A Simple Moving Average Cross Strategy (& how to use valuewhen)

hey Traders welcome back to another
video in today's video I want to answer
a question from a student in the
partnership Mastery course and in doing
so we're going to build out a strategy
idea that's a little bit interesting
it's not something I'd personally trade
in its raw form but it has potential to
be turned into a system with a bit of
creativity adding some filters adding
some better risk management that sort of
thing so this is just Pure Food For
Thought while answering a practical
question from a student so the question
is I'm trying to get the exact price on
the corresponding chart y-axis when a
moving average crosses over another
moving average the crossover can trigger
at any time within the bars time frame
but I'm working on closed bars there
doesn't seem to be a crossover price
option in pinescript it's just a Boolean
true false result what the student has
been doing is averaging the two moving
average prices when ta cross occurs
however it's not as accurate as they
would like because the two moving
averages don't necessarily cross when
the bar closes as an FYI I want to use
the crossover prices starting level when
looking for higher highs and lows or
lower lows in highs thanks in advance
so the script I have here is one that I
built out after a code an example of how
to get the crossover price as just a
pure indicator and then I added some
strategy code to turn it into a system
which wasn't part of the question but I
just got carried away because I was
curious to see how this concept would
work as a trading system so to start off
the video I'm going to show you how to
get the crossover price and draw that
onto your chart and then we'll add
strategy functionality to the script to
show you guys one how easy it is to turn
anything into a system and two just to
make the lesson more interesting because
otherwise we're just detecting moving
average Crossovers and when I make
YouTube videos I like to try and give
you guys a little bit more than
something that simple so let's get into
the pine editor and start coding okay so
the first thing we need to do when
detecting a moving average cross server
is obviously get the moving averages now
you don't need to do this but I'm going
to make these user inputs
so I'll just copy the code over to save
time
we're just getting two user inputs here
for each moving average and after we
have these inputs we need to get the ma
values themselves so that's really easy
we just use the ta.ema function pass in
a price source and a length so now that
we have our moving averages we should
probably draw them onto the chart so
that we can see what's going on so I'm
just going to use a couple of plot
functions here to draw these Mas there
they are and get rid of this closing
price plot now and there we go so what
we want to do is detect when the
crossover happens and figure out what
the closing price of the crossover bar
was so there are two ways we can do this
we can do it the easy way or the hard
way so I'll start with the easy way and
then I'll show you the more complicated
sophisticated way so the first thing I
need to do is detect when the cross
happens so to do that I'll just create a
new variable here called cross and it'll
be set to TA dot cross
now this cross function takes two price
sources and when they cross this
function will return true otherwise it's
false so we want to see if ema1 crosses
ema2
and now what we can do just really
quickly to see
when this cross is detected is we can
just change the background color of our
chart to Green whenever cross is true or
n a whenever it's not true and now we
will be getting a big green background
whenever a cross occurs so that's the
first step completed now in order to get
the price of the crossover the easiest
way to do this is to just simply
reference the closing price of the bar
whenever the cross occurs so we can just
say here
float cross price equals
do we have a cross of our EMAs if so
set it cross price to the closing price
otherwise if we do not have a cross of
our moving averages set cross price to n
a and then finally we can draw a label
onto our chart
to display the cross price so for this I
just need to check if our cross Boolean
is true if it is we want to create a new
label so label I'll just call it cross
label
equals label.new and then this requires
two parameters to tell trading view
where to draw the label the first one is
a bar index or bar time
the second one is a price for now I'll
just set it to the bars high but we'll
change that in a moment the final
parameter here is the text we want to
display so I can just say here cross
price equals plus now you can't add a
number directly to a string in trading
view in Pine script we need to use the
Str dot two string function to convert
numbers into text so here we can pass in
our cross price and if we save our code
we should be getting labels now on the
bars High whenever a cross occurs that
label's a bit hard to read so let's
change the color I'll just change the
color to color.white
um that'll give it a white background
with dark text makes it easy to read
um I don't like that it draws over price
action what I'd prefer is this label
drawing up here on the actual crossover
itself so what I'm going to do here
is check
for the highest EMA price
so we can check here is ema1 greater
than ema2 if so then the highest EMA is
ema1 otherwise it is eme2 and then I can
paste this into our y-axis value on our
label parameters now I want to save my
code these labels will be drawing on the
crossover itself on the highest moving
average when the crossover occurs now we
can get rid of our background color
