I've been utilizing this DCA approach in my trading strategy for a while now, and I believe it's time to share it with the community.
The VWMA Bands and RMF DCA Strategy is a powerful trading approach that combines the concepts of Volume Weighted Moving Average (VWMA) bands and the Relative Momentum Factor (RMF).
This strategy employs Dollar Cost Averaging (DCA) to optimize entry points and achieve potentially favorable risk-adjusted returns with Dynamic TP
In essence, the strategy initiates a trade and, in the event of a price decline, engages in Dollar Cost Averaging (DCA) with specific rules in place:
- A DCA order is executed exclusively when additional long conditions are met.
- The DCA order is carried out only if the percentage drop from the previous order to the DCA order surpasses the minimum change input threshold.
DCA TYPE you have got two options
Select Volume Multiply to calculate the DCA value based on the TOTAL position size and then Multiply it by the DCA multiply input
Select Base Multiply to calculate the DCA value based on the first-order USD value then Multiply it by the DCA multiply input
- VWMA Bands: VWMA bands are utilized in the strategy to define a price range within which potential trading opportunities are detected. A price below the lower band indicates a potential buying opportunity.
- Relative Momentum Factor (RMF): RMF combines the Relative Strength Index (RSI) and the Money Flow Index (MFI) to gauge market momentum and strength. RMF filtering ensures that only trades exhibiting strong momentum are considered.
- DCA Approach: Employing a Dollar Cost Averaging (DCA) approach, the strategy triggers additional buy orders exclusively when the LONG condition is satisfied and the price drops below a predefined percentage from the previous order. This systematic approach enables gradual position accumulation to potentially benefit from market fluctuations.
- Multiplier Effect: The strategy features a customizable multiplier that enhances the value of each DCA order. This dynamic adjustment enables traders to fine-tune their exposure and potential returns, aligning with their risk tolerance and market expectations.
The strategy enters a trade when the following conditions are met:
The price is below the lower VWMA band.
The RMF value (combination of RSI and MFI) is less than a specified input value.
The strategy exits a trade when the following conditions are met:
- The price rises above the upper VWMA band.
- The RMF value is greater than a specified input value.
- If MIN TP is Active , it will not close until the profit is 2% or higher
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.