Trend Following Strategy
Overview
Noro's trend following strategy is a simple trend trading strategy based on price channel, RSI and body filter. It identifies the overall trend using price channel, enters based on RSI overbought/oversold levels, and uses body filter for additional signal confirmation. The strategy suits trending instruments like indices and forex.
Strategy Logic
The key aspects are:
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Price channel determines the overall trend. Channel formed by looking back high/low defines uptrend/downtrend.
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RSI indicates overbought/oversold for entry timing. RSI above 60 is overbought, below 40 is oversold zone.
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Body filter provides final signal. Trades only if candle body exceeds a threshold to avoid noise.
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Entries based on combining trend, RSI signal and body filter. Long entries in uptrend on bullish signals, short entries in downtrend on bearish signals.
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Optional background colors clearly visualize the trend.
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Customizable trading time frames to selectively trade.
Multiple indicators align to create a relatively stable trend following system.
Advantages
The main advantages are:
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Price channel intuitively identifies the overall trend direction.
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RSI effectively detects overbought/oversold levels for timing entry.
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Body filter enhances signal quality and avoids false signals.
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Multi-indicator confirmation improves accuracy.
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Simple indicators reduce curve fitting risks.
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Customizable trading time frames add flexibility.
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Easy to use with minimal parameters. Beginner friendly.
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Background colors provide visual clarity.
Risks
Some risks to consider:
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Price channel trend misidentification risk.
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Inaccurate RSI signal risks.
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Body filter eliminating valid signals.
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Drawdown risk during trend corrections.
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Optimization risk from bad parameter tuning.
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Position sizing risk from default full allocation.
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Instrument selection risk if applied on non-trending assets.
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Trading time frame risks if improperly configured.
Enhancement Opportunities
Some enhancement possibilities:
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Add stop loss strategy to control loss per trade.
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Optimize parameters based on instrument behavior.
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Incorporate position sizing rules based on trend strength.
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Implement drawdown limits to contain losses.
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Add volume price analysis for signal verification.
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Introduce machine learning for parameter optimization.
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Specialize parameters based on asset class.
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Refine trading time frame logic for more flexibility.
Conclusion
Noro's trend following strategy integrates price channel, RSI and body filter into a simple and practical trend trading system. It can trade along the trends and avoid counter-trend trades. With parameter optimization, risk controls and other improvements, the strategy has potential to become a consistently profitable trend trading strategy.
/*backtest
start: 2023-08-25 00:00:00
end: 2023-09-24 00:00:00
period: 3h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
//@version=2
strategy(title = "Noro's TrendMaster Strategy v1.0", shorttitle = "TrendMaster str 1.0", overlay = true, default_qty_type = strategy.percent_of_equity, default_qty_value = 100, pyramiding = 0)
//Settings- 1