because that just clutters up our chart
a bit and there we go we are detecting
Crossovers and we're getting the price
value from that crossover or cross under
ta dot cross detects both Crossovers and
cross unders if you wanted to detect
just a crossover you would use the TA
dot cross whoops
crossover function and that takes the
same two parameters alternatively you
can use the cross under function
ta cross will detect either of those
conditions so that's the easiest way to
get the closing price or any price value
this could be the high of that bar the
low whatever the volume on that bar
whenever this condition is true whatever
we set cross price to will be
corresponding to the bar that caused the
ma to uh officially cross an alternative
way to get the cross price in Pine
script would be to use the value when
function so I'll show you what that
looks like
this is a little bit more complicated
but gives us a little bit more
flexibility with the values we are
getting now I'll show you what I mean
to use this function it's in the TA
Library so ta dot value when
and if I control click on this function
here's an example and it's doing exactly
what the student wanted to do it's
getting the value of the closing price
on the second most recent cross so what
we need to pass in here is the Boolean
condition we want to trigger this
function so in this case that would be
our cross Boolean the next thing we need
is a price source so in this case we
want to get the closing price and then
finally we have to tell it which
occurrence to reference so if I set this
to zero and save my code I will get
exactly the same price values drawing
onto our chart however if I set this
value to 1 then the value when function
is going to treat this number like a
historical operator for the values that
occur whenever this condition is true so
in other words if I set this to one this
label will now be referencing the
previous crossover because remember in
coding we start counting from zero so
one would be the second last occurrence
of our crossover and cross under so now
if I save my code this label will say
287.11 287.11 it's now referencing the
previous crossover and if I wanted to
reference the one before that this one
here 265 I would put two in here and now
we're referencing one two three crosses
ago so for now I'm going to comment out
this line of code and we'll stick with
the simpler version of this method since
we don't need to reference previous
crosses we just need to reference the
current one that just occurred so so far
the script is pretty simple we're not
really doing anything particularly
useful with this script we're just
getting the price value of the Cross
obviously that is useful in some
circumstances but to wrap up this lesson
I'm going to add some complexity to the
script and what I'm going to do is I'm
going to check if the closing price of
our crossover is the highest close over
the past 10 bars if that's true then
we're going to flag this bar as
important and what this will achieve as
a side effect is whenever the moving
average is
crossing over multiple times during
consolidation we won't be highlighting
those bars because during consolidation
obviously the crossbars close is not
going to be the highest or lowest close
over the past 10 bars because we're in
consolidation so that can be useful to
filter out some noise when dealing with
a moving average cross system
so let's code that out now first let's
check if the crossover price is the
highest price over the past 10 bars or
in this case the highest close there's
multiple ways we can do this the way I'm
going to choose to do it today is this
way I'm going to declare a new Boolean
value called highest price and this is
going to be set to cross so whenever we
have a crossover or cross under highest
price is going to be set to true but
then what I'm going to do is loop from
the previous bar right before the cross
back to 10 bars ago and on each
iteration of this Loop we are going to
check if the cross price is less than or
equal to the close
on this Loop for Loop bar if that
condition is met then we are going to
set highest price to false and break out
of the loop and then what I'll do here
is I will flag the bar if it is a high
or low close and to do that I'll just
use the background color function it's
the simplest way I know of to highlight
a bar the plot shape function works as
well but I like this method especially
when I'm developing a script maybe once
I'm finished with the script I'll add a
nicer looking way to flag bars and
market conditions but for now this will
do so I'll set it to color.new
color.green with 50 transparency
and otherwise if highest price is not
true then we want to set the background
color to nothing just the default color
so now when I save my code
we should be getting some green bars on
our chart there we have it and that's
working perfectly so now we are only
drawing the background color green when
this buys the highest close over the
past 10 bars now the reason we had to
start our for loop from one instead of
zero which you would typically do is
because if we check if the cross price
the closing price of our crossover is
less than or equal to the closing price
of the original crossbar we're comparing
the closing price of the closing price
and this will return false so we need to
start counting from the bar before our
crossover
and we count back 10 bars from there and
compare the closing price to each bar
over that Loop so now I can pretty much
copy this
um block of code here but just flip
everything around so that we're checking
if the crossover bar or cross under bar
is the lowest closing bar over the past
10 bars and I can paint the background
color red when that occurs and now we
