8 Day Run - Momentum Strategy

The 8 Day Run - Momentum Strategy indicator is a daily timeframe tool designed to capture mean reversion opportunities following extended momentum runs.

Usage

This strategy identifies overextended price movements relative to a 5-period Simple Moving Average (SMA). It is primed for a trade once price has maintained a "run" of 8 or more consecutive closes on one side of the SMA.

• Long Entry: Occurs when the price closes below the 5-period SMA after a run of at least 8 consecutive closes above the SMA.
• Short Entry: Occurs when the price closes above the 5-period SMA after a run of at least 8 consecutive closes below the SMA.
• Exit: Positions are closed on the first close back on the opposite side of the 5-period SMA (a close above for shorts, or a close below for longs).

The script provides visual feedback via background coloring: a light tint indicates an active "run" (8+ bars), while a darker tint highlights the specific signal bar.

Details

Inspired by the work of Linda Bradford Raschke, this strategy focuses on the exhaustion of short-term momentum. The core concept relies on the statistical tendency for price to revert to its short-term average after a persistent trend. By waiting for 8 consecutive closes on one side of the 5-period SMA, the script identifies a state of high momentum that is likely to experience a "snap-back" or correction once the trend-side closes are interrupted.

Settings

• Initial Capital: Sets the starting balance for the strategy backtest.
• Commission: Allows for the inclusion of trading costs to provide more realistic performance results.

FAQ

How do I access the 8 Day Run - Momentum Strategy?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What timeframe is this strategy designed for?

The strategy is specifically designed for daily periodicities to capture daily momentum effects.

Can the lookback period for the SMA be changed?

In its current implementation, the script uses a fixed 5-period Simple Moving Average as the baseline for identifying runs and signals.