🧮Strategy "Deviation from the average"
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Last updated
Last updated
The strategy is based on trading on price deviations from its average value, but with a more advanced tool such as the Balance Indicator.
The point is to find the moment when there is a critical preponderance of ascending or descending candlesticks, then enter the appropriate position (Long or Short) and hold it until the price and the moving average intersect.
Theory: with strong dominance by one of the parties, the asset price deviates from its average value, but after restoring equality of forces, the price usually returns to its average value.
Let's analyze the conditions of the strategy in more detail.
Step 1. Go to "Add Widget" and open the Trading View tab.
Step 2. You need to decide on the traded instrument. This strategy works well on more volatile coins, such as TRB, WIF, STRK, SUI, etc.
Step 3. After you have decided on a trading instrument, then you should select a working timeframe.
The timeframe can be absolutely any (optimal TF = 1M-1H).
The larger the TF, the less sensitivity and volatility (deviations from the average), so there will be fewer trades and win rate, more profits and losses.
Step 4. Once you have completed the above steps, you will need to configure the following indicators: Balance Indicator (section "1EX Indicators"), Moving Average (section "Indicators")
To adjust the balance indicator, you will need to select two parameters: Rolling period and critical imbalance.
Rolling period - is the time interval for which the indicator calculates a certain value. To get better results, you need to choose a period that will be a multiple of 30-50 times your working timeframe on the instrument chart. Lower multiplicity means higher sensitivity, higher multiplicity means lower sensitivity.
Example: TF = 1 min, Period = 30 min (30 candles for 1 minute each).
Critical imbalance - is a critical percentage of the preponderance of green candles over red candles, or vice versa, a critical percentage of the preponderance of red candles over green candles, the optimal value is from 0.67 to 0.73 (it is different for each trading instrument).
The value of the indicator lines:
Green line - relative value of the dominance of green candles (upward dynamics).
Red line - relative magnitude of the dominance of red candlesticks (downward dynamics).
To set up the Moving Average indicator, you need to select the length "Length". The length of the indicator must correspond to the Rolling period of the balance indicator, that is, it must be the same (in some cases, the value may range from 30 to 50 and not coincide with the value of the Rolling period).
After the settings, the workspace should take the following form:
The Long signal will appear when, according to the Balance Indicator, we reach a critical imbalance of the downward dynamics, in simple words, when the red line of the indicator reaches critical values (for example, 0.67), after which we get into a long position and hold it until the price reaches the values of the Moving Average indicator, that is, to the average value of the price for a certain period.
The trading result in this situation is +0.56% excluding leverage.
The Short signal will appear when, according to the Balance Indicator, we reach a critical imbalance of the upward dynamics, in simple words, when the green line of the indicator reaches critical values (for example, 0.7), after which we get into a short position and hold it until the price reaches the values of the Moving Average indicator, that is, to the average value of the price for a certain period.
The trading result in this situation is +0.26% excluding leverage.
Additional conditions:
You do not need to get into position again if the critical imbalance has come to your values and increases further. That is, if you have an imbalance of 0.67 and the indicator starts to grow further, then you should not continue to increase the volume of the position.
The trading result in this situation is +0.65% excluding leverage.
If the imbalance came to critical values, then rose and fell or fell immediately below the critical values, and then returned to the critical value again, then in such a situation it is necessary to increase the volume and enter the same position again (average the price or add collateral) until the price reaches the average values.
The trading result in this situation is +1.27% excluding leverage.
CONCLUSIONS:
You can use this strategy both independently and as one of the filters within a variety of trading strategies used by traders.
IMPORTANT! Trading involves risks. The user is solely responsible for their actions or inactions when using the described trading strategy. The strategy and its description are for informational purposes only. The information provided here does not constitute personalized investment advice. News, articles, expert comments, research, forecasts, and other information are presented without considering any specific investment profile, and the financial instruments or operations mentioned may not align with the expected returns, investment horizon, or acceptable risk levels for any particular user. Company 1EX is not responsible for any potential losses resulting from trades based on the described strategy or investments in the financial instruments mentioned in this publication.
