Bollinger Bands Enhanced StrategyOverview
The common practice of using Bollinger bands is to use it for building mean reversion or squeeze momentum strategies. In the current script Bollinger Bands Enhanced Strategy we are trying to combine the strengths of both strategies types. It utilizes Bollinger Bands indicator to buy the local dip and activates trailing profit system after reaching the user given number of Average True Ranges (ATR). Also it uses 200 period EMA to filter trades only in the direction of a trend. Strategy can execute only long trades.
Unique Features
Trailing Profit System: Strategy uses user given number of ATR to activate trailing take profit. If price has already reached the trailing profit activation level, scrip will close long trade if price closes below Bollinger Bands middle line.
Configurable Trading Periods: Users can tailor the strategy to specific market windows, adapting to different market conditions.
Major Trend Filter: Strategy utilizes 100 period EMA to take trades only in the direction of a trend.
Flexible Risk Management: Users can choose number of ATR as a stop loss (by default = 1.75) for trades. This is flexible approach because ATR is recalculated on every candle, therefore stop-loss readjusted to the current volatility.
Methodology
First of all, script checks if currently price is above the 200-period exponential moving average EMA. EMA is used to establish the current trend. Script will take long trades on if this filtering system showing us the uptrend. Then the strategy executes the long trade if candle’s low below the lower Bollinger band. To calculate the middle Bollinger line, we use the standard 20-period simple moving average (SMA), lower band is calculated by the substruction from middle line the standard deviation multiplied by user given value (by default = 2).
When long trade executed, script places stop-loss at the price level below the entry price by user defined number of ATR (by default = 1.75). This stop-loss level recalculates at every candle while trade is open according to the current candle ATR value. Also strategy set the trailing profit activation level at the price above the position average price by user given number of ATR (by default = 2.25). It is also recalculated every candle according to ATR value. When price hit this level script plotted the triangle with the label “Strong Uptrend” and start trail the price at the middle Bollinger line. It also started to be plotted as a green line.
When price close below this trailing level script closes the long trade and search for the next trade opportunity.
Risk Management
The strategy employs a combined and flexible approach to risk management:
It allows positions to ride the trend as long as the price continues to move favorably, aiming to capture significant price movements. It features a user-defined ATR stop loss parameter to mitigate risks based on individual risk tolerance. By default, this stop-loss is set to a 1.75*ATR drop from the entry point, but it can be adjusted according to the trader's preferences.
There is no fixed take profit, but strategy allows user to define user the ATR trailing profit activation parameter. By default, this stop-loss is set to a 2.25*ATR growth from the entry point, but it can be adjusted according to the trader's preferences.
Justification of Methodology
This strategy leverages Bollinger bangs indicator to open long trades in the local dips. If price reached the lower band there is a high probability of bounce. Here is an issue: during the strong downtrend price can constantly goes down without any significant correction. That’s why we decided to use 200-period EMA as a trend filter to increase the probability of opening long trades during major uptrend only.
Usually, Bollinger Bands indicator is using for mean reversion or breakout strategies. Both of them have the disadvantages. The mean reversion buys the dip, but closes on the return to some mean value. Therefore, it usually misses the major trend moves. The breakout strategies usually have the issue with too high buy price because to have the breakout confirmation price shall break some price level. Therefore, in such strategies traders need to set the large stop-loss, which decreases potential reward to risk ratio.
In this strategy we are trying to combine the best features of both types of strategies. Script utilizes ate ATR to setup the stop-loss and trailing profit activation levels. ATR takes into account the current volatility. Therefore, when we setup stop-loss with the user-given number of ATR we increase the probability to decrease the number of false stop outs. The trailing profit concept is trying to add the beat feature from breakout strategies and increase probability to stay in trade while uptrend is developing. When price hit the trailing profit activation level, script started to trail the price with middle line if Bollinger bands indicator. Only when candle closes below the middle line script closes the long trade.
Backtest Results
Operating window: Date range of backtests is 2020.10.01 - 2024.07.01. It is chosen to let the strategy to close all opened positions.
