Overview

The name of this strategy is Ergotic Momentum Direction Convergence Trading Strategy. It is a quantitative trading strategy designed based on the technical indicator described in William Blau's book "Momentum, Direction and Divergence". This strategy focuses on three key aspects - momentum, direction and divergence, by calculating price momentum indicators of stocks, determining market trend direction, and finding divergences between price and indicators to spot trading opportunities.

Strategy Logic

The core indicator of this strategy is Ergotic TSI, and its calculation formula is as follows:

            
            
            
Val1 = 100 * EMA(EMA(EMA(price change, r), s), u)   

Val2 = EMA(EMA(EMA(absolute value of price change, r), s), u))  

Ergotic TSI = If Val2 != 0, Val1/Val2, else 0

where r, s, u are smoothing parameters. This indicator reflects the ratio of price change to the absolute value of price change, which belongs to the momentum oscillator indicator. Then we calculate the EMA moving average of Ergotic TSI as the signal line. Go long when TSI crosses over the signal line, and go short when it crosses below.

Advantage Analysis

The main advantages of this strategy are:

1. Strong ability to capture price change trends
2. Good filtering of price fluctuations
3. Relatively good divergence characteristics
4. Flexible parameter settings to adjust smoothing

Risk Analysis

There are also some risks in this strategy:

1. Wrong signals may occur at trend reversal points
2. Inappropriate parameter settings may miss trading opportunities or increase false signals
3. Parameters need proper adjustment to suit different products and trading environments
   Risks can be controlled by optimizing parameters, combining other indicators for confirmation, and setting stop loss.

Optimization Directions

This strategy can be optimized in the following aspects:

1. Test different price inputs, such as open, close, mid price, etc.
2. Adjust r, s, u parameter values to find optimal parameter combinations
3. Add other indicators or filters to further confirm signals
4. Set stop loss points and exit mechanisms

Conclusion

This strategy integrates considerations of momentum change, trend judgment and divergence features. It can effectively capture trend opportunities. With parameter optimization, signal filtering and risk control methods, good strategy performance can be achieved. Overall, the strategy is designed reasonably and worth further research and practice.