Smart Fib Strategy

Smart Fibonacci Strategy

This advanced trading strategy combines the power of adaptive SMA entries with Fibonacci-based exit levels to create a comprehensive trend-following system that self-optimizes based on historical market conditions. Credit goes to Julien_Eche who created the "Best SMA Finder" which received an Editors Pick award.

Strategy Overview

The Smart Fibonacci Strategy employs a two-pronged approach to trading:

1. Intelligent Entries: Uses a self-optimizing SMA (Simple Moving Average) to identify optimal entry points. The system automatically tests multiple SMA lengths against historical data to determine which period provides the most robust trading signals.

2. Fibonacci-Based Exits: Implements ATR-adjusted Fibonacci bands to establish precise exit targets, with risk-management options ranging from conservative to aggressive.

This dual methodology creates a balanced system that adapts to changing market conditions while providing clear visual reference points for trade management.

Key Features

- **Self-Optimizing Entries**: Automatically calculates the most profitable SMA length based on historical performance
- **Adjustable Risk Parameters**: Choose between low-risk and high-risk exit targets
- **Directional Flexibility**: Trade long-only, short-only, or both directions
- **Visualization Tools**: Customizable display of entry lines and exit bands
- **Performance Statistics**: Comprehensive stats table showing key metrics
- **Smoothing Option**: Reduces noise in the Fibonacci bands for cleaner signals

Trading Rules

Entry Signals
- **Long Entry**: When price crosses above the blue center line (optimal SMA)
- **Short Entry**: When price crosses below the blue center line (optimal SMA)

### Exit Levels
- **Low Risk Option**: Exit at the first Fibonacci band (1.618 * ATR)
- **High Risk Option**: Exit at the second Fibonacci band (2.618 * ATR)

Strategy Parameters

Display Settings
- Toggle visibility of the stats table and indicator components

Strategy Settings
- Select trading direction (long, short, or both)
- Choose exit method (low risk or high risk)
- Set minimum trades threshold for SMA optimization

SMA Settings
- Option to use auto-optimized or fixed-length SMA
- Customize SMA length when using fixed option

Fibonacci Settings
- Adjust ATR period and SMA basis for Fibonacci bands
- Enable/disable smoothing function
- Customize Fibonacci ratio multipliers

Appearance Settings
- Modify colors, line widths, and transparency

Optimization Methodology

The strategy employs a sophisticated optimization algorithm that:

1. Tests multiple SMA lengths against historical data
2. Evaluates performance based on trade count, profit factor, and win rate
3. Calculates a "robustness score" that balances profitability with statistical significance
4. Selects the SMA length with the highest robustness score

This ensures that the strategy's entry signals are continuously adapting to the most effective parameters for current market conditions.

Risk Management

Position sizing is fixed at $2,000 per trade, allowing for consistent exposure across all trading setups. The Fibonacci-based exit system provides two distinct risk management approaches:

- **Conservative Approach**: Using the first Fibonacci band for exits produces more frequent but smaller wins
- **Aggressive Approach**: Using the second Fibonacci band allows for larger potential gains at the cost of increased volatility

Ideal Usage

This strategy is best suited for:
- Trending markets with clear directional moves
- Timeframes from 4H to Daily for most balanced results
- Instruments with moderate volatility (stocks, forex, commodities)

Traders can further enhance performance by combining this strategy with broader market analysis to confirm the prevailing trend direction.