Custom Trading Strategies
While this is not a requirement for using chart.observer, you may wish to use a 3rd party charting tool like TradingView. With this and similar charting websites, you will find they have a distinction between “Strategies” and “Indicators” on their platform, which is explained in various resources. The main differences are as follows:
- Indicators: These are mathematical calculations that provide a visual representation of market data on charts. They help traders understand trends and patterns but do not make predictions about future movements. Indicators are passive tools used for analysis and can be set up to trigger alerts based on specific conditions. In TradingView, indicators are created using the
indicator()function in Pine Script[12]. - Strategies: These include all the features of indicators but go further by incorporating a set of rules or criteria for executing trades. Strategies are active tools that dictate specific trading actions based on market information. A key feature of strategies is the ability to backtest them, allowing traders to simulate how a strategy would have performed in past market conditions. This helps in optimizing and fine-tuning the strategy before applying it to live trading. Strategies in TradingView are created using the
strategy()function in Pine Script[12].
In summary, while indicators provide insights into market trends and patterns, strategies offer a comprehensive trading plan with backtesting capabilities, making them suitable for automating trades based on predetermined rules. In many cases, a strategy is made up of multiple indicators that agree or disagree with each other. Below is an example of a custom strategy applied to the Solana (SOL) 4 Hour candlestick chart on Tradingview. The window at the bottom is the back-testing result over 18 months of historical data.
You will find that the community of users on Tradingview have contributed thousands of custom trading strategies, along with the ones that come built-in. Anyone who learns the Pinescript programming language can author their own custom Tradingview Strategies. Contributing your strategy for use on their website is optional. Most community strategies are free to use, while some require a subscription or special invite. We plan to publish some Knowledge Base articles on the topic of coding these strategies yourself.
Let’s review…
- Strategies are similar, but more powerful than Indicators
- Like Indicators, they can forward trade signals to chart.observer
- They are a Tradingview concept, but also found in other charting tools
- You can back-test against historical trading data
Using Strategies with chart.observer
In our article on Indicators, we discuss the way in which notifications, or “alerts”, can be forwarded to chart.observer from another website or software program. This signal from a 3rd party indicator results in a trade here on our platform. The same can be said for Tradingview Strategies. You may find that other charting tools have a similar concept, but they may have a different name for it. In any event, we simply need the signal to be forwarded to our “webhook” API, in the manner described in our Knowledge Base section on Automating Trades.
Our roadmap of future chart.observer feature releases includes adding a section to the chart.observer website where our users share a link to their own custom strategies on Tradingview.
Back-Testing a Strategy
In this video from Tradingview.com, they describe how to evaluate the past performance of any strategy selected from their built-in or community library. Please note that back-testing does not guarantee future performance. One of the reasons we created chart.observer is to allow for the “forward-testing” of trading strategies. However this too, does not guarantee that your strategy will work well with real money on the line. We provide this service for entertainment purposes only.
Citations:
[1] https://blog.traderspost.io/article/what-is-the-difference-between-a-tradingview-strategy-and-an-indicator
[2] https://docs.tradingparadise.io/trading-paradise-complete-guidebook/easy-trade-buy-and-sell-strategy-indicator/how-do-indicators-and-strategies-differ-in-tradingview