Dual and Triple Exponential Moving Average Crossover Strategy

Author: ChaoZhang, Date: 2024-01-03 16:47:08


I. Strategy Overview

This strategy is named “Dual and Triple Exponential Moving Average Crossover Strategy”. It combines the crossover signals of Dual Exponential Moving Average (DEMA) and Triple Exponential Moving Average (TEMA) to determine entries and exits.

II. Strategy Logic

This strategy mainly uses the crossover of Dual Exponential Moving Average (DEMA) and Triple Exponential Moving Average (TEMA) to generate trading signals.

The formula for DEMA is:

DEMA = 2*EMA1 - EMA2

Where EMA1 and EMA2 are Exponential Moving Averages with period N. DEMA combines the smoothness of EMA and responsiveness.

The formula for TEMA is:

TEMA = 3*(EMA1 - EMA2) + EMA3

Where EMA1, EMA2 and EMA3 are Exponential Moving Averages with period N. TEMA filters out fake breakouts by triple smoothing.

When DEMA crosses above TEMA, a buy signal is generated. When DEMA crosses below TEMA, a sell signal is generated. According to the crossover principle, it can capture cycle conversion timely.

III. Advantages

  1. Both DEMA and TEMA optimize EMA, improving trading accuracy.
  2. DEMA smooths price change, TEMA filters out fakeouts, forming synergy and improving win rate.
  3. Combining fast DEMA and slow TEMA, crossover signals are more reliable.
  4. Capturing cycle conversion timely based on crossover principle.

IV. Risks and Solutions

  1. Frequent crossover under volatility causes false signals. Parameter tuning needed.
  2. Inappropriate parameter setting affects signal quality. Parameter optimization required.
  3. Lack of fundamental validation. Other indicators or models can assist.

V. Optimization

  1. Test and optimize parameters of DEMA and TEMA to find best combination.
  2. Add other technical indicators for filtering, e.g. KDJ for trend.
  3. Add machine learning prediction to validate signals and reduce false signals.
  4. Check trading volume or sentiment to judge true or fake crossover.

VI. Summary

This strategy generates trading signals from DEMA and TEMA crossover, combining DEMA’s responsiveness and TEMA’s filtering capability to improve accuracy. But single indicator combo is prone to illusions. Multi-verification tools are still needed to form systematic trading system for long-term steady profits.

start: 2023-12-03 00:00:00
end: 2024-01-02 00:00:00
period: 2h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]

strategy("DEMA-TEMA Cross Strategy", shorttitle="DEMA-TEMA Cross", overlay=true)

// Input options for Double EMA (DEMA)
dema_length = input.int(10, title="DEMA Length", minval=1)
dema_src = input(close, title="DEMA Source")

// Calculate Double EMA (DEMA)
dema_e1 = ta.ema(dema_src, dema_length)
dema_e2 = ta.ema(dema_e1, dema_length)
dema = 2 * dema_e1 - dema_e2

// Input options for Triple EMA (TEMA)
tema_length = input.int(8, title="TEMA Length", minval=1)
tema_src = input(close, title="TEMA Source")

// Calculate Triple EMA (TEMA)
tema_ema1 = ta.ema(tema_src, tema_length)
tema_ema2 = ta.ema(tema_ema1, tema_length)
tema_ema3 = ta.ema(tema_ema2, tema_length)
tema = 3 * (tema_ema1 - tema_ema2) + tema_ema3

// Crossover signals for long (small green arrow below candle)
crossover_long = ta.crossover(dema, tema)

// Crossunder signals for short (small red arrow above candle)
crossunder_short = ta.crossunder(dema, tema)

plotshape(crossunder_short ? 1 : na, title="Short Entry", location=location.abovebar, color=color.red, style=shape.triangledown, size=size.small)
plotshape(crossover_long ? -1 : na, title="Long Entry", location=location.belowbar, color=color.green, style=shape.triangleup, size=size.small)

plot(dema, "DEMA", color=color.green)
plot(tema, "TEMA", color=color.blue)

if (crossover_long)
    strategy.entry("Long", strategy.long)

if (crossunder_short)
    strategy.entry("Short", strategy.short)