AFL for Intraday Trend Following Strategy using MACD and Bollinger Band
Trend following is certainly a sure-shot way to mint money during rising or falling markets. At sideways trend it can be painful due to consecutive whipsaws but there is no way to avoid that. The only thing we can try is to minimize whipsaws using combination of indicators. The intraday trend following strategy that we are going to discuss uses combination of MACD and Bollinger Bands to indicate trading opportunities. MACD is used to identify the direction of market (uptrend or downtrend) while Bollinger bands are used to catch only strong trends and avoid unnecessary whipsaws. This is a pure intraday strategy as none of the positions are carried forward. The strategy has a decent success rate in 5 minutes timeframe. Also, the CAGR of 40%~ in 4 years backtesting period is commendable.
Script:
_SECTION_BEGIN(“MACD Intraday Trend Following Strategy”);
SetTradeDelays( 1, 1, 1, 1 );
SetOption( “InitialEquity”, 200000);
SetOption(“FuturesMode” ,True);
SetOption(“MinShares”,1);
SetOption(“CommissionMode”,2);
SetOption(“CommissionAmount”,100);
SetOption(“AccountMargin”,10);
SetOption(“RefreshWhenCompleted”,True);
SetPositionSize(100,spsPercentOfEquity);
SetOption( “AllowPositionShrinking”, True );
SetOption(“MaxOpenPositions”,10);
BuyPrice=Open;
SellPrice=Open;
ShortPrice=Open;
CoverPrice=Open;
SetChartOptions(0,chartShowArrows|chartShowDates);
_N(Title = StrFormat(“{{NAME}} – {{INTERVAL}} {{DATE}} Open %g, Hi %g, Lo %g, Close %g (%.1f%%) {{VALUES}}”, O, H, L, C ));
Plot( Close, “Price”, colorWhite, styleCandle );
NewDay = (Day()!= Ref(Day(), -1)) OR BarIndex() == 0;
Plot(NewDay,””,colorlightGrey,styleHistogram|styleDots|styleNoLabel|styleOwnScale);
FirstTradeTime=093000;
SquareOffTime = 151500;
r1 = Param( “Fast avg”, 12, 2, 200, 1 );
r2 = Param( “Slow avg”, 26, 2, 200, 1 );
r3 = Param( “Signal avg”, 9, 2, 200, 1 );
ml = MACD(r1, r2);
sl = Signal(r1,r2,r3);
Hist= ml-sl;
Periods = Param(“Periods”, 20, 10, 100, 10 );
Width = Param(“Width”, 3, 1, 10, 1 );
Color = ParamColor(“Color”, colorCycle );
Style = ParamStyle(“Style”);
Plot( BBandTop( C, Periods, Width ), “BBTop” + _PARAM_VALUES(), Color, Style );
Plot( BBandBot( c, Periods, Width ), “BBBot” + _PARAM_VALUES(), Color, Style );
Buy= Cross(ml , sl) AND Hist>0 AND TimeNum()>= FirstTradeTime AND Close>BBandTop( C, Periods, Width ) AND TimeNum()<SquareOffTime;
Short= Cross( sl, ml) AND hist<0 AND TimeNum() >= FirstTradeTime AND Close<BBandBot( C, Periods, Width ) and TimeNum()<SquareOffTime;
Sell=short OR TimeNum() >= SquareOffTime;
Cover=buy OR TimeNum() >= SquareOffTime;
Buy=ExRem(Buy,Sell);
Sell=ExRem(Sell,Buy);
Short=ExRem(Short,Cover);
Cover=ExRem(Cover,Short);
StopLoss=Param(“stop”,0.5,0.5,3,0.5);
ApplyStop(Type=0,Mode=1,Amount=StopLoss);
Target=Param(“Target”,3,0.5,5,0.5);
ApplyStop(Type=1,Mode=1,Amount=Target);
printf(“\nBuy : ” + Buy );
printf(“\nSell : ” + Sell );
printf(“\nShort : ” + Short );
printf(“\nCover : ” + Cover );
printf(“\nml : ” + ml );
printf(“\nsl : ” + sl );
printf(“\nHist : ” + Hist );
/* Plot Buy and Sell Signal Arrows */
PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorGreen, 0, L, Offset=-40);
PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorLime, 0,L, Offset=-50);
PlotShapes(IIf(Buy, shapeUpArrow, shapeNone),colorWhite, 0,L, Offset=-45);
PlotShapes(IIf(Cover, shapeSquare, shapeNone),colorGreen, 0, L, Offset=-40);
PlotShapes(IIf(Cover, shapeSquare, shapeNone),colorLime, 0,L, Offset=-50);
PlotShapes(IIf(Cover, shapeUpArrow, shapeNone),colorWhite, 0,L, Offset=-45);
PlotShapes(IIf(Sell, shapeSquare, shapeNone),colorRed, 0, H, Offset=40);
PlotShapes(IIf(Sell, shapeSquare, shapeNone),colorOrange, 0,H, Offset=50);
PlotShapes(IIf(Sell, shapeDownArrow, shapeNone),colorWhite, 0,H, Offset=-45);
PlotShapes(IIf(Short, shapeSquare, shapeNone),colorRed, 0, H, Offset=40);
PlotShapes(IIf(Short, shapeSquare, shapeNone),colorOrange, 0,H, Offset=50);
PlotShapes(IIf(Short, shapeDownArrow, shapeNone),colorWhite, 0,H, Offset=-45);
_SECTION_END();