The Binomial Momentum Breakout Reversal Strategy combines the Stochastic indicator and Bull Power indicator to implement dual signal filtering and reversal trading at market turning points to chase oversold and overbought situations.
The strategy consists of two parts:
123 Reversal Strategy
It uses the reversal strategy proposed by Ulf Jensen in his book “How I Tripled My Money in the Futures Market”. It goes long when the close price is higher than the previous close for 2 consecutive days and the 9-day slow stochastic is below 50; it goes short when the close price is lower than the previous close for 2 consecutive days and the 9-day fast stochastic is above 50.
Bull Power Indicator
It uses the momentum indicator proposed by Vadim Gimelfarb in his book “Bull and Bear Balance Indicator”. It judges the bullish/bearish power by calculating the relationship between the current K-line and previous K-line, and generates trading signals.
The strategy combines the above two single signal strategies. It generates trading signals only when the signals of two strategies are consistent to implement dual signal filtering.
The strategy combines the advantages of reversal strategies and tracking strategies. It can capture reversal signals timely when the market shows signs of reversal, while reducing false signals through dual signal filtering to avoid chasing highs and selling lows. The main advantages are:
The strategy also has some risks:
The counter measures:
The strategy can be further optimized in the following aspects:
The Binomial Momentum Breakout Reversal Strategy combines the Stochastic indicator and Bull Power indicator to achieve dual signal filtering and reversal trading. It can seize market reversal opportunities and avoid noise generated by single signals. It is a stable and effective quantitative strategy. The strategy can be improved through parameter optimization, stop loss strategies, signal verification, etc., making it suitable for more varieties and market environments. It has great potential for optimization and application.
/*backtest start: 2024-01-01 00:00:00 end: 2024-01-31 23:59:59 period: 1h basePeriod: 15m exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}] */ //@version=4 //////////////////////////////////////////////////////////// // Copyright by HPotter v1.0 05/07/2019 // This is combo strategies for get a cumulative signal. // // First strategy // This System was created from the Book "How I Tripled My Money In The // Futures Market" by Ulf Jensen, Page 183. This is reverse type of strategies. // The strategy buys at market, if close price is higher than the previous close // during 2 days and the meaning of 9-days Stochastic Slow Oscillator is lower than 50. // The strategy sells at market, if close price is lower than the previous close price // during 2 days and the meaning of 9-days Stochastic Fast Oscillator is higher than 50. // // Second strategy // Bull Power Indicator // To get more information please see "Bull And Bear Balance Indicator" // by Vadim Gimelfarb. // // WARNING: // - For purpose educate only // - This script to change bars colors. //////////////////////////////////////////////////////////// Reversal123(Length, KSmoothing, DLength, Level) => vFast = sma(stoch(close, high, low, Length), KSmoothing) vSlow = sma(vFast, DLength) pos = 0.0 pos := iff(close[2] < close[1] and close > close[1] and vFast < vSlow and vFast > Level, 1, iff(close[2] > close[1] and close < close[1] and vFast > vSlow and vFast < Level, -1, nz(pos[1], 0))) pos BullPower(SellLevel, BuyLevel) => pos = 0 value = iff (close < open , iff (close[1] < open , max(high - close[1], close - low), max(high - open, close - low)), iff (close > open, iff(close[1] > open, high - low, max(open - close[1], high - low)), iff(high - close > close - low, iff (close[1] < open, max(high - close[1], close - low), high - open), iff (high - close < close - low, iff(close[1] > open, high - low, max(open - close, high - low)), iff (close[1] > open, max(high - open, close - low), iff(close[1] < open, max(open - close, high - low), high - low)))))) pos := iff(value > SellLevel, -1, iff(value <= BuyLevel, 1, nz(pos[1], 0))) pos strategy(title="Combo Backtest 123 Reversal & Bull Power", shorttitle="Combo", overlay = true) Length = input(14, minval=1) KSmoothing = input(1, minval=1) DLength = input(3, minval=1) Level = input(50, minval=1) //------------------------- SellLevel = input(15, step=1) BuyLevel = input(3, step=1) reverse = input(false, title="Trade reverse") posReversal123 = Reversal123(Length, KSmoothing, DLength, Level) posBullPower = BullPower(SellLevel, BuyLevel) pos = iff(posReversal123 == 1 and posBullPower == 1 , 1, iff(posReversal123 == -1 and posBullPower == -1, -1, 0)) possig = iff(reverse and pos == 1, -1, iff(reverse and pos == -1, 1, pos)) if (possig == 1) strategy.entry("Long", strategy.long) if (possig == -1) strategy.entry("Short", strategy.short) if (possig == 0) strategy.close_all() barcolor(possig == -1 ? #b50404: possig == 1 ? #079605 : #0536b3 )