ChaoZhang
Overview
The triple supertrend breakout strategy is a commonly used strategy that utilizes multiple supertrend lines with different parameter settings and a trend-defining EMA to identify trend direction and trade. The main idea of this strategy is to establish long positions when at least two supertrend lines are showing an uptrend above the trend-defining EMA line, and establish short positions when at least two supertrend lines are showing a downtrend below the trend-defining EMA line.
Strategy Principle
This strategy uses three supertrend lines with different parameters and an EMA line that defines the major trend to determine entries and exits:
Set up three supertrend lines - supertrend1, supertrend2, supertrend3, with green color indicating an uptrend and red color indicating a downtrend.
Set up an EMA line ematrend to define the major trend. When all three supertrend lines are above this EMA, the market is defined as being in an uptrend, and vice versa for downtrends.
When at least two supertrend lines show an uptrend (green) simultaneously under the condition of a major uptrend market, that is, the direction value is less than 0, it is judged as a long signal; when at least two supertrend lines show a downtrend (red) simultaneously under the condition of a major downtrend market, that is, the direction value is greater than 0, it is judged as a short signal.
Subsequently, open long/short positions when signals are triggered.
Set stop loss and take profit conditions. Fixed take profit is set at a risk/reward ratio of 3; trailing stop loss is set at a drop of one ATR.
Close positions when stop loss or take profit conditions are triggered.
Advantage Analysis
The advantages of this strategy include:
Using three supertrend lines combined with a trend-judging EMA can effectively identify trend signals.
The long and short conditions are clear and easy to understand and implement.
Setting a trailing stop loss and fixed take profit effectively manages risks.
Hyperparameters can be adjusted as needed to optimize the strategy.
Risk Analysis
There are also some risks to this strategy:
Improper parameter settings may lead to missing good trading opportunities. Different periods, multiples for ATR, and periods for EMA can be tested.
There is some probability of failed breakouts. This can be reduced by adjusting parameters.
Stop loss or take profit set too wide may increase loss probability. Stop loss range should be tightened properly.
Backtest data can easily lead to overfitting problems. Multi-market, multi-timeframe testing should be noted.
Optimization Directions
Some ways this strategy can be optimized:
Test the optimal parameter combinations. Different combinations of ATR periods, multiples, and EMA periods can be tested to find the best.
Increase trading varieties. Can add stocks, cryptocurrencies etc to test effectiveness across markets.
Combine with other indicators for signal filtering. For example, RSI, MACD etc can be added to avoid misreading trend signals.
Optimize the stop loss and take profit mechanism. Trailing stop loss, or stop loss based on changes in ATR/volatility can be tested.
Conclusion
In summary, the triple supertrend breakout strategy is a relatively simple and practical trend following strategy. It combines multiple supertrend lines and a trend-judging EMA to discover opportunities and manages risk effectively. Through parameter and logic optimization, better results can be achieved. This strategy is easy to understand and worth learning from.
/*backtest
start: 2022-12-14 00:00:00
end: 2023-12-20 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
// @version=5
// author=theasgard and moonshot-indicator (ms)
// year 2021
//
// This is a well knowen strategy by using 3 different Supertrends and a trend-defining EMA,
// feel free to play around with the settings, a backtest on 8h ETHUSDT pair brought some good results using
// the 233EMA and investing 75% of a 10k start capital
//
// the idea is to have at least 2 supertrnds going green above the trend-EMA to go long and exit by turning
// 2 supertrends red (idea: 1 supertrend in red could initialize a take profit)
// shorts work vice versa
// The EMA shows in green for uptrends and in red for downtrends, if it is blue no Signal will be taken because