Commission and Slippage: Includes a standard Binance commission of 0.1% and accounts for possible slippage over 5 ticks.
Initial capital: 10000 USDT
Percent of capital used in every trade: 30%
Maximum Single Position Loss: -9.78%
Maximum Single Profit: +25.62%
Net Profit: +6778.11 USDT (+67.78%)
Total Trades: 111 (48.65% win rate)
Profit Factor: 2.065
Maximum Accumulated Loss: 853.56 USDT (-6.60%)
Average Profit per Trade: 61.06 USDT (+1.62%)
Average Trade Duration: 76 hours
These results are obtained with realistic parameters representing trading conditions observed at major exchanges such as Binance and with realistic trading portfolio usage parameters.
How to Use
Add the script to favorites for easy access.
Apply to the desired timeframe and chart (optimal performance observed on 4h BTC/USDT).
Configure settings using the dropdown choice list in the built-in menu.
Set up alerts to automate strategy positions through web hook with the text: {{strategy.order.alert_message}}
Disclaimer:
Educational and informational tool reflecting Skyrex commitment to informed trading. Past performance does not guarantee future results. Test strategies in a simulated environment before live implementation
Meanreversion
BBPullback1.0.2This is a simple strategy script based on Bollinger Bands pullbacks.
The strategy is simple, as follows:
For LONGS: At the close of any candle, it check to see if this candle is an UP candle where the low broke below the lower Bollinger Band. If so, we call this the trigger candle. For the next bar, we issue a BUY signal if the price breaks above the high of the trigger candle. The stoploss is the low of the trigger candle. We take profit when the price goes above the middle Bollinger Band (the mean/average line).
For SHORTS: At the close of any candle, it check to see if this candle is an DOWN candle where the high broke above the upper Bollinger Band. If so, we call this the trigger candle. For the next bar, we issue a SELL signal if the price breaks below the low of the trigger candle. The stoploss is the high of the trigger candle. We take profit when the price goes below the middle Bollinger Band (the mean/average line).
I11L - Reversal Trading Ideas by Larry ConnorsThis is my own Twist on Larry Connors Simple Tradingideas.
It Combines the RSI, Averaging In and the Lowest Bars in a Single System.
The current Configuration is designed for the Daily Timeframe.
Feel free to play with the Parameters and keep in mind that Larry Intended to buy fear and sell the greed!
The Rules are the following:
---Buy---
Buy, if the lowest Bar of your Configuration has been hit (default is set to 7).
---Average Down--
Buy, if the lowest Bar of your Configuration * Your open trades has been hit AND only if the buyin is atleast 1% cheaper.
---Close---
Close, if the RSI closes above a certain level (default is set to 70).
---TP---
There is no TP
---SL---
There is no SL, so be cautions of your tail Risk!
tvbot Trend Following with Mean Reversion algoDefault settings are for the ETHUSDT 5 min Binance Chart regular candles.
Back test Default settings are 10,000 usd to start, Commission 0.075%, capital deployment per position is 10%, slippage value of 1.
This algo uses the EMA to set the trend line . You are also able to turn the trend line into a range instead of just a static line. The algo uses the VWMA to set the base entry parameters. When a candle closes above or below the VWMA it will record that price and then wait for the VWMA to meet the candle close price. When that happens the Base entry condition is met. (it causes the vwma to create a hook like structure. essentially tell you that the momentum has changed directions.)
The algo will always check to see if the trend line has either breached or has been tested and held. If this condition has been met it will then go to the base entry condition to check to see if the momentum has changed.
There is a mean reversion component in this algo as well. When the price has moved away from the mean(set by user) by a certain amount the algo will start to look for a top or bottom. Once that condition has been met it will then use the base entry condition to look for a change in momentum, but the mean reversion base entry condition uses the HMA to check for a change in momentum.
This algo effectively looks like a hamburger. Mean reversion being the tops and bottoms(bun) and the trend following(beef patty)
Mean reversionSimple mean reversion strategy.
