The study of K-line patterns is a hot topic in stock trading, such as "three crows", "dark cloud cover", and "hanging line" among short positions, and "morning star", "pregnant line", and "hanging line" among long positions. Dawn Star" and so on are all classic forms that are familiar to stockholders.
What we reproduce for you today is one of the classic forms - "Furong out of water".
What does the form of "water hibiscus" mean?
This pattern is generally when the stock price is at the bottom of the K-line, and a big positive line breaks the N1-day, N2-day, and N3-day moving averages, indicating that the bulls are strong and will enter a wave of strong upward market in the future.
For the definition of the specific form, we refer to the formula in Tongdaxin software:
- A Assignment: closing Yang line
- B assignment: A and the closing price > the S-day simple moving average of the closing price and the closing price > the M-day simple moving average of the closing price and the closing price > the LL-day simple moving average of the closing price
- CC assignment: B and the M-day simple moving average of the opening price < closing price and the LL-day simple moving average of the opening price < closing price
- Output CSFRO: CC and (closing price - opening price)>0.0618*closing price
The commonly used parameters in this form are: S is 20, M is 40, LL is 60, and the maximum does not exceed 60.
To this end, we can design a simple strategy logic: when the stock has this pattern, buy it the next day, and the exit conditions refer to the pattern structure, and sell when the closing price falls below the S-day, M-day, and LL-day moving averages.
The backtest settings are as follows:
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Backtest time: 2021-01-01 to 2022-10-21
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Backtest product: CSI 500 constituent stocks
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Initial capital: 10 million
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Handling fee: 0.0008 (bilateral 10003 commission + unilateral 10001 stamp duty, a total of 1.6 thousand, that is, bilateral 10000 8)
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Slippage: 0.00123 (two sides thousand 1.23)
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Number of positions: 20 shares
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From the perspective of the overall effect of the strategy, the trend of the net value of the strategy is very consistent with the trend of the market. The peaks and troughs come earlier than the market. At the same time, in each wave of trends, the strategy has stronger offensive capabilities and is more resilient. Achieved a cumulative excess return of 28.05%, an annualized return of -0.50%, and a maximum drawdown of 23.29% , but the winning rate was low at only 25.67%.
However, since the exit conditions of this strategy are relatively simple, there is still a lot of room for optimization. At the same time, other indicators can be used to further select stocks to increase the winning rate of the strategy.
The source code of this issue’s strategy has been shared with the Nuggets Quantitative Community . Interested friends can go to the link below and download it by themselves. If you have other K-line patterns that you are interested in, please leave us a message, maybe we can help you realize it!
Portal: https://bbs.myquant.cn/thread/3242