// the 3 supertrends are not all above or below the trendline(EMA)
//
// Update 1:
// Fixed a minor input error
// Added ATR stoploss, and commented out the percentage stop loss
// Added time window to backtest
// Added exit on risk/revard is met
// This version is only buy...wait for next update adding shorts
strategy("ms hypertrender", overlay=true)
// set up 3 supertrendlines and colour the direction up/down
atrPeriod1 = input(10, "ATR Length 1")
factor1 = input.float(1.0, "ATR Factor 1", step = 0.01)
[supertrend1, direction1] = ta.supertrend(factor1, atrPeriod1)
upTrend1 = plot(direction1 < 0 ? supertrend1 : na, "Up Trend 1", color = color.green, style=plot.style_linebr)
downTrend1 = plot(direction1 < 0? na : supertrend1, "Down Trend 1", color = color.red, style=plot.style_linebr)
atrPeriod2 = input(11, "ATR Length 2")
factor2 = input.float(2.0, "ATR Factor 2", step = 0.01)
[supertrend2, direction2] = ta.supertrend(factor2, atrPeriod2)
upTrend2 = plot(direction2 < 0 ? supertrend2 : na, "Up Trend 2", color = color.green, style=plot.style_linebr)
downTrend2 = plot(direction2 < 0? na : supertrend2, "Down Trend 2", color = color.red, style=plot.style_linebr)
atrPeriod3 = input(12, "ATR Length 3")
factor3 = input.float(3.0, "ATR Factor 3", step = 0.01)
[supertrend3, direction3] = ta.supertrend(factor3, atrPeriod3)
upTrend3 = plot(direction3 < 0 ? supertrend3 : na, "Up Trend 3", color = color.green, style=plot.style_linebr)
downTrend3 = plot(direction3 < 0? na : supertrend3, "Down Trend 3", color = color.red, style=plot.style_linebr)
//set up the trend dividing EMA and color uptrend nutreal downtrend
len = input.int(233, minval=1, title="Trend-EMA Length")
src = input(close, title="Source")
offset = input.int(title="Offset", defval=0, minval=-500, maxval=500)
//general Bull or Bear Trend? Visualized by ema
ematrend = ta.ema(src, len)
generaluptrend = supertrend1 > ematrend and supertrend2 > ematrend and supertrend3 > ematrend
generaldowntrend = supertrend1 < ematrend and supertrend2 < ematrend and supertrend3 < ematrend
emacolor = if generaluptrend
color.green
else if generaldowntrend
color.red
else
color.blue
plot(ematrend, title="EMA", color=emacolor, linewidth=3, offset=offset)
// Bullish? min 2 supertrends green
bullish = (direction1 < 0 and direction2 < 0) or (direction1 < 0 and direction3 < 0) or (direction2 < 0 and direction3 < 0) and generaluptrend
extremebullish = direction1 < 0 and direction2 < 0 and direction3 < 0 and generaluptrend //all 3 green
// Bearish? min 2 supertrends red
bearish = (direction1 > 0 and direction2 > 0) or (direction1 > 0 and direction3 > 0) or (direction2 > 0 and direction3 > 0) and generaldowntrend
extremebearish = direction1 > 0 and direction2 > 0 and direction3 > 0 and generaldowntrend //all 3 red
// Open Long
//plotchar(((bullish and not bullish[1]) or (extremebullish and not extremebullish[1])) and (emacolor==color.green)? close : na, title = 'Start Long', char='▲', color = #80eb34, location = location.belowbar, size = size.small)
// TP 10% Long
TP10long = ((generaluptrend and bullish[1]) or (generaluptrend and extremebullish[1])) and (direction1 > 0 or direction2 > 0 or direction3 > 0)
//plotchar(TP10long and not TP10long[1]? close : na, title = 'TP on Long', char='┼', color = #ffd000, location = location.abovebar, size = size.tiny)
// Exit Long
//plotchar(extremebearish and not extremebearish[1] or bearish and not bearish[1]? close : na, title = 'Close all Longs', char='Ꭓ', color = #ff0037, location = location.abovebar, size = size.tiny)
stopsupertrendup = if supertrend1 < supertrend2 and supertrend1 < supertrend3
(supertrend1)
else if supertrend2 < supertrend1 and supertrend2 < supertrend3
(supertrend2)
else if supertrend3 < supertrend1 and supertrend3 < supertrend2
(supertrend3)
lowestLows = ta.lowest(low, 1)
// Open Short
//plotchar(((bearish and not bearish[1]) or (extremebearish and not extremebearish[1])) and (emacolor==color.red)? close : na, title = 'Start Short', char='▼', color = #0547e3, location = location.abovebar, size = size.small)
// TP 10% Short
TP10short = ((generaldowntrend and bearish[1]) or (generaldowntrend and extremebearish[1])) and (direction1 < 0 or direction2 < 0 or direction3 < 0)
