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Simple SWING trading strategy using EMAs in Python that delivers IMPRESSIVE results! — Transcript

by Algo-trading with Saleh · 3,066 words · 406 segments · language en · Watch on YouTube

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0:00hey guys it's Sol today I want to write
0:01a swing Trend following strategy that
0:04means we're going to try to write a
0:05trend for as long as possible and only
0:08exit when we think the trend is over
0:10next I will use this strategy as the
0:12base for my next video which is going to
0:14be about using the genetic algorithm to
0:16optimize the results that we already
0:18have so let's get into it the main
0:21indicators that I want to use in this
0:23strategy are going to be three moving
0:25average lines now I'm using the EMA the
0:27purple line here has the period of 20 1
0:30the yellow one has a period of 50 and
0:33the blue one has a period of 100 now the
0:36way you can change that on trading view
0:37by the way is by going here and changing
0:40the length all right so we want to open
0:43a long position only when the 21 period
0:47is above the 50 and both of them are
0:49above the blue line here which is 100
0:52period so this would be an example of
0:54when we would go long now here's an
0:55example for a short trade and obviously
0:57all the conditions now have to be the
0:59opposite for for us to take a short
1:00trade so here which is the purple line
1:0321 moving average is below the yellow
1:06one and both of them are below the the
1:08value for the 100 moving average we
1:10would go short I also have another
1:12condition because in these cases when we
1:14are touching the perple line I don't
1:16want to go short so I will also say that
1:18I want to make sure the price is below
1:20the purple line so now let's go to Jesse
1:23and create a new strategy I'm going to
1:25name it Trend swing Trader
1:30now if I go back to my editor and look
1:33for it I will find it here right so this
1:36is the code that Jesse just generated
1:38for us and we're going to edit it so the
1:40first thing I'm going to do is to define
1:41a new property and name it Trend and in
1:45it we're going to Define three moving
1:47averages so the first one is going to be
1:49ta EMA and I will pass in the current
1:53candles and as for the period I will
1:55pass 21 the second one is going to be
1:58the same code but with the period perod
2:00of 50 and the third one is going to be
2:02the same but with a period of 100 now my
2:04condition is pretty simple if
2:07E3 is smaller than
2:10E2 and that is smaller than E1 smaller
2:14than the current price then we are in
2:16uptrend so I will return
2:19one otherwise if the condition is the
2:23opposite I will return minus one and if
2:27none of the above is true I will return
2:29zero which means we are in a ranging
2:30market so my shootong method is going to
2:33be simply return When the current Trend
2:38equals 1 and the opposite will go for
2:42the shoot short method so we want to
2:45make sure the trend is minus one in
2:47other words in a downtrend as for
2:49position sizing first I'm going to give
2:50it my entire Capital to just open the
2:53position with the market order so I'm
2:54going to say Quantity equals uols size
2:58to quantity first I'm going to pass my
3:01entire available margin and for entry I
3:05will pass the current price actually
3:08let's create a new variable here for it
3:11so entry is going to
3:13be self
3:17price and as for fee rate I will pass in
3:21self fee rate so my buy order is going
3:26to be quantity and then the entry and I
3:28will do the opposite for my go short
3:36Method All right
3:39so and we don't really care about the
3:41shoot cancel entry because we are
3:42opening the position with the market
3:44order so it doesn't really matter if
3:46this function is returning true or false
3:48all right so we have our entry rules now
3:50but what about our exit rules when would
3:52we exit this trade what would be our
3:54take profit and stoploss orders so for
3:56that let's go back to the Chart as for
3:58the Stop Plus I'm going to use the ATR
4:00indicator which is one of my favorites
4:02when it comes to setting the suus what
4:04it does is it tells us the average price
4:07that every candle is changing so for
4:09example in this point in time when we
4:11are opening the position the average
4:13true range is $
4:17886 so if I do it like this and this is
4:21going to be my subplus this would be
4:24that value
4:25880 but because this is too short I'm
4:28going to use two times of this this so I
4:31will increase
4:32this to something around here and for my
4:35take profit I will use something similar
4:38but because this is a swing trading
4:40strategy we want to be able to write the
4:42trend for as long as possible so here's
4:44what I'm going to do I will exit half my
4:46position at this point and when we hit
4:48this point I'm going to update my suplus
4:51to become a bit lower and we're going to
4:53keep doing this for as long as the trend
4:55goes down so this way we can write the
4:57trend for as long as possible and
4:58hopefully we'll be able to close it
5:00somewhere around here all right so let's
5:02go back to the code I'm going to say
5:05when the position opens and I'm going to
5:07use the unopen position method for this
5:09if it's a long position I will say my
5:12suplus order is going to be well first
5:15we need to pass the quantity and that's
5:17going to be the current positions
5:20quantity and the price is going to be
5:22the current price minus the current ATR
5:26multiplied by two and my take profit
5:29it's going to be the same but multiply