Strategy aims to find three bullish or bearish candle pattern which ends with strong move. Position will be open until we get close above previous highs.
Strategy uses also simple moving average to filter short positions.
This strategy works well with QQQ and daily time frame but it seems to do fairly well intraday also.
User can modify moving average length and how strong is the move of the last candle.
This strategy is inspired a strategy by hackertrader. The original idea by QuantpT.
Steven Primo's bollinger bands strategyHi, this strategy is taken from a video made by Steven Primo. You can look it up on YouTube if you want to know about it.
It is a mean-reversion strategy based on the Bollinger Bands, in which we wait for 5 consecutive closes above the upper band, and for a short-term top. Once it happens, we place an entry order on this top, with a stop at the nearest bottom before the movement started, and use the difference from the stop and entry point to determine the target. For shorting, it's the same process, but for the downside. From my testing, only long orders were profitable, but you can configure whichever you want.
It works well for directional markets with a low level of noise, as you can see with the BTCUSD chart. One of its caveats is the short number of occurrences, and the long stop loss and target. You can enable a trailing stop, but from my testings, it just made the results worse.
I made some modifications, like removing the MA requirement, since the entry point was above it almost all the time, and I forced the BB to use a log version of the prices, so that discrepancies are eliminated. You'll also notice that you can't select an extension that is lower than 100, and that is intentional, since you're not supposed to enter a trade in which you can lose more than what you can earn.
I chose not to implement any kind of risk management, but I might do that in the future. You can leave your suggestions in the comments.
R3 ETF StrategyThis strategy is a modification of the “R3 Strategy” from the book "High Probability ETF Trading" by Larry Connors and Cesar Alvarez. This RSI strategy is for a 1-day time-frame and has these 3 simple rules:
Criteria:
The price must be above the 200 day moving average.
The 2-period (day) RSI drops 3 days in a row.
The 2-period RSI must have been below 60 3 days ago and below 10 today.
Entry and Exit:
If the 3 rules above are true, then buy on the close of the current day.
Exit on the day's close when the RSI crosses above 70.
How it works :
The Strategy will buy when the buy conditions above are true. The strategy will sell when the RSI crosses above 70. The RSI period/length, and RSI entry/exit criteria thresholds have all been coded to be adjustable with inputs.
Plots :
Blue line = 200 Day EMA (Used as Entry Criteria)
Disclaimer: Open-source scripts I publish in the community are largely meant to spark ideas that can be used as building blocks for part of a more robust trade management strategy. If you would like to implement a version of any script, I would recommend making significant additions/modifications to the strategy & risk management functions. If you don’t know how to program in Pine, then hire a Pine-coder. We can help!
Outside DayThis strategy is taken from Perry Kaufman's book "Trading System and Methods".
You can enter on the direction of the candle, or opposite to it. I find that the opposite tends to yield better results in volatile assets, allowing a better reward to risk ratio. There is no stop loss in this strategy, only a fixed take profit and a time limitation.
Low-High-Trend StrategyWhen asked what the key to successful investing was, Warren Buffet famously said “buy low, sell high.” Was he onto something? Today I am sharing with the community a simple “buy low, sell high” strategy with an optional trend filter and take-profit target. I’ve found that this strategy works well in a variety of markets but has a higher tendency to out-perform buy & hold in markets that are ranging sideways.
How it works:
The strategy tracks the highest and lowest price over the last X number of bars (you select the look-back period). The highest price line is plotted in green and the lowest price line is potted in red. If the price crosses over the lowest price in the last X number of bars, then a buy signal is generated. Exit options include a take-profit % or selling when the price crosses over the highest price in the last X amount of bars. I.e. “Buy low, sell high.” An EMA is also plotted as a blue trend line, and there is an option to only trade if the price is above the EMA trend line.
Disclaimer: Open source scripts I publish in the community are largely meant to spark ideas that can be used as building blocks for part of a more robust trade management strategy. Even though this example script beats buy and hold over the back-test time-frame, I wouldn't advise using it as a stand-alone strategy without significant additions/modifications to the strategy and risk management functions. In this example the script is being used as a medium-term strategy with just 10% leverage over account equity, a $25k start balance, and back-testing 10+ years. Modifiable slippage and commissions are included in the model.
