Fractional Accumulation Distribution Strategy

2024年11月10日

🔹 INTRODUCTION:

As traders and investors, we often find ourselves searching for ways to maximize our market positioning—trying to capture the best price, manage risk, and adapt to ever-changing volatility. Through years of working with a variety of traders and investors, a common theme emerged: the most successful market participants were those who accumulated positions strategically over time, rather than relying on one-off, rigid entry points. However, even the best of them struggled to consistently time their entries and exits for optimal results.
That's why I created the Fractional Accumulation/Distribution Strategy (FADS)—an adaptable solution designed to dynamically adjust position sizing and entry points based on changing market conditions, enabling both passive and active market participants to optimize their approach.
The FADS trading strategy combines volatility-based trend detection and adaptive position scaling to maximize profitability across varied market conditions. By using the price ranges from higher timeframes, FADS pinpoints extreme demand and supply zones with a high statistical probability of reversal, making it effective in both high and low volatility environments. By applying adjustable threshold settings, users can focus on meaningful price movements to reduce unnecessary trades. Adaptive position scaling further enhances this approach by adjusting position sizes based on entry level distances, allowing for strategic position building that balances risk and reward in uncertain markets. This systematic scaling begins with smaller positions, expanding as the trend solidifies, creating a refined, robust trading experience.



🔹 FEATURES:

• Multi-Timeframe Volatility-Based Trend Detection
  
• Accumulation/Distribution Level Filter
  
• Customizable Period for Highest/Lowest Prices Capture
  
• Adjustable Sensitivity & Frequency in Positioning
  
• Broad control settings of Strategy
  
• Adaptive Position Scaling
  

🔹 SETTINGS:

1. Volatility: Determines trading range based on market volatility [Day, Week, Month, Quarter, Year]. Highest range value number of periods.
   
2. Factor: Adjusts the width of the Accumulation & Distribution bands separately. The Level Filter feature offers customizable triggering bands, allowing users to fine-tune the initiation point for the Accumulation/Distribution sequence. This flexibility enables traders to align entries more precisely with market conditions, setting optimal thresholds for initiating trade chains, whether in accumulating positions during uptrends or distributing in downtrends.
   
3. Lowest: Choose the price source (e.g., Close, Low). Number of bars considered when determining the lowest price level. Selecting the checkbox generate a signal when the price crosses below the previous lowest value for calculating the lowest value used for trade signals.
   
4. Highest: Choose the price source (e.g., Close, High). Number of bars considered when determining the highest price levels. Selecting the checkbox generate a signal when the price crosses above the previous highest value for calculating the highest value used for trade signals.
   
5. Accumulation Spread: Adjusts the buying frequency sensitivity by setting the distance between entries based on personal risk tolerance. Larger values for less frequent buys; smaller values for more frequent buys.
   
6. Distribution Spread: Adjusts the selling frequency sensitivity by setting the distance between exits based on reward preference. Larger values for less frequent sells; smaller values for more frequent sells.
   
7. Percentage of Capital Allocation: Sets the portion of total capital used for the initial trade in a strategy. It sets the scale for subsequent trades during accumulation phase.
   

🔹 APPLICATIONS:

❖ Accumulation and Distribution Phases

• Early entries are avoided by initiating accumulation only after a trend reversal is confirmed and price breaks below long-term range.
  
• Position sizes are determined by the distance between consecutive trades, smaller distance results in smaller position sizes and vice versa.
  
• Average position cost is reduced by accumulating larger positions at the lower prices, potentially resulting in improved profitability.
  
• Early exits are avoided by initiating distribution only after trend reversal is confirmed and price breaks above long-term range.
  
• The pace of distribution can be tracked by the violet line that represents average positions during distribution phase
  

❖ Use Cases (Different than default setting input is used for illustration purposes)

If the starting point of accumulation starts too high for the risk preference, Accumulation Level Filter can be lowered by increasing the 🟢 threshold Factor.


If the starting point of distribution is too low for the reward preference, the Distribution Level Filter can be raised by increasing the 🔴 threshold Factor.


In lower timeframes, positions during the accumulation phase could be purchased at higher levels relative to prior entry positions. To optimize for this, consider extending the period used to capture the lowest prices. Similarly, during the distribution phase, increasing the period for identifying higher prices can improve accuracy.


🔹 Strategy Properties:

• Adjusting properties within the script settings is recommended to align with specific accounts and trading platforms, ensuring realistic strategy results.
  
• Balance (default): $100,000
  
• Initial Order Size: 1% of the default balance
  
• Commission: 0.1%
  
• Slippage: 5 Ticks
  
• Backtesting: Backtested using TradingView’s built-in strategy testing tool with default commission rates of 0.1% and slippage of 5 ticks. It reflects average market conditions for Apple Inc. (APPL) on 1-hour timeframe
  
• Disclaimers: Commission and slippage varies with market conditions and brokerage policies. The assumed value may not represent all trading environments.
  

PAST PERFORMANCE DOESN’T GUARANTEE FUTURE RESULTS!


Disclaimer: Please remember that past performance may not be indicative of future results. Due to various factors, including changing market conditions, the strategy may no longer perform as well as in historical backtesting. This post and the script don’t provide any financial advice.

This invite-only script is being published as part of my commitment to developing tools that align with TradingView’s community standards. Access requests will be reviewed carefully after the script passes TradingView's moderation process.

2024年12月14日

リリースノート

• Capital % input changed to float (supporting decimals)
  

2024年12月14日

リリースノート

• Converted to PS v6
  
• Updated Author's Instruction