5:32it by three but as I said I want to exit
5:35only half my position at this point not
5:37the entire so I will divide this by two
5:40and if it's a short position I will do
5:43the
5:44opposite so in a short position my
5:46stopus is going to be two times of the
5:48ATR above the current price and my take
5:51profit I mean half of it is going to be
5:54the current price minus three times of
5:58the current ATR all right so we are
6:00exiting half of our position this way we
6:03also have our suplus but what about that
6:05other half of our take profit when this
6:07order is executed I want to bring down
6:09my stop l order obviously I'm talking
6:12about a short position here if it was a
6:14long position it would be the other way
6:15and I want to use some kind of trailing
6:18now how can we do that with J so here's
6:20how I'm going to Define another method
6:22called unreduced position now this event
6:25method will get triggered right after
6:27the size of my position gets reduced now
6:30notice the word reduced here it means
6:32it's not closed it's just reduced in our
6:34case it will get reduced in half so if
6:37that's the case I'm going to say if it's
6:40a long
6:42position my
6:44stoploss is going to be the quantity of
6:47my position at this point in time which
6:49is going to be self. position quantity
6:52and as for the price I want it to be at
6:54my entry price so this way even if the
6:57price goes against me I will exit the
6:59second half of my position in break even
7:01so the first half gave me profits the
7:04second half would give me nothing it
7:06will also lose me nothing so I will
7:08still sit in profit so I will say
7:12self-position do entry price now I won't
7:15do any take profit because if this
7:17method is getting executed that means my
7:20take profit order has already been
7:22executed so we don't have any take
7:23profit Order anymore so we don't need to
7:25update it either and our suplus is
7:28getting updated to be here here now so
7:30by the way when you do this Jesse will
7:33automatically cancel the previous stop
7:35order and submit the new one for us so
7:37we don't need to worry about canceling
7:39that previous one so all I need to say
7:40at this point is to say l if it's a
7:43short position do the same thing all
7:45right now if you remember I said I want
7:47to exit the second half of my position
7:49with some kind of trailing sub order and
7:51right now we only set the suplus once
7:54and update it twice here so how would it
7:57be trailing because let's say the trend
7:59keeps going down and in that case we
8:02need to keep updating that order right
8:04so the way I do that is I Define another
8:07method called update position and in it
8:10I'm going to say if it's a long position
8:12the subplus is going to
8:15be the current positions quantity and
8:18the price is going to be the current
8:21price minus the current
8:24ATR multiplied by two and for a short
8:27position it would be the current price
8:29added by two times of the current ATR
8:32but here's the thing if I do it just
8:34like this it will always update that
8:36suus even if the price is going against
8:39us so I'm going to update my code that
8:42this is going to be the minimum of
8:44either this or the current positions
8:47entry price which was our previous stop
8:50price that we set here so I'm also going
8:52to do the same here all right so we're
8:56almost finished but there's one more
8:58thing we need to do so so if I run this
9:00strategy right now this update position
9:03method is going to get executed on every
9:05candle and that means it will even get
9:07executed before this method is executed
9:10and that's not cool because first we
9:12need one of these orders to get executed
9:15and then when the position is reduced
9:18then we want to update our suplus on
9:21every new candle after that so here I'm
9:24going to add one condition I will say if
9:27the reduced count equals =
9:301 then I want to do this all right so we
9:33are ready to execute our first back test
9:35now let's go back to
9:37Jesse this exchange is fine this symbol
9:41is also fine and as for time frame I
9:43will choose the 4
9:45hours and I will pick my
9:49strategy and I'm back testing it since
9:51the beginning of 2022 up until a few
9:54days ago the fast mode is on and so is
9:57the Benchmark option all right let's
10:00execute it all right so it looks
10:03actually pretty okay and we are beating
10:05the
10:07market the max throw down isus
10:1023% and the
10:12profit is 77% the win rate is
10:1647% and we have an average win to loss
10:20ratio of 1.4 okay so this looks okay but
10:23I believe we can improve it so the first
10:25thing I'm going to do is to do what I
10:27always do for my position sizing cuz
10:29right now we are using our entire
10:31capital for every single trade and
10:32that's never good so I'm going to go
10:34back to my source code and in my goong
10:37method instead of doing it like
10:40this first I will calculate my sub price
10:43right here and it's going to be the
10:45entry minus 2 * of the
10:48ATR and instead of using this function I
10:52will use risk to quantity as for the
10:55first one I will pass my available
10:58margin the entry will be the current
11:01price then I will pass the subop price
11:05as a third argument and the fee rate is
11:07going to be my current fee all right so
11:11I will also do the same for my short
11:15positions and let's go back to Jesse now
11:18remember these numbers it's 77% profit
11:21with a Max draw down of minus
11:2423% let's reexecute
11:27it all right it's saying we're missing
11:30one required argument let's go back here
