441 vues

-----------

USAGE

This script compares trend trading with a volatility stop to "buy and hold".

Trades are taken with the trend, except when price exceeds a volatility

forecast. The trend is defined by a moving average crossover. The forecast

is based on projecting future volatility from historical volatility .

The trend is defined by two parameters:

- long: the length of a long ("slow") moving average.

- short: the length of a short ("fast") moving average.

The trend is up when the short moving average is above the long. Otherwise

it is down.

The volatility stop is defined by three parameters:

- volatility window: determines the number of periods in the historical

volatility calculation. More periods means a slower (smoother)

estimate of historical volatility .

- stop forecast periods: the number of periods in the volatility

forecast. For example, "7" on a daily chart means that the volatility

will be forecasted with a one week lag.

- stop forecast stdev: the number of standard deviations in the stop

forecast. For example, "2" means two standard deviations.

EXAMPLE

The default parameters are:

- long: 50

- short: 20

- volatility window: 30

- stop forecast periods: 7

- stop forecast standard deviations: 1

The trend will be up when the 20 period moving average is above the 50

period moving average. On each bar, the historical volatility will be

calculated from the previous 30 bars. If the historical volatility is 0.65

(65%), then a forecast will be drawn as a fuchsia line, subtracting

0.65 * sqrt(7 / 365) from the closing price. If price at any point falls

below the forecast, the volatility stop is in place, and the trend is

negated.

OUTPUTS

Plots:

- The trend is shown by painting the slow moving average green (up), red

(down), or black (none; volatility stop ).

- The fast moving average is shown in faint blue

- The previous volatility forecasts are shown in faint fuchsia

- The current volatility forecast is shown as a fuchsia line, projecting

into the future as far as it is valid.

Tables:

- The current historical volatility is given in the top right corner, as a

whole number percentage.

- The performance table shows the mean, standard deviation, and sharpe

ratio of the volatility stop trend strategy, as well as buy and hold.

If the trend is up, each period's return is added to the sample (the

strategy is long). If the trend is down, the inverse of each period's

return is added to the sample (the strategy is short). If there is no

trend (the volatility stop is active), the period's return is excluded

from the sample. Every period is added to the buy-and-hold strategy's

sample. The total number of periods in each sample is also shown.

- changed the forecast plot style to be more pleasing