ChaoZhang
Overview
This strategy combines the Ichimoku Cloud, short-term (55) and long-term (200) Simple Moving Averages (SMA) to identify potential buy and sell signals. Buy signals require the price to be above the cloud and long-term SMA, and to retest the short-term SMA after crossing above it. Sell signals require the price to be below the cloud and long-term SMA, and to retest the short-term SMA after crossing below it. The strategy avoids generating signals during ranging markets or high news events, as these periods tend to have more fake-outs. Backtesting shows the strategy performs best on the 1-hour and 2-hour timeframes.
Strategy Principles
The strategy is based on the following principles: 1. When price is above the cloud and long-term SMA, the market is in an uptrend. 2. When price is below the cloud and long-term SMA, the market is in a downtrend. 3. Crossovers of the short-term SMA confirm trends, and retests of the short-term SMA provide low-risk entry opportunities. 4. Ranging markets and high news events have more fake-outs and should be avoided.
The code first calculates the required Ichimoku Cloud components (Conversion Line, Base Line, Leading Span A and B), as well as the short-term and long-term SMAs. It then defines multiple conditions to identify the price position relative to the cloud and moving averages. When all buy/sell conditions are met, the code generates buy and sell signals respectively.
Strategy Advantages
- Combines multiple indicators to confirm trends, improving signal reliability. The Ichimoku Cloud filters out noise, while SMA crossovers confirm trends.
- Seeks low-risk entry opportunities on retests of moving averages within confirmed trends.
- Further reduces fake-out risks by avoiding trades during ranging markets and high news events.
- Suitable for medium to long-term trading on 1-hour and 2-hour timeframes, capturing big trends with large profit potential.
Strategy Risks
- Losses may occur during trend reversals. Although moving average crossovers and cloud breakouts confirm trends, they still lag.
- Lacks clear stop-loss levels. Current conditions focus on entry timing but do not define specific exit points.
- Parameter selection is subjective and uncertain. Different choices of cloud parameters, moving average lengths, etc. will affect strategy performance.
Strategy Optimization Directions
- Introduce clear stop-loss levels, such as previous high/low breaches, ATR multiples, etc., to reduce single trade risk.
- Cross-reference with other trend confirmation indicators, such as MACD, DMI, etc., to form more robust signal combinations.
- Optimize parameters to find the best combination that improves the strategy’s adaptability to various market conditions.
- Differentiate between trending and ranging markets, actively enter positions in trends while reducing trading frequency in ranges.
Summary
The “Ichimoku Cloud and Moving Average Strategy” seeks low-risk entry opportunities by combining the Ichimoku Cloud with Simple Moving Averages within established trends. By filtering out trades during ranging markets and high news events, the strategy reduces fake-out risks and improves overall performance. It is mainly suitable for medium to long-term traders and performs well on 1-hour and 2-hour timeframes. However, there is still room for further optimization, such as introducing clear stop-losses, optimizing signal combinations, and tuning parameters, to achieve more robust strategy performance.
/*backtest
start: 2023-05-11 00:00:00
end: 2024-05-16 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
//@version=5
strategy("Ichimoku Cloud and Moving Average Strategy", shorttitle="ICMA", overlay=true)
// Input parameters
shortMA = input.int(55, title="Short-term Moving Average Length")
longMA = input.int(200, title="Long-term Moving Average Length")
// Calculate moving averages
shortSMA = ta.sma(close, shortMA)
longSMA = ta.sma(close, longMA)
// Ichimoku Cloud settings
conversionPeriod = input.int(9, title="Conversion Line Period")
basePeriod = input.int(26, title="Base Line Period")
spanBPeriod = input.int(52, title="Span B Period")
displacement = input.int(26, title="Displacement")
// Calculate Ichimoku Cloud components
conversionLine = ta.sma(high + low, conversionPeriod) / 2
baseLine = ta.sma(high + low, basePeriod) / 2
leadSpanA = (conversionLine + baseLine) / 2
leadSpanB = ta.sma(high + low, spanBPeriod) / 2
// Plot Ichimoku Cloud components
plot(leadSpanA, color=color.blue, title="Leading Span A")
plot(leadSpanB, color=color.red, title="Leading Span B")
// Entry conditions
aboveCloud = close > leadSpanA and close > leadSpanB
belowCloud = close < leadSpanA and close < leadSpanB
aboveShortMA = close > shortSMA
aboveLongMA = close > longSMA
belowShortMA = close < shortSMA
belowLongMA = close < longSMA
// Buy condition (Price retests 55 moving average after being above it)
buyCondition = aboveCloud and aboveLongMA and close[1] < shortSMA and close > shortSMA
// Sell condition (Price retests 55 moving average after being below it)
sellCondition = belowCloud and belowLongMA and close[1] > shortSMA and close < shortSMA
// Strategy entry and exit
strategy.entry("Buy", strategy.long, when = buyCondition)
strategy.entry("Sell", strategy.short, when = sellCondition)
// Plot moving averages
plot(shortSMA, color=color.green, title="Short-term SMA")
plot(longSMA, color=color.red, title="Long-term SMA")
// Plot buy and sell signals
plotshape(series=buyCondition, style=shape.triangleup, location=location.belowbar, color=color.green, size=size.small, title="Buy Signal")
plotshape(series=sellCondition, style=shape.triangledown, location=location.abovebar, color=color.red, size=size.small, title="Sell Signal")