We are thrilled to announce the latest addition to our suite of Pine Script strategies at Day Trader Playbook: the Sagitta Long-Only Swing Strategy. This channel break out strategy is designed for swing traders who aim to capitalize on the momentum of bullish market trends.
The Logic Behind Sagitta
The Sagitta strategy is built on a robust channel break out logic, which is a proven method for identifying the momentum of an asset. It operates on a 2-hour time frame, providing a balanced approach between short-term and long-term trading signals.
Key Components of the Strategy
Channel Lookback: Sagitta uses a 7-period lookback to determine the highest price in the channel, setting this as a benchmark for a potential breakout.
Filter EMA Length: A longer-term EMA serves as a trend filter, ensuring that trades are only entered in the direction of the prevailing trend.
Exit EMA Length: A shorter-term EMA helps in defining the exit point for the strategy to lock in profits and minimize losses.
Volume Increase %: The strategy looks for a significant increase in volume, set at 6%, as an additional confirmation of the strength behind the breakout.
Liquidity Average: A 100-day average liquidity threshold of 10,000 NQ contracts ensures that the strategy only takes positions in well-traded instruments.
Strategy Entry and Exit Criteria
The Sagitta strategy meticulously checks for the following conditions before entering a long position:
The closing price must be higher than the highest price of the channel from the previous period.
The closing price must be above the longer-term EMA, confirming the long-term trend direction.
The closing price must be greater than the opening price, indicating buying pressure.
The current volume must exceed the previous period's volume by the specified percentage, confirming the breakout's strength.
The average volume over 100 days must be above the liquidity threshold, ensuring tradeability.
A position is entered when all these conditions align, capturing the momentum of a potential upward trend. The strategy exits the position when the price falls below the shorter-term EMA, effectively managing risk and protecting profits.
Backtested Performance
The Sagitta strategy has undergone rigorous backtesting, showing consistent profitability over the past four years. It has delivered an impressive $210,000 in total net profits since late 2019 while maintaining a maximum drawdown of just $15,000, showcasing its effectiveness in maximizing gains while controlling risk.
Sagitta, November 2019 - present
Plan B and C subscribers can download the Pine Script for Sagitta in the section Swing Trading.
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