The AdxSmas strategy is a trading strategy that combines the Average Directional Index (ADX) indicator with Simple Moving Averages (SMA). Here is a brief explanation of how the strategy works:
The strategy uses the populate_indicators method to calculate three indicators: ADX, short SMA (3-period), and long SMA (6-period). These indicators are computed using historical price data.
In the populate_buy_trend method, the strategy generates buy signals based on two conditions:
The ADX value is greater than 25, indicating a strong trend.
The short SMA crosses above the long SMA, suggesting a potential bullish signal.
In the populate_sell_trend method, the strategy generates sell signals based on two conditions:
The ADX value is less than 25, indicating a weak trend or consolidation. The long SMA crosses above the short SMA, indicating a potential bearish signal. The strategy uses these buy and sell signals to generate trading decisions. When a buy signal is present, the strategy sets the 'buy' column of the dataframe to 1. When a sell signal is present, the strategy sets the 'sell' column of the dataframe to 1. The strategy also specifies the minimal return on investment (ROI) and stop-loss values. The minimal ROI is set to 0.1, meaning that a trade should aim for a minimum 0.1% return before considering selling. The stop-loss is set to -0.25, indicating a 0.25% loss threshold at which a trade should be exited. Overall, the AdxSmas strategy aims to capture trends in the market by combining the ADX indicator with moving averages. It generates buy signals when a strong trend is detected and the short SMA crosses above the long SMA, and sell signals when the trend weakens or reverses. The minimal ROI and stop-loss parameters provide risk management guidelines for the strategy.