AFL of the week: Support Resistance based Trading System

This is a breakout strategy where buy/sell signal is generated when price crosses a dynamic support/resistance. The calculation of support/resistance is based on highest high value and lowest low value for a particular lookback period. This strategy seems to work well in Trending markets.

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AFL Overview

ParamterValue
Preferred TimeframeDaily, Hourly
Indicators UsedNone
Buy ConditionPrice crosses above dynamic resistance.
Sell ConditionPrice crosses below dynamic support.
Stop Loss2%
TargetsNo fixed target, Stop and reverse when AFL gives opposite signal
Position Size150 (fixed)
Initial Equity200000
Brokerage50 per order
Margin10%

AFL Code

Click here to download AFL code for this system.

AFL Screenshot

Dynamic Support Resistance

Backtest Report

 ParameterValue
  NSE Nifty
Initial Capital 200000
Final Capital1275626.60
Backtest Period01-Jan-2007 to 19-02-2016
TimeframeDaily
Net Profit % 537.81%
Annual Return %22.48%
Number of Trades243
Winning Trade %41.56%
Average holding Period8.93 periods
Max consecutive losses6
Max system % drawdown-28.78%
Max Trade % drawdown-60.73%

Download the detailed backtest report here.

Please note that you can expect even better results if you allow compounding of your returns.

Equity Curve

EquityCurve_DynamicSupRes

Additional Amibroker settings for backtesting

Goto Symbol–>Information, and specify the lot size and margin requirement. The below screenshot shows lot size of 75 and margin requirement of 10% for NSE Nifty:

Symbol Info_Nifty

Disclaimer:

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10 Comments

  1. Dear Sir,
    Error showing in line 36, 38, 39 & 40.
    Kindly have a look.
    And thanks for the efforts.

      • Thanks a lot. Back testing in daily & hourly tf showing great results.
        Bye the way, “The calculation of support/resistance is based on highest high value and lowest low value for a particular lookback period. ”

        What is period here? Can we change it to suit lower tf?

        • Hi Gautam,
          The default lookback period is 3 as per the below code:
          period=Optimize(“Swing”,3,1,25,1);
          You can definitely change it to suit different timeframes and symbols. For ex: Lookback period of 4 works great in BankNifty

  2. How to make this AFL close all trades at a particular time?
    And also open a new trade at the start of the day.

    • Hi Ethinix,

      You’ll have to mention the time in the COVER and SELL conditions.

  3. period=Optimize(“Swing”,3,1,25,1);
    From the comments above, I could perceive that 3 is the look back period. What does 1,25,1 inputs signify?

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