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Adaptive Moving Average and Weighted Moving Average Crossover Trading Strategy

Author: ChaoZhang, Date: 2024-01-23 14:13:55
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Overview

This strategy generates trading signals based on the Adaptive Indicator for Moving Averages (AIOMA) and the Weighted Moving Average (WMA) indicators. It produces buy and sell signals based on the crossovers between AIOMA and WMA.

Strategy Name

AIOMA-WMA Adaptive Crossover Strategy

Strategy Logic

The strategy includes the following main components:

  1. AIOMA Indicator Calculation

    • Calculate a series of Exponential Moving Averages (EMA) with specified length
    • Chain these EMAs to create smoothed values
    • The final AIOMA is an EMA of the last smoothed value

  2. WMA Indicator Calculation

    • Calculate WMA with specified length

  3. Signal Generation

    • Buy signal when WMA crosses above AIOMA
    • Sell signal when WMA crosses below AIOMA

  4. Trading Logic

    • Enter long position on buy signal
    • Enter short position on sell signal
    • Close position on reverse crossover signals

Advantages

  1. Using two different types of moving averages improves signal accuracy
  2. AIOMA reduces false signals through multiple exponential smoothings
  3. WMA as the main indicator reacts faster to price changes to capture trends early
  4. Simple trading logic, easy to understand and implement

Risks

  1. Excessive lagging due to multiple EMA smoothings
  2. WMA prone to wrong signals from short-term price fluctuations
  3. No stop loss logic, can lead to large losses

Can reduce risks through parameter optimization, adding stop loss, filtering with other indicators etc.

Enhancement Areas

  1. Test different parameter combinations to find optimal values
  2. Trigger stop loss orders together with entry signals
  3. Filter signals using volatility indicators
  4. Incorporate position sizing strategies

Conclusion

This strategy combines the strengths of AIOMA and WMA by using crossovers to generate trading signals. Compared to single moving averages, it improves signal quality. Further refinements like parameter optimization, stop loss strategies, volatility filtering etc. can make it a robust trading system.

/*backtest
start: 2023-12-01 00:00:00
end: 2023-12-31 23:59:59
period: 1h
basePeriod: 15m
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/
// © SDTA

//@version=5
strategy("AIOMA-WMA Strategy", overlay=true)

// Parametreler
aioma_length = input(14, "AIOMA Length")
wma_length = input(21, "WMA Length")

// AIOMA hesaplama
length1 = aioma_length
ema1 = ta.ema(close, length1)
length2 = aioma_length
ema2 = ta.ema(ema1, length2)
length3 = aioma_length
ema3 = ta.ema(ema2, length3)
length4 = aioma_length
ema4 = ta.ema(ema3, length4)
aioma = ta.ema(ema4, aioma_length)

// WMA hesaplama
wma = ta.wma(close, wma_length)

// Kesişim kontrolü
cross_up = ta.crossover(wma, aioma)
cross_down = ta.crossunder(wma, aioma)

// İşlem fonksiyonu
enterTrade(dir, price, signalText, color) =>
    if dir
        strategy.entry("Enter", strategy.long)
        label.new(x = bar_index, y = price, text = signalText, color = color, textcolor = color, style = label.style_label_up, size = size.small, tooltip = "Entry Signal")
    else if not dir
        strategy.entry("Exit", strategy.short)
        label.new(x = bar_index, y = price, text = signalText, color = color, textcolor = color, style = label.style_label_down, size = size.small, tooltip = "Exit Signal")

// Long pozisyon girişi
if cross_up
    enterTrade(true, low, "Buy Signal", color.green)

// Short pozisyon girişi
if cross_down
    enterTrade(false, high, "Sell Signal", color.red)

// Pozisyon kapatma
if cross_up and strategy.position_size > 0
    strategy.close("Enter")
if cross_down and strategy.position_size < 0
    strategy.close("Exit")

// Grafiğe plot
plot(aioma, color=color.blue, linewidth=2, title="AIOMA")
plot(wma, color=color.red, linewidth=2, title="WMA")
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