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Range Contraction NR4 Breakout Trading Strategy: Python

· by CryptoDataDownload
Range Contraction NR4 Breakout Trading Strategy: Python


Strategy Description
According to the book "Street Smarts: High Probability Short-Term Trading Strategies" by Laurence A. Connors and Linda Bradford Raschke, this strategy identifies certain days that meet "contraction" criteria and anticipates a breakout in one of the directions (it could be either) for a momentum trade. The strategy focuses on inside days and whether or not the days' range is the smallest out of a rolling window. If those conditions are met, then a breakout signal is generated once the following day begins to trade above the signal high or low extremes. A breakout leads to a momentum move where stops are meant to be trailed.

Strategy Rules and Conditions
  • Inside day is defined as a day with a higher low than the previous days' low and a lower high than the previous days' high
  • NR4 or "Narrow range 4" days are defined as the smallest change in daily range out of the last 4. So in effect, this is a rolling window of Highs-Lows (the range), and identifies if day #4 is the smallest (most contracted) out of the window
  • Signals are generated once the following day trades above or below the signal day high or low


    • The Code
    The code applies the above ruleset to BTCUSDT from Binance on CryptoDataDownload. New columns are added to the Pandas DataFrame that set Boolean logic for whether or not the strategy conditions are met. If they are met, the "buy_signal" or "sell_signal" columns will show "TRUE", meaning a signal was generated. The file saves a CSV at the end with all of the columns and titles it "NR4_volatility_strategy.csv"

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    Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Author does not own the any crypto currency discussed. The information and content are subject to change without notice. CryptoDataDownload and its affiliates do not provide investment, tax, legal or accounting advice.

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    THE PERFORMANCE OF TRADING SYSTEMS IS BASED ON THE USE OF COMPUTERIZED SYSTEM LOGIC. IT IS HYPOTHETICAL. PLEASE NOTE THE FOLLOWING DISCLAIMER. CFTC RULE 4.41: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. U.S. GOVERNMENT REQUIRED DISCLAIMER: COMMODITY FUTURES TRADING COMMISSION. FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS. DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS WEBSITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.