However, by definition, you're always following. That means you're always a bit later than your want to be. The main challenges such strategies face are:
- Confirming that there is a trend
- Following the trend, hopefully, early enough to catch the majority of the move
- Hopping off the trade when it seems to have run its course
This Trend-following strategy attempts to address such challenges while allowing for a dynamic stop loss.
The trading system requires three crossovers on the same candle to confirm that a new trend is beginning:
The first benefit of using all three crossovers is to reduce false signals. The second benefit is that you know that a strong trend is likely to develop relatively soon, with the help of the fast setup of the three EMAs.
The strategy comes with a fixed take profit and a , which acts as a trailing stop to adapt to the trend's strength. That helps you get out of the way as soon as market conditions change. Depending on your long term confidence in the asset, you can edit the fixed take profit to be more conservative or aggressive.
The position is closed when:
The best time frame for this strategy based on our backtest is the 4-hr. Shorter timeframes can also work well, although they exhibit larger in their returns. In general, this approach suits medium timeframes. A trading fee of 0.1% is taken into account. The fee is aligned to the base fee applied on Binance, which is the largest cryptocurrency exchange.
You can execute this strategy on your favourite exchange at coinrule.com
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