Green line = Highest price in the look-back period
Red line = Lowest price in the look-back period
Blue line = EMA Trend
Mean Reversion Strategy v2 [KL]Description :
This strategy will enter a position when the following conditions are met:
a) Main signal: When source data (ATR) diverts from its moving average value, and
b) Confirmation: If predicted direction of trend is favorable.
Assumptions :
During periods of high price volatility, ATR diverts from its moving average value. Eventually, ATR should revert. But since just knowing the magnitude of increase/decrease of ATR does not indicate a trend signal, we need to introduce a model to predict the current trend.
In short:
• Trend Prediction : This strategy calculates the expected logarithmic return of the security (the "Drift") and considers prices to be moving in uptrend if the drift curve is upward sloping.
• Assessment of ATR diversion : To determine "yes/no" regarding whether ATR at a given point in time has diverted, this script conducts a two-tailed hypothesis test at each candlestick period. The null hypothesis (H0) is that the fast moving average value should equal the slow moving average value (say, denoted as H0: atr14 == atr28; it is assumed that atr28 is more meaningful for the purpose of describing the current trend because it has a larger sample size). Investopedia has an article summarizing this topic .
Exit Condition :
When trailing stop loss hits.
Previous version :
This strategy is based on Version 1 published back in September . This older version considers +/- one standard deviation to be the critical values relative to average ATR when testing whether ATR has diverted from the mean. This does not take Standard Error ("SE") into account. As a result, the threshold is often too wide and it generates too many entry signals.
[KL] Mean Reversion (ATR) StrategyThis strategy will enter into a position when price volatility is relative high, betting that price will subsequently trend in a favourable direction.
Hypothesis : During periods of high price volatility, ATR will divert from its moving average by at least +/- one standard deviation. Eventually, ATR will revert back to the mean. However, just knowing the magnitude of increase/decrease of ATR does not give a trend signal, so we need to introduce a model in this script to predict whether the next bars will be up/down.
Trend Prediction : This strategy calculates the expected logarithmic return of the security (the "Drift") and considers prices to be moving in uptrend if the drift curve is upward sloping or if the drift value is positive.
Entry Conditions : Long position is entered when:
(a) ATR has diverted from mean by one standard deviation, and
(b) trend is predicted to move in our favor.
Exit Condition : When trailing stop loss is hit.
Results from backtesting against VOO (1H timeframe):
- approx 46% win rate over 491 trades, on average holding for 20 hours per trade
- price at the beginning of backtest (Jan. 2015) was $187.52, giving holding period return of ~120% had we not sold in between ("HPR of HODL'ing")
- this strategy gained ~159%, exceeding ~120% HPR of HODL'ing
HYE Combo Market [Strategy] (Vwap Mean Reversion + Trend Hunter)In this strategy, I used a combination of trend hunter and vwap mean reversion strategies that I published before.
Trend Hunter Strategy:
Mean Reversion Vwap Strategy:
The results are quite impressive, especially for bitcoin.
While the hodl return for bitcoin was 13419%, the strategy's return in the same period was about 5 times (65000%) of this.
s3.tradingview.com
In this combo strategy, I made some changes to the original settings of the strategies used together and added some more new features.
Trend Hunter Strategy Settings: (Original / Combo)
- Slow Tenkansen Period : 9 / 9
- Slow Kijunsen Period : 26 / 13
- Fast Tenkansen Period : 5 / 3
- Fast Kijunsen Period : 13 / 7
- BB Length : 20 / 20
- BB Stdev : 2 / 2
- TSV Length : 13 / 20
- TSV Ema Length : 7 / 7
* I also added a "vidya moving average" to be used as a confirmation tool to open a long position. (Candle close must be above the vidya line.)
Vwap Mean Reversion Strategy Settings: (Original / Combo)
- Small Vwap : 2 / 8
- Big Vwap : 5 / 10
- Percent Below to Buy : 3 / 2
- RSI Period : 2 / 2
- RSI Ema Period : 5 / 5
- Maximum RSI Level for Buy : 30
* I also added a "mean vwap line" to be used for exits in this part of the strategy. In the original version, when small vwap crossovers big vwap, we close the position, but in this strategy we will wait for the close above the mean vwap.
TIPS AND WARNINGS
1-) The standard settings of this combo strategy is designed and tested with daily timeframe. For lower timeframes, you should change the strategy settings and find the best value for yourself.
2-) Only the mean vwap line is displayed on the graph. For a detailed view, you can delete the "//" marks from the plot codes in the strategy code.
3-) This is a strategy for educational and experimental purposes. It cannot be considered as investment advice. You should be careful and make your own risk assessment when opening real market trades using this strategy.
________________________________________________________
Bu stratejide, daha önce yayınladığım trend avcısı ve vwap ortalamaya geri dönüş stratejilerinin bir kombinasyonunu kullandım.
Sonuçlar özellikle bitcoin için oldukça etkileyici.
Bitcoin için hodl getirisi %13419 iken, stratejinin aynı dönemdeki getirisi bunun yaklaşık 5 katı (%65000) idi.
Bu kombo stratejide, birlikte kullanılan stratejilerin orijinal ayarlarında bazı değişiklikler yaptım ve bazı yeni özellikler ekledim.
Trend Avcısı Strateji Ayarları: (Orijinal / Combo)
- Yavaş Tenkansen Periyodu : 9 / 9
- Yavaş Kijunsen Periyodu : 26 / 13
- Hızlı Tenkansen Periyodu : 5 / 3
- Hızlı Kijunsen Periyodu : 13 / 7
- BB Uzunluğu : 20 / 20
- BB Standart Sapması : 2 / 2
- TSV Uzunluğu : 13 / 20
- TSV Ema Uzunluğu : 7 / 7
* Ayrıca long pozisyon açmak için onay aracı olarak kullanılmak üzere "vidya hareketli ortalama" ekledim. (Mum kapanışı vidya çizgisinin üzerinde olmalıdır.)
Vwap Ortalamaya Dönüş Stratejisi Ayarları: (Orijinal / Combo)
- Küçük Vwap : 2 / 8
- Büyük Vwap : 5 / 10
- Alış İçin Gerekli Fark Oranı : 3 / 2
- RSI Periyodu : 2 / 2
- RSI Ema Periyodu: 5 / 5
- Alış için gerekli maksimum RSI seviyesi : 30
* Stratejinin bu bölümünde pozisyondan çıkışlar için kullanılacak bir "ortalama vwap çizgisi" de ekledim. Orijinal versiyonda, küçük vwap, büyük vwap'ı yukarı kestiğinde pozisyonu kapatıyoruz, ancak bu stratejide, ortalama vwap'ın üzerindeki kapanışı bekleyeceğiz.
İPUÇLARI VE UYARILAR
1-) Bu birleşik stratejinin standart ayarları, günlük zaman dilimi ile tasarlanmış ve test edilmiştir. Daha düşük zaman dilimleri için strateji ayarlarını değiştirmeli ve kendiniz için en iyi değeri bulmalısınız.
2-) Grafikte sadece ortalama vwap çizgisi görüntülenir. Ayrıntılı bir görünüm için strateji kodundaki "plot" ile başlayan satırlarda grafikte görünmesini istediğiniz özelliğin önündeki "//" işaretlerini silebilirsiniz.
3-) Eğitim ve deneysel amaçlı bir stratejidir. Yatırım tavsiyesi olarak değerlendirilemez. Bu stratejiyi kullanarak gerçek piyasa işlem açarken dikkatli olmalı ve kendi risk değerlendirmenizi yapmalısınız.
dirt cheap yet elegant RSI StrategyFor Educational Purposes. Results can differ on different markets and can fail at any time. Profit is not guaranteed.
This only works in a few markets and in certain situations. Changing the settings can give better or worse results for other markets. This is a good way to show off a good looking strategy, atleast in paper, with minimal effort involved in the making and usage. It can be made with the most minimal lines of code if needed to bring shame unto others. It only works in a few markets and who knows if it will actually rebound from the overbought or oversold levels but in case it doesn't I put in a time-based stop to exit in case of that worst case scenario. There's not much to it, good for trolling others, or serious business, you decide.
Bollinger Bands Strategy with Intraday Intensity IndexFor Educational Purposes. Results can differ on different markets and can fail at any time. Profit is not guaranteed.
This only works in a few markets and in certain situations. Changing the settings can give better or worse results for other markets.
This is a mean reversion strategy based on Bollinger Bands and the Intraday Intensity Index (a volume indicator). John Bollinger mentions that the Intraday Intensity Index can be used with Bollinger Bands and is one of the top indicators he recommends in his book. It seems he prefers it over the other volume indicators that he compares to for some reason. III looks a lot like Chaikin Money Flow but without the denominator in that calculation. On the default settings of the BBs, the III helps give off better entry signals. John Bollinger however is vague on how to use the BBs and it's hard to say if one should enter when it is below/above the bands or when the price crosses them. I find that with many indicators and strategies it's best to wait for a confirmation of some sort, in this case by waiting for some crossover of a band. Like most mean reversion strategies, the exit is very loose if using BBs alone. Usually the plan to exit is when the price finally reverts back to the mean or in this case the middle band. This can potentially lead to huge drawdowns and/or losses. Mean reversion strategies can have high win/loss ratios but can still end up unprofitable because of the huge losses that can occur. These drawdowns/losses that mean reversion strategies suffer from can potentially eat away at a large chunk of all that was previously made or perhaps up to all of it in the worst cases, can occur weeks or perhaps up to months after being profitable trading such a strategy, and will take a while and several trades to make it all back or keep a profitable track record. It is important to have a stop loss, trailing stop, or some sort of stop plan with these types of strategies. For this one, in addition to exiting the trade when price reverts to the middle band, I included a time-based stop plan that exits with a gain or with a loss to avoid potentially large losses, and to exit after only a few periods after taking the trade if in profit instead of waiting for the price to revert back to the mean.
GMS: Mean Reversion StrategyThis is based on my GMS: Mean Reversion Indicator ()
Features:
- % Based Profit Target and Stop Loss
- SMA Trend Filter
- Can choose trade exit based off a moving average or linear regression curve
- Filter for long only trades, short only trades, or both at the same time.
Source code is open, so feel free to take a look!
I hope it helps,
Andre
Trend Following or Mean RevertingThe strategy checks nature of the instruments. It Buys if the close is greater than yesterday's high, reverse the position if the close is lower than yesterday's low and repeat the process.
1. If it is trend following then the equity curve will be in uptrend
2. If it is mean reverting then the equity curve will be downtrend
Thanks to Rayner Teo.
Mean Reversion Strategy by KrisWatersThis is a type of mean reversion strategy. It only generates long signals when the price is far away from the mean. It tries buy from the dip. Use it with BTC/USDT pair on 4 hour timeframe.
Bollinger Band Strategy (Basic) Version 1 This strategy is for learning purposes only. Pay special attention to these strategies on longer aggregation periods (like 1 hr chart or more). Don't expect accurate results when you set a limit to 10 cents above your entry to be accurate. For example if you set the chart to 1 day, the price may move down and hit a stop 10 times then tag your limit. If this doesn't make sense, just don't use strategies here. Learn more first. That being said, I don't have specific recommendations for each aggregation period, backtesting isn't always perfect.
Now then, this strategy can be used as the traditional BB method by setting the "Stop" and "Limit Out" to like 10000, check "Reversal Entry" and uncheck "Limit Time of Day" This will keep the strategy running just reverse your position when price crosses outside each band.
