Profit Guard Short Strategy with Time Delay & Stop Loss

"Profit Guard Short Strategy" Explanation

This script, named "Profit Guard Short Strategy," is designed to identify and execute short-selling opportunities in financial markets, aiming to profit from price declines. It incorporates adaptive filtering, a time-based exit mechanism, and a stop-loss to manage risk.

Profit-Making Mechanisms:

Trend Following (Short Direction):
The core profit strategy is to identify and capitalize on downtrends.
It uses two Simple Moving Averages (SMAs): a faster one (FMA) and a slower one (SMA).
When the FMA crosses below the SMA, it signals a potential shift from an uptrend to a downtrend.
The script further confirms this with a price crossover below the FMA, indicating a strong likelihood of a continuing downtrend.

Adaptive Filtering:
Volatility Filter (ATR): The script uses the Average True Range (ATR) to ensure sufficient market volatility. It only enters short positions when the ATR is above a certain threshold, avoiding trades in stagnant or low-volatility conditions.
Range Filter: The script calculates the price range over a specified lookback period and avoids entering trades when the range is too narrow, indicating a range-bound market. This helps to focus on trending markets.

Time-Based Exit:
The script implements a time delay before considering the crossover exit signal. This allows the trade to run for a predetermined period, giving it a chance to reach its profit potential.
After the time delay, the script closes the short position when the price or the FMA crosses back above the SMA, indicating a potential trend reversal.

Stop-Loss Mechanism:

Risk Management: The stop-loss is a crucial risk management tool.
Percentage-Based: The script uses a percentage-based stop-loss, calculated from the entry price.
Protection: If the price moves against the short position and reaches the stop-loss level, the position is automatically closed, limiting potential losses.

Lookback (Range Filter):

Range Calculation: The "lookback" period (rangeLookback) determines the number of past bars the script uses to calculate the highest high and lowest low prices.
Purpose: This calculation is used to determine the price range and filter out range-bound markets.
Impact: A larger lookback period considers a wider historical range, while a smaller lookback period focuses on recent price action.

Default Settings and Market Considerations:

Default Settings: The default settings of this script are optimized for the BTCUSDT market.
Market Sensitivity: Different markets have varying volatility, price ranges, and trading characteristics.
Resetting Settings: It is crucial to reset the script's settings when trading other markets. This includes:
Moving Average Lengths: Adjusting fastMA_length and slowMA_length based on the market's volatility and trend characteristics.
ATR Sensitivity: Modifying atrSensitivity to match the market's typical volatility.
Range Percent: Adjusting rangePercent to reflect the market's typical price ranges.
Time Delay: Modifying delayMinutes based on the market's typical trend duration.
Stop Loss Percent: Adjusting stopLossPercent based on the market's volatility and your risk tolerance.