SMA and ATR Based Trend Tracking Strategy
Author: ChaoZhang, Date: 2024-01-18 16:04:51Tags:
I. Strategy Name
The strategy is named SMA and ATR Based Trend Tracking Strategy.
II. Strategy Overview
This strategy uses the SMA indicator to determine the price trend direction and sets stop loss positions with the ATR indicator to track the trend. It goes short when the price breaks down an uptrend and goes long when the price breaks through a downtrend to implement trend trading.
III. Strategy Principle
1. Entry Signals
(1) Go long when the close price rises and is higher than SMA.
(2) Go short when the close price falls and is lower than SMA.
2. Stop Loss Setting
Use the ATR indicator’s value multiplied by the set stop loss multiple as the stop loss position.
3. Stop Loss Updating
After each bar’s close, check the stop loss position and update it to a stop loss value closer to the current price.
4. Exit Signals
Actively stop loss when price touches stop loss line.
IV. Advantages of Strategy
1. Strong Trend Tracking Ability
The dynamic stop loss setting of the ATR indicator enables automatic tracking of trends.
2. Good Drawdown Control
Strict stop loss rules help control maximum drawdown per trade.
3. Simple Parameter Setting
Only 3 parameters make adjustment and optimization easy.
V. Risks of Strategy
1. Risk of Stop Loss being too Loose
If the stop loss multiple is set too high, the stop loss position may be too loose, thus increasing drawdown.
2. Risks of False Breakout
Price false breakouts may lead to missing the trend direction. Other indicators should be used to filter signals.
3. Risks of Parameter Optimization
Excessive reliance on parameter optimization may lead to curve fitting. The stability of parameters should be carefully evaluated.
VI. Strategy Optimization Directions
1. Optimizing Stop Loss Algorithm
Other types of stop loss algorithms can be tested, such as moving stop loss, proportional stop loss, etc.
2. Adding Filter Signals
Other indicators can be added to filter false breakouts. For example, adding trading volume conditions.
3. Evaluating Stability of Parameters
Back-testing history to evaluate parameters’ adaptability to different products and timeframes.
VII. Summary
The overall idea of this strategy is clear. It judges trend direction through SMA and uses ATR to track trends with good drawdown control. It is suitable for medium-long term trend trading. But parameters still need proper adjustment in live trading, and risks of over-optimization should be prevented.
/*backtest
start: 2024-01-16 00:00:00
end: 2024-01-16 17:00:00
period: 1m
basePeriod: 1m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/
// This Pine Script™ code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © omererkan
//@version=5
strategy(title="SMA with ATR", overlay=true)
smaLen = input.int(100, title="SMA Length")
atrLen = input.int(10, title="ATR Length")
stopOffset = input.float(4, title="Stop Offset Multiple", step=0.25)
smaValue = ta.sma(close, smaLen)
stopValue = ta.atr(atrLen) * stopOffset
lowerCloses = close < close[1] and
close[1] < close[2] and
close[2] < close[3]
enterLong = close > smaValue and
lowerCloses
longStop = 0.0
longStop := if enterLong and strategy.position_size < 1
close - stopValue
else
math.max(close - stopValue, longStop[1])
higherCloses = close > close[1] and
close[1] > close[2] and
close[2] > close[3]
enterShort = close < smaValue and
higherCloses
shortStop = 0.0
shortStop := if enterShort and strategy.position_size > -1
close + stopValue
else
math.min(close + stopValue, shortStop[1])
plot(smaValue, color=#4169e1, linewidth=2, title="SMA")
plot(strategy.position_size > 0 ? longStop : na, color=color.lime,
style=plot.style_linebr, title="Long stop", linewidth=2)
plot(strategy.position_size < 0 ? shortStop : na, color=color.red,
style=plot.style_linebr, title="Short stop", linewidth=2)
if enterLong
strategy.entry("EL", strategy.long)
if enterShort
strategy.entry("ES", strategy.short)
if strategy.position_size > 0
strategy.exit("SL Long", from_entry="EL", stop=longStop)
if strategy.position_size < 0
strategy.exit("SL Short", from_entry="ES", stop=shortStop)
if enterLong
strategy.cancel("Exit Short")
if enterShort
strategy.cancel("Exit Long")
template: strategy.tpl:40:21: executing "strategy.tpl" at <.api.GetStrategyListByName>: wrong number of args for GetStrategyListByName: want 7 got 6