A Complete Guide to Developing and Testing TradingView Strategies

1. Strategy Conceptualization

Before diving into coding, you need to:

• Define your trading hypothesis

• Identify the markets and timeframes you'll trade

• Determine entry and exit conditions

• List the indicators you'll use

• Set initial risk management parameters

2. Pine Script Basics

TradingView uses Pine Script for strategy development. Here are the fundamental elements:

//@version=5
strategy("My Strategy", overlay=true)

// Define inputs
length = input(14, "RSI Period")
overbought = input(70, "Overbought Level")
oversold = input(30, "Oversold Level")

3. Building Your Strategy

Key Components:

1. Indicator Calculations

   
   // Calculate your indicators
   rsi = ta.rsi(close, length)
   ema = ta.ema(close, 20)

2. Entry Conditions

   
   // Define entry conditions
   longCondition = rsi < oversold and close > ema
   shortCondition = rsi > overbought and close < ema

3. Position Management

   
   // Execute trades
   if (longCondition)
   strategy.entry("Long", strategy.long)
   if (shortCondition)
   strategy.entry("Short", strategy.short)

4. Testing Phase

a) Initial Back testing

• Run your strategy on historical data

• Start with a broad timeframe (2-3 years minimum)

• Check basic performance metrics:

  • Win rate

  • Profit factor

  • Maximum drawdown

  • Total trades

b) Strategy Optimization

• Adjust parameters through:

  • Walk-forward analysis

  • Monte Carlo simulations

  • Parameter sensitivity testing

c) Robustness Testing

• Test across different:

  • Time periods

  • Market conditions

  • Symbols

  • Timeframes

5. Common Pitfalls to Avoid

1. Overfitting

   • Don't optimize for perfect historical performance

   • Keep parameters reasonable and logical

2. Look-Ahead Bias

   • Ensure your strategy only uses data available at the time of decision

   • Be careful with indicator calculations

3. Survivorship Bias

   • Test on delisted securities when possible

   • Consider market conditions during different periods

6. Strategy Validation

Before going live:

• Paper trade for at least 1-2 months

• Compare live results with backtests

• Monitor slippage and trading costs

• Document all assumptions and limitations

7. Implementation Best Practices

Risk Management

// Example of position sizing
strategy.risk.max_position_size = 100
strategy.risk.max_drawdown = 5000

Performance Monitoring

• Track key metrics:

  • Sharpe Ratio

  • Maximum Drawdown

  • Recovery Factor

  • Profit Factor

8. Going Live

Before trading real money:

1. Start with small position sizes

2. Monitor execution quality

3. Compare actual vs. expected results

4. Keep detailed trading logs

Example Strategy: Simple RSI with EMA Filter

Here's a basic example combining RSI and EMA:

//@version=5
strategy("RSI+EMA Strategy", overlay=true)

// Parameters
rsiLength = input(14)
emaLength = input(20)
rsiOverbought = input(70)
rsiOversold = input(30)

// Calculations
rsiValue = ta.rsi(close, rsiLength)
emaValue = ta.ema(close, emaLength)

// Entry Conditions
longEntry = rsiValue < rsiOversold and close > emaValue
shortEntry = rsiValue > rsiOverbought and close < emaValue

// Position Management
if (longEntry)
strategy.entry("Long", strategy.long)
if (shortEntry)
strategy.entry("Short", strategy.short)

Conclusion

Developing a TradingView strategy is an iterative process that requires patience, testing, and continuous refinement. Focus on creating robust, well-tested strategies rather than chasing perfect historical performance.