plot(xATRTrailingStop, color=color, title="ATR Trailing Stop")
barbuy = close > xATRTrailingStop
barsell = close < xATRTrailingStop
strategy.entry("Long", strategy.long, when = barbuy)
strategy.entry("Short", strategy.short, when = barsell)
barcolor(barbuy? color.green:color.red)