MACD Strategy with trailing ATR stop

The MACD Strategy with trailing ATR stop indicator provides a comprehensive trend-following framework that combines EMA/SMA crossovers for trend filtering, MACD for entry timing, and an ATR-based trailing stop for risk management.

Usage

The Usage section describes how the script can be used to identify trend-aligned entries and manage multi-stage exits.

• Entry Logic: A long entry is triggered when the Trend Ribbon is bullish (EMA is above the SMA) and the MACD line crosses above the signal line.
• Pyramiding: The strategy allows for up to two simultaneous positions, enabling traders to add to their position if a second valid signal occurs while the first is active.
• Exit Strategy: The script utilizes a three-tier exit system:
  1. Partial Profit 1: Closes a set percentage of the position (default 10%) when price reaches a specific percentage gain (default 1%).
  2. Partial Profit 2: Closes a second portion (default 50%) when the price reaches a higher target (default 5%).
  3. Trailing Stop: The remaining position is held until the price closes below the dynamic ATR-based trailing stop line.

Details

The script utilizes a "Trend Ribbon" composed of a 34-period Exponential Moving Average (EMA) and a Simple Moving Average (SMA). This filter ensures that MACD long signals are only taken during established uptrends. The MACD calculation is highly customizable, allowing users to switch between EMA and SMA for both the oscillator and the signal line.

For risk management, the strategy calculates a "Floating SL" based on the Average True Range (ATR) multiplied by a user-defined coefficient. This level is established at the time of entry to protect against downside volatility.

Settings

Trend

• Ribbon Period: Determines the lookback period for both the EMA and SMA used to filter the trend.

MACD

• Fast Length: The short-term lookback period for the MACD oscillator.
• Slow Length: The long-term lookback period for the MACD oscillator.
• Source: The price data used for MACD calculations (default is Close).
• Signal Smoothing: The lookback period for the MACD signal line.
• Simple MA (Oscillator): When enabled, uses SMA instead of EMA for the MACD line calculation.
• Simple MA (Signal Line): When enabled, uses SMA instead of EMA for the signal line calculation.

Take Profit & Stop Loss

• Long Take Profit 1 %: The percentage gain required to trigger the first partial exit.
• Long Take Profit 1 Qty: The percentage of the total position to close at the first target.
• Long Take Profit 2 %: The percentage gain required to trigger the second partial exit.
• Long Take Profit 2 Qty: The percentage of the total position to close at the second target.
• SL Multiplier: The value multiplied by the ATR to determine the distance of the stop loss.
• ATR Period: The lookback period used for the ATR calculation.

Backtest Period

• Start/Stop Year, Month, Day: Defines the specific time range for historical performance evaluation.

FAQ

How do I adjust the strategy for different assets? Cryptocurrency and equity markets have varying volatility profiles; you should adjust the ATR Multiplier and Take Profit percentages to align with the specific volatility of the asset being traded.

What happens if the second Take Profit is hit before the first? The strategy executes exits based on price levels relative to the average entry price; the orders are placed as limit orders once a position is opened.

How can I access the MACD Strategy with trailing ATR stop? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.