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Dynamic ATR Trend Following Strategy Based on Support Level Breakthrough

Published at

1/10/2025

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4 categories in total

Author

8 person written this

fmzquant

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Overview
This is a dynamic ATR trend following strategy based on support level breakthrough. The strategy combines the EMA moving average system, ATR volatility indicator and Smart Money Concept (SMC) to capture market trends. The strategy achieves good risk management by dynamically calculating position size and stop loss and take profit positions.

Strategy Principle
The strategy is mainly built on the following core components:

Use the 50 and 200 period EMA moving average system to confirm the market trend direction
Use the ATR indicator to dynamically adjust stop loss and profit targets
Find the best entry point through Order Block and Imbalance Zone analysis
Automatically calculate opening volume based on account risk percentage
By observing the fluctuation range of the past 20 K-lines, we can judge whether the market is in a consolidation state.

Strategy Advantages

Perfect risk management, through dynamic calculation to ensure that the risk of each transaction is controllable
The trend judgment system is reliable and avoids trading in a consolidation market
The stop loss and take profit settings are reasonable, and the risk-return ratio is 1:3
Fully consider market volatility and be able to adapt to different market environments
The code structure is clear, easy to maintain and optimize

Strategy Risks

The EMA indicator has a lag, which may cause a delay in entry
False signals may be triggered in volatile markets
The strategy relies on trend persistence and may perform poorly in volatile markets
The stop loss position is wider, and in some cases, you may suffer a larger loss

Strategy Optimization Direction

The volume-price relationship analysis can be introduced to improve the accuracy of trend judgment
Can increase market sentiment indicators and optimize entry timing
Consider adding multi-time period analysis to improve system stability
The judgment criteria for order blocks and imbalance areas can be refined
Optimize the stop loss method and consider using a moving stop loss

Summary
This strategy is a relatively complete trend tracking system, which improves the stability of trading through reasonable risk management and multiple signal confirmation. Although there is a certain lag, it is a reliable trading system overall. It is recommended to conduct sufficient backtesting verification before real-time use, and optimize parameters according to specific trading products and market environment.

Strategy source code

/*backtest
start: 2019-12-23 08:00:00
end: 2024-12-10 08:00:00
period: 1d
basePeriod: 1d
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

// TradingView Pine Script strategy for Smart Money Concept (SMC)
//@version=5
strategy("Smart Money Concept Strategy", overlay=true, default_qty_type=strategy.fixed, default_qty_value=100)

// === Input Parameters ===
input_risk_percentage = input.float(1, title="Risk Percentage", step=0.1)
input_atr_length = input.int(14, title="ATR Length")
input_ema_short = input.int(50, title="EMA Short")
input_ema_long = input.int(200, title="EMA Long")

// === Calculations ===
atr = ta.atr(input_atr_length)
ema_short = ta.ema(close, input_ema_short)
ema_long = ta.ema(close, input_ema_long)

// === Utility Functions ===
// Identify Order Blocks
is_order_block(price, direction) =>
    ((high[1] > high[2] and low[1] > low[2] and direction == 1) or (high[1] < high[2] and low[1] < low[2] and direction == -1))

// Identify Imbalance Zones
is_imbalance() =>
    range_high = high[1]
    range_low = low[1]
    range_high > close and range_low < close

// Calculate Lot Size Based on Risk
calculate_lot_size(stop_loss_points, account_balance) =>
    risk_amount = account_balance * (input_risk_percentage / 100)
    lot_size = risk_amount / (stop_loss_points * syminfo.pointvalue)
    lot_size

// Determine if Market is Consolidating
is_consolidating() =>
    (ta.highest(high, 20) - ta.lowest(low, 20)) / atr < 2

// === Visual Enhancements ===
// Plot Order Blocks
// if is_order_block(close, 1)
//     line.new(x1=bar_index[1], y1=low[1], x2=bar_index, y2=low[1], color=color.green, width=2, extend=extend.right)
// if is_order_block(close, -1)
//     line.new(x1=bar_index[1], y1=high[1], x2=bar_index, y2=high[1], color=color.red, width=2, extend=extend.right)

// Highlight Imbalance Zones
// if is_imbalance()
//     box.new(left=bar_index[1], top=high[1], right=bar_index, bottom=low[1], bgcolor=color.new(color.orange, 80))

// === Logic for Trend Confirmation ===
is_bullish_trend = ema_short > ema_long
is_bearish_trend = ema_short < ema_long

// === Entry Logic ===
account_balance = strategy.equity
if not is_consolidating()
    if is_bullish_trend
        stop_loss = close - atr * 2
        take_profit = close + (math.abs(close - (close - atr * 2)) * 3)
        stop_loss_points = math.abs(close - stop_loss) / syminfo.pointvalue
        lot_size = calculate_lot_size(stop_loss_points, account_balance)
        strategy.entry("Buy", strategy.long, qty=lot_size)
        strategy.exit("TP/SL", "Buy", stop=stop_loss, limit=take_profit)

    if is_bearish_trend
        stop_loss = close + atr * 2
        take_profit = close - (math.abs(close - (close + atr * 2)) * 3)
        stop_loss_points = math.abs(close - stop_loss) / syminfo.pointvalue
        lot_size = calculate_lot_size(stop_loss_points, account_balance)
        strategy.entry("Sell", strategy.short, qty=lot_size)
        strategy.exit("TP/SL", "Sell", stop=stop_loss, limit=take_profit)

// === Plotting Indicators ===
plot(ema_short, color=color.blue, title="EMA 50")
plot(ema_long, color=color.orange, title="EMA 200")
plotshape(series=is_bullish_trend and not is_consolidating(), style=shape.triangleup, location=location.belowbar, color=color.green, text="Buy")
plotshape(series=is_bearish_trend and not is_consolidating(), style=shape.triangledown, location=location.abovebar, color=color.red, text="Sell")

Strategy parameters

The original address: https://www.fmz.com/strategy/474884

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