JayRogers

Strategy Code Example - Risk Management

*** THIS IS JUST AN EXAMPLE OF STRATEGY RISK MANAGEMENT CODE IMPLEMENTATION ***

For my own future reference, and for anyone else who needs it.

Pine script strategy code can be confusing and awkward, so I finally sat down and had a little think about it and put something together that actually works (i think...)

Code is commented where I felt might be necessary (pretty much everything..) and covers:
  • Take Profit
  • Stop Loss
  • Trailing Stop
  • Trailing Stop Offset
...and details how to handle the input values for these in a way that allows them to be disabled if set to 0, without breaking the strategy.exit functionality or requiring a silly amount of statement nesting.

Also shows how to use functions (or variables/series) to execute trade entries and exits.

Cheers!
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//@version=2

strategy(title = "Strategy Code Example", shorttitle = "Strategy Code Example", overlay = true, pyramiding = 0, default_qty_type = strategy.percent_of_equity, default_qty_value = 10, currency = currency.GBP)

// Revision:        1
// Author:          @JayRogers
//
// *** THIS IS JUST AN EXAMPLE OF STRATEGY RISK MANAGEMENT CODE IMPLEMENTATION ***

// === GENERAL INPUTS ===
// short ma
maFastSource   = input(defval = open, title = "Fast MA Source")
maFastLength   = input(defval = 14, title = "Fast MA Period", minval = 1)
// long ma
maSlowSource   = input(defval = open, title = "Slow MA Source")
maSlowLength   = input(defval = 21, title = "Slow MA Period", minval = 1)

// === STRATEGY RELATED INPUTS ===
tradeInvert     = input(defval = false, title = "Invert Trade Direction?")
// the risk management inputs
inpTakeProfit   = input(defval = 1000, title = "Take Profit", minval = 0)
inpStopLoss     = input(defval = 200, title = "Stop Loss", minval = 0)
inpTrailStop    = input(defval = 200, title = "Trailing Stop Loss", minval = 0)
inpTrailOffset  = input(defval = 0, title = "Trailing Stop Loss Offset", minval = 0)

// === RISK MANAGEMENT VALUE PREP ===
// if an input is less than 1, assuming not wanted so we assign 'na' value to disable it.
useTakeProfit   = inpTakeProfit  >= 1 ? inpTakeProfit  : na
useStopLoss     = inpStopLoss    >= 1 ? inpStopLoss    : na
useTrailStop    = inpTrailStop   >= 1 ? inpTrailStop   : na
useTrailOffset  = inpTrailOffset >= 1 ? inpTrailOffset : na

// === SERIES SETUP ===
/// a couple of ma's..
maFast = ema(maFastSource, maFastLength)
maSlow = ema(maSlowSource, maSlowLength)

// === PLOTTING ===
fast = plot(maFast, title = "Fast MA", color = green, linewidth = 2, style = line, transp = 50)
slow = plot(maSlow, title = "Slow MA", color = red, linewidth = 2, style = line, transp = 50)

// === LOGIC ===
// is fast ma above slow ma?
aboveBelow = maFast >= maSlow ? true : false
// are we inverting our trade direction?
tradeDirection = tradeInvert ? aboveBelow ? false : true : aboveBelow ? true : false

// === STRATEGY - LONG POSITION EXECUTION ===
enterLong() => not tradeDirection[1] and tradeDirection // functions can be used to wrap up and work out complex conditions
exitLong() => tradeDirection[1] and not tradeDirection
strategy.entry(id = "Long", long = true, when = enterLong()) // use function or simple condition to decide when to get in
strategy.close(id = "Long", when = exitLong()) // ...and when to get out
// === STRATEGY - SHORT POSITION EXECUTION ===
enterShort() => tradeDirection[1] and not tradeDirection
exitShort() => not tradeDirection[1] and tradeDirection
strategy.entry(id = "Short", long = false, when = enterShort())
strategy.close(id = "Short", when = exitShort())

// === STRATEGY RISK MANAGEMENT EXECUTION ===
// finally, make use of all the earlier values we got prepped
strategy.exit("Exit Long", from_entry = "Long", profit = useTakeProfit, loss = useStopLoss, trail_points = useTrailStop, trail_offset = useTrailOffset)
strategy.exit("Exit Short", from_entry = "Short", profit = useTakeProfit, loss = useStopLoss, trail_points = useTrailStop, trail_offset = useTrailOffset)
Thanks a Ton man, i will remember you in my whole life..this post is my turning point in my trading journey. God Bless you!
+1 Reply
Hey do you find issues with the trailing stop in backtesting?

I find it gives a false value for the exit. If the trailing stop is triggered, it reports the trade close as either high or low of the bar, seemingly depending if you are long or short - giving wildly succesful backtest results , but false ones.

Anyone else get this?
Reply
Objredline BobVanders
@BobVanders, I'm having a similar issue it sounds like:

strategy.exit("Exit long", from_entry="Long", qty = 20, stop = (close-R_value), comment = "xxx"

The problem is, say I pyramid entered in 3 times 20 shares, but only one of the pyramid entries satisfies the stop condition. The List of Trades will show all 3 pyramid entries were exited. However on the plot, it will only show one -20 qty "xxx" exit.

With trail_points and trail_offset, it is the same problem exiting the entire set of pyramid buys.

In addition with trail_points and _trail_offset, either I'm not understanding what these two parameters mean, or it's not calculating it right. I understand it as this: strategy.exit context: trail_points = 1000, trail_offset=200. As: once position is up 10%, it will sell if it then falls 2%. Can someone shed light on if this understanding is correct?
Reply
Hello, how can it possible that the long trades on 20.05, 26.05 were closed exactly on the high of the bar?
18.05, 23.05, 24.05, 27.05 short trades closed exactly on the low of the bar.

just some trades as example. Is it possible with trailing stop loss?
What is different between trailing stop and trailing stop offset?

Thx
Reply
@robot2006, i would like to know as well
Reply
BobVanders robot2006
@robot2006, I have same problem with trailing stop, have reported to pine coding team. It's a bug I believe.
Reply
Excellent stuff. I was looking for strategizing certain ideas that require trailing stop loss. Did'nt understand how to do it, till I bumped into your super post. Many thanks.
Reply
Thank you very much for posting this. It's been my best Christmas present!
Reply
Thanks man. This helped me out a great deal
Reply
I am getting an error while compiling this code on Mt4

On Line 3: 'strategy' - declaration without type

Can anyone help plz?
Reply
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