//plotchar(TP10short and not TP10short[1]? close : na, title = 'TP on Short', char='┼', color = #ffd000, location = location.belowbar, size = size.tiny)
// Exit Short
//plotchar(extremebullish and not extremebullish[1] or bullish and not bullish[1]? close : na, title = 'Close all Shorts', char='Ꭓ', color = #ff0037, location = location.belowbar, size = size.tiny)
stopsupertrenddown = if supertrend1 > supertrend2 and supertrend1 > supertrend3
(supertrend1)
else if supertrend2 > supertrend1 and supertrend2 > supertrend3
(supertrend2)
else if supertrend3 > supertrend1 and supertrend3 > supertrend2
(supertrend3)
highestHighs = ta.highest(high,1)
// Set stop loss level with input options (optional)
//longLossPerc = input.float(title="Long Stop Loss (%)",
// minval=0.0, step=0.1, defval=1) * 0.01
//shortLossPerc = input.float(title="Short Stop Loss (%)",
// minval=0.0, step=0.1, defval=1) * 0.01
// Determine stop loss price
//longStopPrice = strategy.position_avg_price * (1 - longLossPerc)
//shortStopPrice = strategy.position_avg_price * (1 + shortLossPerc)
openlong = (extremebullish and not extremebullish[1]) and (emacolor==color.green)//(((bullish and not bullish[1]) or
openshort = (extremebearish and not extremebearish[1]) and (emacolor==color.red)//(((bearish and not bearish[1]) or
exitlong = lowestLows<(stopsupertrendup - ((stopsupertrendup / 100) * 0.1)) //(extremebearish and not extremebearish[1] or bearish and not bearish[1]) or TP10long or
exitshort = highestHighs>(stopsupertrenddown - ((stopsupertrenddown / 100) * 0.1)) //(extremebullish and not extremebullish[1] or bullish and not bullish[1]) or TP10short
//strategy.entry("buy", strategy.long, when=openlong)
//strategy.entry("sell", strategy.short, when=openshort)
//strategy.close("buy", when=exitlong)
//strategy.close("sell", when=exitshort)
// Submit exit orders based on calculated stop loss price
//if (strategy.position_size > 0)
// strategy.exit(id="Long Stop", stop=longStopPrice)
//if (strategy.position_size < 0)
// strategy.exit(id="Short Stop", stop=shortStopPrice)
backtest_timeframe_start = input(defval = timestamp("01 Apr 2016 13:30 +0000"), title = "Backtest Start Time")
USE_ENDTIME = input(false,title="Define the ending period for backtests (If false, will test up to most recent candle)")
backtest_timeframe_end = input(defval = timestamp("19 Mar 2021 19:30 +0000"), title = "Backtest End Time")
TARGET_PROFIT_MODE = input(false,title="Exit when Risk:Reward met")
REWARD_RATIO = input(3,title="Risk:[Reward] (i.e. 3) for exit")
// Trailing stop loss {
TSL_ON = input(true,title="Use trailing stop loss")
var entry_price = float(0)
ATR_multi_len = 26
ATR_multi = input(2, "ATR multiplier for stop loss")
ATR_buffer = ta.atr(ATR_multi_len) * ATR_multi
plotchar(ATR_buffer, "ATR Buffer", "A", location = location.top)
risk_reward_buffer = (ta.atr(ATR_multi_len) * ATR_multi) * REWARD_RATIO
take_profit_long = low > entry_price + risk_reward_buffer
take_profit_short = low < entry_price - risk_reward_buffer
var trailing_SL_buffer = float(0)
var stop_loss_price = float(0)
stop_loss_price := math.max(stop_loss_price, close - trailing_SL_buffer)
// plot TSL line
trail_profit_line_color = color.green
if strategy.position_size == 0 or not TSL_ON
trail_profit_line_color := color.black
stop_loss_price := close - trailing_SL_buffer
plot(stop_loss_price,color=trail_profit_line_color)
// }
if true
buy_condition = openlong
exit_condition = exitlong
//ENTRY:
if buy_condition
if strategy.position_size == 0
entry_price := close
trailing_SL_buffer := ATR_buffer
stop_loss_price := close - ATR_buffer
msg = "entry"
if strategy.position_size > 0
msg := "pyramiding"
strategy.entry("Long",strategy.long, comment=msg)
//EXIT:
// Case (A) hits trailing stop
if TSL_ON and strategy.position_size > 0 and close <= stop_loss_price
if close > entry_price
strategy.close("Long", comment="take profit [trailing]")
else if close <= entry_price
strategy.close("Long", comment="stop loss")
// Case (B) take targeted profit relative to risk
if strategy.position_size > 0 and TARGET_PROFIT_MODE
if take_profit_long
strategy.close("Long", comment="take profits [risk:reward]")
// Case (C)
if strategy.position_size > 0 and exit_condition
if take_profit_long
strategy.close("Long", comment="exit[rsi]")