Seykota Alt 16: Anti-Chop Filters

// This Pine Script® code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © danieltuckerrust
// ALTERNATIVE 16: Anti-Chop Filters
// THEORY: Trend following systems fail in ranging markets; only trade when genuine trend exists.
// The baseline takes every Donchian breakout. But breakouts in choppy, sideways markets lead to
// whipsaws. This alternative requires three confirming filters: ADX > 25 (directional strength),
// Efficiency Ratio > 0.3 (net movement vs total movement), and Trend Strength (% of bars closing
// higher/lower). Seykota: "The elements of good trading are: (1) cutting losses, (2) cutting losses,
// and (3) cutting losses." This version focuses on avoiding bad trades entirely.
// Trade-off: Far fewer trades, higher win rate, but may miss early trends or chop that becomes trend.

//@version=6
strategy("Seykota Alt 16: Anti-Chop Filters v1.0",
     overlay=true,
     initial_capital=100000,
     commission_type=strategy.commission.percent, commission_value=0.005,
     slippage=2,
     default_qty_type=strategy.fixed, default_qty_value=0,
     pyramiding=10,
     max_bars_back=5000)

//================ Inputs
allowLong   = input.bool(true,  "Allow LONGs?")
allowShort  = input.bool(true,  "Allow SHORTs?")

entryLen    = input.int(55,     "Donchian ENTRY lookback",            minval=10)
exitLen     = input.int(10,     "Donchian EXIT lookback",             minval=5)
nLen        = input.int(20,     "N = ATR length",                     minval=5)
stopN       = input.float(2.0,  "Initial stop (in N)",                minval=0.5, step=0.25)
addStepN    = input.float(0.5,  "Add every X * N",                    minval=0.25, step=0.25)
maxUnits    = input.int(4,      "Max units (incl. initial)",          minval=1, maxval=10)
riskPct     = input.float(1.0,  "Risk % of equity PER UNIT",          minval=0.1, maxval=5, step=0.1)

// CHANGED: Anti-chop filter parameters
useAdx      = input.bool(true,  "Use ADX filter?")
adxLen      = input.int(14,     "ADX length",                         minval=5)
adxThresh   = input.float(25,   "Min ADX threshold",                  minval=10, maxval=50, step=5)

useER       = input.bool(true,  "Use Efficiency Ratio filter?")
erLen       = input.int(20,     "ER length",                          minval=5)
erThresh    = input.float(0.3,  "Min ER threshold",                   minval=0, maxval=1, step=0.05)

useTrendStr = input.bool(true,  "Use Trend Strength filter?")
trendLen    = input.int(20,     "Trend strength length",              minval=5)
trendThresh = input.float(60,   "Min trend strength %",               minval=0, maxval=100, step=5)

useMarket   = input.bool(false, "Use market regime filter?")
marketSym   = input.symbol("SPY", "Market symbol for regime (if used)")
marketTF    = input.timeframe("D", "Regime timeframe (if used)")
marketLen   = input.int(200,    "Market MA length (if used)",         minval=50)

timeExitMode= input.string("None","Time exit", options=["None","Close","Roll"])
timeExitBars= input.int(60,     "Time exit bars (if used)",           minval=5)

minVol      = input.int(0,      "Min 20-bar avg volume (chart TF)",   minval=0)
showSignals = input.bool(true,  "Plot signals & stops?")
plotDon     = input.bool(true,  "Plot Donchian bands?")

// Date-range filter
fromDate = input.time(defval=timestamp("2022-01-01T00:00:00"), title="Backtest FROM (yyyy-mm-dd)", confirm=true)
toDate   = input.time(defval=timestamp("2099-12-31T23:59:59"), title="Backtest TO (yyyy-mm-dd)",   confirm=true)
flatAtFrom = input.bool(true, "Force FLAT at range start?")
isRangeStart = (time[1] < fromDate) and (time >= fromDate)
if flatAtFrom and isRangeStart and strategy.position_size != 0
    strategy.close_all(comment="Flat at FROM")

//================ Helpers
sharesForUnit(_equity, _Nentry) =>
    riskDollars   = _equity * (riskPct/100.0)
    perShareRisk  = math.max(stopN * _Nentry, syminfo.mintick)
    math.max(1, math.floor(riskDollars / perShareRisk))

inRange = (time >= fromDate) and (time <= toDate)

//================ Core calcs
N        = ta.atr(nLen)
volMA    = ta.sma(volume, 20)
liqOK    = volMA >= minVol

