This strategy is made for market timing in the bull markets. Hence, more ideal to use it with index ETFs or high conviction large caps.
This makes use of different custom indicators:
Multi Band Channel - Overbought/Oversold Oscillator
VixFix Linear regression
Regular Linear Regression.
Multi Band Oscillator is used for identifying overbought/oversold state of the instrument. This is used in conjunction with VIXFix Linear Regression to to find market bottoms for entry conditions.
Few parameters are explained below:
CheckBandDistance - If checked checks for narrow bands and ignore signals when crossover happens in narrow bands.
ConsiderOversoldDaysCounter/ConsiderOverboughtDaysCounter - If checked, considers oversold and overbought crossovers only if instrument stays in oversold/overbought state for that many bars.
UseLinearRegressionToOpen/UseLinearRegressionToClose - If checked, combines linear regression along with overbought/oversold condition for entry and exits.
UseVixFixToOpen - Uses VixFixLinear regression to identify market bottom and this condition will be combined with oversold/overbought state. When using VixFixLinearRegression signal, we can allow generating entry signals during non crossover bars. Vix Fix Entry Range sets the max bar for multi band state to be for generating signal. For example, if Vix Fix Entry Range is set to oversold, signal is generated based on VixFix if price is below oversold.
ExitStrategy - This can be trailing/reversal or combined. If set to reversal, exit will happen on state moving out of oversold region. If set to Trailing, stop will be based on trailing stops. Indicator shows what is the present stop value. If set to combined, exit will happen on stages. 30% of the remaining position gets closed upon reversals. State may go into oversold and return back many times before having full exit. If this happens, each time, 30% of the position will be closed. Full position closure happens on hitting training stop.
Candles are colored based on linear regression.
Green -> positive and moving up
Lime -> Positive moving down
Orange -> Negative moving up
Red -> Negative moving down
Purple -> Possible VixFix peak - aka Market bottom
Another snapshot of the script along with Linear regression and VIXFix-LinReg indicators:
I have not put additional indicators to identify trend. But, can be combined with higher timeframe trend filters to generate better signals. Making this as invite only script as I find it very lucrative to time index ETFs. Please PM me if you want to try this script.
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Added maxLossPercentage for protection. This is set to 50 by default to allow more room for instrument to recover during dips.
VixStateEntry disabled for reversal Exits. If exit type is reversal, entry is only done in oversold region.
Note: Only parameter you need to set is Exit Strategy. More trending instruments such as Nasdaq, trailing stop is better method. More volatile (BTC) or less aggressive instruments (XJO) - reversal exits are better suited.
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Add optional donchian trend filter for strengthening entry and exits.
Minor optimizations on oversold-overbought boundaries
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Add optional higher time frame moving average condition
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Added option to use different initial stop multiplier. Removed trail percentage stop.
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Ignore oversold days for entry when exit condition based on trailing stops
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Added option to use custom moving average for ATR. Settings optimized for non leveraged index ETFs - SPX, QQQ, DIA, IWM
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Added trailProfitPercent - after which tighter trailing will be done.
Updated Stoploss values before tightened trailing.
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Updated implementation to use strategy.order instead of strategy.entry to allow regular topups
Added trade stats table
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Added reduce percent input
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Default VIX-Fix entry changed to overbought (Meaning allow entry if it is not in overbought condition)
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Major update - added divergence based confirmations which makes the strategy much stronger
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Major updates:
Refine divergence based filters.
Updated display information on major entry criteria - this includes volatility, momentum and divergence.
Added custom alerts using alert function. This will generate additional alerts based on overbought oversold conditions and can be used for reduce/reload positions.
New custom alert has to be configured in slightly different way: