How to create algo strategy to automatically trigger reversal trades when a stock moves a certain %?
This can be used as base for 52 Week HL Strategy and as a base for any breakout trade as well.
But in this episode, we will be focussing on triggering reversal trades when a stock moves by 3%. So if a stock moves up by 3%, we will short it and viceversa. This is a simple mean reversion strategy.
So going into the script, the first thing we will do is store stock’s daily open and closing price into a variable.
price_close = close
price_open = open
Now we can then perform a calculation to determine the percentage price change.
price_change = price_close / price_open
The price_change
variable now holds the calculation. So for example, if a stock opened at 100 and rallied 3% to close at 103, the price_change
variable would be 103/100 which is 1.03.
But if the same stock opened at 100, and declined 3% to close at 97, the variable would read 97/100 which is 0.97.
As per the strategy, we already know that if a stock declined 3% or more, the price_change
variable would be 0.97 or less, and we want to go long as we are trading reversal.
So let’s write the code for taking the trades now.
if price_change < 0.97
strategy.entry(“long”, strategy.long, 100)
And the code to go short if a stock rallies more than 3%.
if price_change > 1.03
strategy.entry(“short”, strategy.short, 100)
Lastly, we will plot the price_change
variable in the data window to see and we can confirm that the trades are being executed.
plot(price_change)
And here are the results of our strategy.
This can be used as base for 52 Week HL Strategy and as a base for any breakout trade as well.
Check Out Script Library to get script used for this episode:
https://marketsecrets.in/script-library/
To know more, checkout:
Related
Getting started with algo-trading basics how to backtest a trading strategy? how to do algo trading in india? how to do algo trading in Zerodha? how to start with algo trading in india? how to use amibroker afl for algo trading? how to use pine script for algo trading? how to write algo trading scripts? step-by-step approach to start with algo-trading in India