This strategy uses the Rate of Change (ROC) indicator to determine market direction and generate trading signals. The core idea of the strategy is to follow long-term trends and outperform the market by taking on greater risk.
A 6% stop loss is set. When stop loss is triggered, reverse position. This indicates we may be on the wrong side of the market so we exit immediately.
If ROC goes above 200, market is considered a bubble. When ROC falls back below bubble territory, go short signal is triggered. Require the bubble persists for at least 1 week.
Use fixed position sizing + incremental method. Increase/decrease position by $200 for every $400 gain/loss. This allows us to pyramid profits but also increases drawdown.
Advantages of this strategy:
Some risks also exist:
Some ways to optimize the strategy:
In summary, this is a long term trend following strategy centered around the ROC indicator. It aims to generate alpha by taking on higher risk. Further optimizations can improve its viability. The key is finding suitable risk tolerance.
/*backtest start: 2022-12-05 00:00:00 end: 2023-12-11 00:00:00 period: 1d basePeriod: 1h exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}] */ // This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/ // © gsanson66 //This strategy use the Rate of Change (ROC) of the closing price to send enter signal. //@version=5 strategy("RATE OF CHANGE BACKTESTING", shorttitle="ROC BACKTESTING", overlay=false, precision=3, initial_capital=1000, default_qty_type=strategy.cash, default_qty_value=950, commission_type=strategy.commission.percent, commission_value=0.18) //--------------------------------FUNCTIONS-----------------------------------// //@function Displays text passed to `txt` when called. debugLabel(txt, color, loc) => label.new(bar_index, loc, text = txt, color=color, style = label.style_label_lower_right, textcolor = color.black, size = size.small) //@function which looks if the close date of the current bar falls inside the date range inBacktestPeriod(start, end) => (time >= start) and (time <= end) //----------------------------------USER INPUTS----------------------------------// //Technical parameters rocLength = input.int(defval=365, minval=0, title='ROC Length', group="Technical parameters") bubbleValue = input.int(defval=200, minval=0, title="ROC Bubble signal", group="Technical parameters") //Risk management stopLossInput = input.float(defval=10, minval=0, title="Stop Loss (in %)", group="Risk Management") //Money management fixedRatio = input.int(defval=400, minval=1, title="Fixed Ratio Value ($)", group="Money Management") increasingOrderAmount = input.int(defval=200, minval=1, title="Increasing Order Amount ($)", group="Money Management") //Backtesting period startDate = input(title="Start Date", defval=timestamp("1 Jan 2017 00:00:00"), group="Backtesting Period") endDate = input(title="End Date", defval=timestamp("1 July 2024 00:00:00"), group="Backtesting Period") //-------------------------------------VARIABLES INITIALISATION-----------------------------// roc = (close/close[rocLength] - 1)*100 midlineConst = 0 var bool inBubble = na bool shortBubbleCondition = na equity = strategy.equity - strategy.openprofit strategy.initial_capital = 50000 var float capital_ref = strategy.initial_capital var float cashOrder = strategy.initial_capital * 0.95 bool inRange = na //------------------------------CHECKING SOME CONDITIONS ON EACH SCRIPT EXECUTION-------------------------------// //Checking if the date belong to the range inRange := true //Checking if we are in a bubble if roc > bubbleValue and not inBubble inBubble := true //Checking if the bubble is over if roc < 0 and inBubble inBubble := false //Checking the condition to short the bubble : The ROC must be above the bubblevalue for at least 1 week if roc[1]>bubbleValue and roc[2]>bubbleValue and roc[3]>bubbleValue and roc[4]>bubbleValue and roc[5]>bubbleValue and roc[6]>bubbleValue and roc[7]>bubbleValue shortBubbleCondition := true //Checking performances of the strategy if equity > capital_ref + fixedRatio spread = (equity - capital_ref)/fixedRatio nb_level = int(spread) increasingOrder = nb_level * increasingOrderAmount cashOrder := cashOrder + increasingOrder capital_ref := capital_ref + nb_level*fixedRatio if equity < capital_ref - fixedRatio spread = (capital_ref - equity)/fixedRatio nb_level = int(spread) decreasingOrder = nb_level * increasingOrderAmount cashOrder := cashOrder - decreasingOrder capital_ref := capital_ref - nb_level*fixedRatio //Checking if we close all trades in case where we exit the backtesting period if strategy.position_size!=0 and not inRange debugLabel("END OF BACKTESTING PERIOD : we close the trade", color=color.rgb(116, 116, 116), loc=roc) strategy.close_all() //-------------------------------LONG/SHORT CONDITION-------------------------------// //Long condition //We reduce noise by taking signal only if the last roc value is in the same side as the current one if (strategy.position_size<=0 and ta.crossover(roc, midlineConst)[1] and roc>0 and inRange) //If we were in a short position, we pass to a long position qty = cashOrder/close strategy.entry("Long", strategy.long, qty) stopLoss = close * (1-stopLossInput/100) strategy.exit("Long Risk Managment", "Long", stop=stopLoss) //Short condition //We take a short position if we are in a bubble and roc is decreasing if (strategy.position_size>=0 and ta.crossunder(roc, midlineConst)[1] and roc<0 and inRange) or (strategy.position_size>=0 and inBubble and ta.crossunder(roc, bubbleValue) and shortBubbleCondition and inRange) //If we were in a long position, we pass to a short position qty = cashOrder/close strategy.entry("Short", strategy.short, qty) stopLoss = close * (1+stopLossInput/100) strategy.exit("Short Risk Managment", "Short", stop=stopLoss) //--------------------------------RISK MANAGEMENT--------------------------------------// //We manage our risk and change the sense of position after SL is hitten if strategy.position_size == 0 and inRange //We find the direction of the last trade id = strategy.closedtrades.entry_id(strategy.closedtrades-1) if id == "Short" qty = cashOrder/close strategy.entry("Long", strategy.long, qty) stopLoss = close * (1-stopLossInput/100) strategy.exit("Long Risk Managment", "Long", stop=stopLoss) else if id =="Long" qty = cashOrder/close strategy.entry("Short", strategy.short, qty) stopLoss = close * (1+stopLossInput/100) strategy.exit("Short Risk Managment", "Short", stop=stopLoss) //---------------------------------PLOTTING ELEMENTS---------------------------------------// //Plotting of ROC rocPlot = plot(roc, "ROC", color=#7E57C2) midline = hline(0, "ROC Middle Band", color=color.new(#787B86, 25)) midLinePlot = plot(0, color = na, editable = false, display = display.none) fill(rocPlot, midLinePlot, 40, 0, top_color = strategy.position_size>0 ? color.new(color.green, 0) : strategy.position_size<0 ? color.new(color.red, 0) : na, bottom_color = strategy.position_size>0 ? color.new(color.green, 100) : strategy.position_size<0 ? color.new(color.red, 100) : na, title = "Positive area") fill(rocPlot, midLinePlot, 0, -40, top_color = strategy.position_size<0 ? color.new(color.red, 100) : strategy.position_size>0 ? color.new(color.green, 100) : na, bottom_color = strategy.position_size<0 ? color.new(color.red, 0) : strategy.position_size>0 ? color.new(color.green, 0) : na, title = "Negative area")template: strategy.tpl:40:21: executing "strategy.tpl" at <.api.GetStrategyListByName>: wrong number of args for GetStrategyListByName: want 7 got 6