11:33so I forgot to set the risk per capital
11:35number which is actually the most
11:36important number in this function so I'm
11:39going to risk 3% of my Capital per each
11:41trade I'll do the same here let's go
11:44back run it again all right so not only
11:48I increase our profit slightly but also
11:51our Max throughout the number is reduced
11:53so that's pretty cool it's very small
11:55change in our position sizing made our
11:57results better even though we using all
11:59the same indicator entry and exit rules
12:02so how cool is that all right there's
12:03another Improvement that I want to do to
12:05it so if you take a look at the price
12:07here this is ranging market and our
12:09Equity curve is going down here this is
12:11a typical issue with Trend following
12:13strategies because when you're trading
12:15the trend you want to avoid the ranging
12:17conditions and one of the best ways that
12:19I do that is by using the adx
12:22indicator so let's remove the ATR the
12:25way the adx works is that we have a
12:28value between 0 and 100 and it will not
12:31tell us the direction of the trend it
12:33will only tell us the strength of the
12:35current Trend in other words if I set a
12:37threshold let's say at number 25
12:40whenever the value of the ATR is below
12:42this below this threshold line you can
12:45see that we are not in a trend and we
12:48want to avoid trading but whenever the
12:50value goes above it then we are in a
12:52trend that's now here we were in an
12:57uptrend we were also in an uptrend
12:59here and here we are in a downtrend all
13:03right let's go to the beginning of my
13:04strategy let's define a new property
13:06called the adx and in it I'm going to
13:10say return whether or not the current
13:14adx is bigger than my threshold which
13:19will be 25 and then I will go to my
13:23Shong method and add another condition I
13:26will say and self. adx I will also do
13:28the same for my shoot short
13:30function all right so let's go back to
13:34Jesse now remember this profit number
13:3879% and this Max rodon minus 18 let's
13:42re-execute it and now not only my profit
13:47increased drastically my Max zon is also
13:50reduced to a significantly better number
13:53and if you take a look at the equity
13:54curve when the price was in a Range our
13:57Equity curve did not go down drastically
13:59anymore the win rate is at 52% and our
14:03average win to loss ratio is
14:051.57 so this is pretty cool but I want
14:09to show you something if I were to back
14:10test this since the beginning of
14:15202024 you will get these results which
14:18look really good but one might say that
14:21hey we're not beating the market I want
14:23to make more than what a Buy and Hold
14:25would give me and I don't really care
14:27about the volatility well if that's you
14:30here's why this strategy is still better
14:32because my Max Ron is minus 10% while
14:36the market was doing significantly worse
14:38and my volatility tolerance is much more
14:41than 10% I can take maybe up minus 30%
14:45so if I go back to our strategy and
14:48increase our risk per capital from three
14:51to let's say five and rerun the back
14:53test now we are making more and the
14:56result of it is that the Maxon is just a
14:59bit worse but it's still significantly
15:01better than the market itself so if you
15:04still want to beat the market I can just
15:05multiply
15:07this by some kind of number let's say
15:10two and rerun it now we are making more
15:14than what the market was making and my
15:17Maxon is still in acceptable number so I
15:20can increase my position size even
15:22further if I have the tolerance for that
15:24amount of volatility which I personally
15:27don't but I'm just saying that if your
15:29goal is to just beat the profits that
15:31the market would have given you by
15:32simply buying and holding your positions
15:34and you don't care about the volatility
15:36then you can do this now obviously to do
15:38this we're going to have to use leverage
15:40and we are using the leverage right now
15:41in fact my leverage number for this
15:44exchange is at number two so you can
15:47even increase that to another number
15:49such as five or 10 and make huge profits
15:52but I personally don't do that because
15:54volatility is really important to me
15:56because I want to be able to sleep at
15:57night so you do whatever works for you
15:59and I do the same for me now before I
16:01forget I kept working on this strategy
16:03and I made a premium version of it and I
16:04submitted it to our strategies index
16:06page which you can find here and these
16:08are the results for 2022 so if you are a
16:11premium user just go ahead and download
16:13the code for this strategy now for my
16:15next video I'm going to take this
16:17strategy that we just wrote and then use
16:19Jess's optimization mode which uses the
16:21genetic algorithm to optimize our
16:23parameters to get better numbers out of
16:25it if that's something you're interested
16:27make sure to stick around for the next
16:28video now before I leave you we have a
16:30giveaway now a random person who likes
16:32this video subscribes to the channel and
16:34posts a comment is going to receive 1
16:35million bunk token all right let's pick
16:37the winner for my previous
16:39video and the winner
16:41is it was helpful to see someone
16:44familiar with the framework build a
16:45complete strategy from a scratch thank
16:47you so much for your comment please
16:49reach out to me so that I can send you
16:50your tokens all right thanks for
16:52watching and happy Trading
16:54[Music]
16:59oh

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