are ignoring any crosses
that occur in consolidation essentially
and that will give us slightly better
quality
crosses to work with especially if we're
going to turn this script into a system
which is what I'm going to do next so
the code here is pretty simple and
self-explanatory the for Loops obviously
a little bit more complex if you're new
to Pine script but everything else is
pretty standard simple stuff what I'm
going to do now is copy over the source
code to the strategy version of the
script and I'll just explain the changes
I made to this original code base
so here's the strategy script now the
first part of the script is identical
other than the fact we've changed the
script to a strategy script and we've
set the default quantity type to a
percentage of equity and the default
quantity value to 100 so this means
we'll be investing 100 of our account
balance on each trade by default but we
can obviously change that in the
properties of the script settings then
we're getting our Mas drawing them to
the chart and then here I've expanded
our crossover detection code just
slightly so now I'm differentiating
between Crossovers and cross unders this
is so we can go long and short we want
to be going along when the shorter term
EMA crosses over the longer term EMA and
we want to be going short when the
shorter term EMA crosses under the
longer term EMA so I need to
differentiate between those two we still
have our cross Boolean here and this is
going to be true of either of these
conditions I'm at then we get our cross
price just like before then we check if
the crossover price the close closing
price of the crossover or cross under
bar is the highest or lowest closing
price over the past 10 bars and then
we're flagging when the bar is the
highest closing bar over the past 10
bars during a crossover condition or
cross under condition and here's the
biggest difference in the code compared
to the last script so here we're
checking if we have a cross condition
then we're drawing our label like we
were in the previous script but then
we're checking if highest price is true
and our strategy position size the back
tester position size is flat equal to
zero then we enter a long position where
alternatively if we're flat and the
current bar is the lowest closing priced
bar over the past 10 bars after a cross
has occurred then we enter short and now
these should really say cross over and
cross under and so if we get a cross or
cross under and this code gets executed
we go long if we're flat and the current
buys the highest close over the past 10
bars after a cross and highest price
will only be true if we've had a
crossover and that bar is the highest
close over the past 10 bars and then the
opposite for sure treats and then
finally we just exit our trade if the
current bars closing price is less than
our short-term EMA so here we get our
cross over the short-term email crosses
over the long-term EMA the bar that
caused that crossover is the highest
close over the past tent bars we enter
long and then we hold our position until
price closes below our short-term EMA
let me exit on the next bars open uh
we're investing 100 of our account
balance on each trade and we're on the
one hour time frame here and you can see
that this system shows potential now
this is just one data sample it's not
enough to tell whether or not this
system is actually actually profitable
we've only got 74 trades here this could
be pure luck and I haven't taken the
time to check how robust the system is
because it's just it's not really
something I would personally trade this
is all purely just for example purposes
to give you guys some food for thought
and just demonstrate how you can create
a simple base for a system in this case
using moving average crosses now
obviously we could improve this system
by adding more filters by adding better
risk management
um I think this exit condition is
adequate but there could be better
systems out there such as a trailing
stop or an exit reason better filters
could include things like verifying
momentum so you could use the adx for
that rate of change you could check the
RSI value of the RSI value is above a
certain threshold then you can consider
momentum to be strong you could check if
the current Bar's size is greater than
the recent ATR value there's dozens of
different techniques you could employ to
improve this system those are just some
examples then obviously you can tweak
the moving average length so we could go
much shorter if we wanted to and now we
get significantly more trades we can see
how that affects the system much more
return but also greater
um the drawdown
so there's obviously pros and cons to
whatever you do with this sort of
approach to a system there's different
time frames so we could check how the
daily chart performs
um now the daily charts only taking nine
trades so that could be an issue you may
need to lower the moving average period
for higher time frame so that we get
more trades but anyway you get the idea
hopefully this answered the original
question for the student who asked it
and hopefully you guys found this
interesting and some food for thought
When developing your own trading systems
through the trading view strategy tester
I'll wrap this up here the source code
as always is below you can go and play
around with this and see how you would
improve it if you have any suggestions
in the comments section please let us
know I'm always curious to see what
techniques you guys employ in your own
trading but for now that will do it for
this video just before we wrap up this
video I just want to remind you guys
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you soon