TrendGuard Flag Finder - Strategy [presentTrading]

6 thg 8, 2023

Introduction and How It Is Different

In the vast world of trading strategies, the TrendGuard Flag Finder stands out as a unique blend of traditional flag pattern detection and the renowned SuperTrend indicator.

- A significant portion of the Flag Pattern detection is inspired by the "Flag Finder" code by Amphibiantrading, which serves as one of foundational element of this strategy.
- While many strategies focus on either trend-following or pattern recognition, this strategy harmoniously combines both, offering traders a more holistic view of the market.
- The integration of the SuperTrend indicator not only provides a clear direction of the prevailing trend but also offers potential stop-loss levels, enhancing the strategy's risk management capabilities.

AAPL 1D chart


ETHBTC 6hr chart


Strategy: How It Works

The TrendGuard Flag Finder is primarily built on two pillars:

1. Flag Pattern Detection: At its core, the strategy identifies flag patterns, which are continuation patterns suggesting that the prevailing trend will resume after a brief consolidation. The strategy meticulously detects both bullish and bearish flags, ensuring traders can capitalize on opportunities in both rising and falling markets.

What is a Flag Pattern? A flag pattern consists of two main components:
1.1 The Pole: This is the initial strong price move, which can be either upwards (for bullish flags) or downwards (for bearish flags). The pole represents a strong surge in price in a particular direction, driven by significant buying or selling momentum.

1.2 The Flag: Following the pole, the price starts consolidating, moving against the initial trend. This consolidation forms a rectangular shape and is characterized by parallel trendlines. In a bullish flag, the consolidation will have a slight downward tilt, while in a bearish flag, it will have a slight upward tilt.

How the Strategy Detects Flags:
Identifying the Pole: The strategy first identifies a strong price movement over a user-defined number of bars. This movement should meet a certain percentage change to qualify as a pole.

Spotting the Flag: After the pole is identified, the strategy looks for a consolidation phase. The consolidation should be counter to the prevailing trend and should be contained within parallel lines. The depth (for bullish flags) or rally (for bearish flags) of this consolidation is calculated to ensure it meets user-defined criteria.


2. SuperTrend Integration: The SuperTrend indicator, known for its simplicity and effectiveness, is integrated into the strategy. It provides a dynamic line on the chart, signaling the prevailing trend. When prices are above the SuperTrend line, it's an indication of an uptrend, and vice versa. This not only confirms the flag pattern's direction but also offers a potential stop-loss level for trades.

When combined, these components allow traders to identify potential breakout (for bullish flags) or breakdown (for bearish flags) scenarios, backed by the momentum indicated by the SuperTrend.

Usage
To use the SuperTrend Enhanced Flag Finder:
- Inputs: Begin by setting the desired parameters. The strategy offers a range of user-controlled settings, allowing for customization based on individual trading preferences and risk tolerance.
- Visualization: Once the parameters are set, the strategy will identify and visually represent flag patterns on the chart. Bullish flags are represented in green, while bearish flags are in red.
- Trade Execution: When a breakout or breakdown is identified, the strategy provides entry signals. It also offers exit signals based on the SuperTrend, ensuring that traders can capitalize on the momentum while managing risk.

Default Settings
The strategy comes with a set of default settings optimized for general use:
- SuperTrend Parameters: Length set to 10 and Factor set to 5.0.
- Bull Flag Criteria: Max Flag Depth at 7, Max Flag Length at 10 bars, Min Flag Length at 3 bars, Prior Uptrend Minimum at 9%, and Flag Pole Length between 7 to 13 bars.
- Bear Flag Criteria: Similar settings adjusted for bearish patterns.
- Display Options: By default, both bullish and bearish flags are displayed, with breakout and breakdown points highlighted.