INPUTS:
Length - length of WMA that I used for mean of Bollinger Band (this may suppose to be SMA, too bad)
Source - O-H-L-C basis for WMA
Deviation - normal Standard deviation that would be set when using Bollinger Band
Trailing stop check box - your stop value will be either a hard stop or trailing stop for an exit
Stop - the stop value - remember you can set this really high and it won't stop out
Limit Out - the limit value for exit
Reversal Entry check box - This changes each entry from a reversal (traditional idea of BB) to enter a trend trade - hopefully version 2 will have choice to trend one direction and reversal in the other.
Limit Time of Day - Especially when trading futures, you may want to only trade a specific time of day, when this box is checked, you can set the entry times below, exit will still only occur based on limit/stop or a flip entry order (the opposite entry condition is met)
Tips:
when I don't know a thing about a price range, like gold. I can set the limit out to 10000 and play with a trailing stop to get a better idea of what is even possible before tuning further.
Mean-Reversion Swing Trading Strategy v1A port of the TradeStation EasyLanguage code for a mean-revision strategy described at
traders.com
"In “Mean-Reversion Swing Trading,” which appeared in the December 2016 issue of STOCKS & COMMODITIES, author Ken Calhoun
describes a trading methodology where the trader attempts to enter an existing trend after there has been a pullback.
He suggests looking for 50% pullbacks in strong trends and waiting for price to move back in the direction of the trend
before entering the trade."
See Also:
- 9 Mistakes Quants Make that Cause Backtests to Lie (blog.quantopian.com)
- When Backtests Meet Reality (financial-hacker.com)
- Why MT4 backtesting does not work (www.stevehopwoodforex.com)
Forex Master v4.0 (EUR/USD Mean-Reversion Algorithm)DESCRIPTION
Forex Master v4.0 is a mean-reversion algorithm currently optimized for trading the EUR/USD pair on the 5M chart interval. All indicator inputs use the period's closing price and all trades are executed at the open of the period following the period where the trade signal was generated.
There are 3 main components that make up Forex Master v4.0:
I. Trend Filter
The algorithm uses a version of the ADX indicator as a trend filter to trade only in certain time periods where price is more likely to be range-bound (i.e., mean-reverting). This indicator is composed of a Fast ADX and a Slow ADX, both using the same look-back period of 50. However, the Fast ADX is smoothed with a 6-period EMA and the Slow ADX is smoothed with a 12-period EMA. When the Fast ADX is above the Slow ADX, the algorithm does not trade because this indicates that price is likelier to trend, which is bad for a mean-reversion system. Conversely, when the Fast ADX is below the Slow ADX, price is likelier to be ranging so this is the only time when the algorithm is allowed to trade.
II. Bollinger Bands
When allowed to trade by the Trend Filter, the algorithm uses the Bollinger Bands indicator to enter long and short positions. The Bolliger Bands indicator has a look-back period of 20 and a standard deviation of 1.5 for both upper and lower bands. When price crosses over the lower band, a Long Signal is generated and a long position is entered. When price crosses under the upper band, a Short Signal is generated and a short position is entered.
III. Money Management
Rule 1 - Each trade will use a limit order for a fixed quantity of 50,000 contracts (0.50 lot). The only exception is Rule
Rule 2 - Order pyramiding is enabled and up to 10 consecutive orders of the same signal can be executed (for example: 14 consecutive Long Signals are generated over 8 hours and the algorithm sends in 10 different buy orders at various prices for a total of 350,000 contracts).
Rule 3 - Every order will include a bracket with both TP and SL set at 50 pips (note: the algorithm only closes the current open position and does not enter the opposite trade once a TP or SL has been hit).
Rule 4 - When a new opposite trade signal is generated, the algorithm sends in a larger order to close the current open position as well as open a new one (for example: 14 consecutive Long Signals are generated over 8 hours and the algorithm sends in 10 different buy orders at various prices for a total of 350,000 contracts. A Short Signal is generated shortly after the 14th Long Signal. The algorithm then sends in a sell order for 400,000 contracts to close the 350,000 contracts long position and open a new short position of 50,000 contracts).