// Donchian levels
donHi    = ta.highest(high, entryLen)
donLo    = ta.lowest(low,  entryLen)
donHiPrev= donHi[1]
donLoPrev= donLo[1]

exitHiPrev = ta.highest(high, exitLen)[1]
exitLoPrev = ta.lowest(low,  exitLen)[1]

// Market regime (optional)
mClose = request.security(marketSym, marketTF, close)
mMA    = request.security(marketSym, marketTF, ta.sma(close, marketLen))
longRegOK  = not useMarket or (mClose > mMA)
shortRegOK = not useMarket or (mClose < mMA)

//================ ANTI-CHOP FILTERS

// 1. ADX (Average Directional Index) - measures trend strength
[diPlus, diMinus, adx] = ta.dmi(adxLen, adxLen)
adxOK = not useAdx or (adx > adxThresh)

// 2. Efficiency Ratio (Kaufman) - net movement / total movement
priceChange = math.abs(close - close[erLen])
volatility = 0.0
for i = 0 to erLen - 1
    volatility := volatility + math.abs(close[i] - close[i + 1])

efficiencyRatio = volatility > 0 ? priceChange / volatility : 0
erOK = not useER or (efficiencyRatio > erThresh)

// 3. Trend Strength - % of bars closing higher/lower over period
upBars = 0
for i = 1 to trendLen
    if close[i] > close[i + 1]
        upBars := upBars + 1

trendStrength = (upBars / trendLen) * 100
trendingUp = trendStrength > (50 + trendThresh/2)
trendingDown = trendStrength < (50 - trendThresh/2)
trendStrOK = not useTrendStr or trendingUp or trendingDown

// Combined trend quality filter
trendQualityOK = adxOK and erOK and trendStrOK

//================ Signals (WITH ANTI-CHOP FILTERS)
longBreak  = allowLong  and liqOK and longRegOK  and trendQualityOK and (close > donHiPrev)
shortBreak = allowShort and liqOK and shortRegOK and trendQualityOK and (close < donLoPrev)

//================ Position state
var float N_entry       = na
var float lastAddLong   = na
var float lastAddShort  = na
var int   units         = 0
var int   barsInPos     = 0
var bool  wantReenterL  = false
var bool  wantReenterS  = false

inPos     = strategy.position_size != 0
inLong    = strategy.position_size > 0
inShort   = strategy.position_size < 0

if inPos
    barsInPos += 1
else
    barsInPos    := 0
    units        := 0
    lastAddLong  := na
    lastAddShort := na
    N_entry      := na
    wantReenterL := false
    wantReenterS := false

//================ Entries
if inRange and not inPos and longBreak
    N_entry := N
    float sh = sharesForUnit(strategy.equity, N_entry)
    strategy.entry("L", strategy.long, qty=sh)
    units       := 1
    lastAddLong := close

if inRange and not inPos and shortBreak
    N_entry := N
    float sh = sharesForUnit(strategy.equity, N_entry)
    strategy.entry("S", strategy.short, qty=sh)
    units        := 1
    lastAddShort := close

//================ Add-ons (also require trend quality)
canAddLong  = inRange and inLong  and units < maxUnits and trendQualityOK and close >= nz(lastAddLong)  + addStepN * N_entry
canAddShort = inRange and inShort and units < maxUnits and trendQualityOK and close <= nz(lastAddShort) - addStepN * N_entry

if canAddLong
    float sh = sharesForUnit(strategy.equity, N_entry)
    strategy.entry("L", strategy.long, qty=sh)
    units       += 1
    lastAddLong := close

if canAddShort
    float sh = sharesForUnit(strategy.equity, N_entry)
    strategy.entry("S", strategy.short, qty=sh)
    units        += 1
    lastAddShort := close

//================ Exits
var float stopL = na
var float stopS = na

if inRange and inLong
    initStopL = strategy.position_avg_price - stopN * N_entry
    stopL     := math.max(initStopL, exitLoPrev)
    strategy.exit("L-EXIT", from_entry="L", stop=stopL)
else
    stopL := na

if inRange and inShort
    initStopS = strategy.position_avg_price + stopN * N_entry
    stopS     := math.min(initStopS, exitHiPrev)
    strategy.exit("S-EXIT", from_entry="S", stop=stopS)
else
    stopS := na

//================ Optional time exit
timeExitTrig = inRange and inPos and (timeExitMode != "None") and (barsInPos >= timeExitBars)

if timeExitTrig
    if inLong
        if timeExitMode == "Close"
            strategy.close("L", comment="Time Exit")
        else if timeExitMode == "Roll"
            wantReenterL := true
            strategy.close("L", comment="Time Exit (Roll)")
    if inShort
        if timeExitMode == "Close"
            strategy.close("S", comment="Time Exit")
        else if timeExitMode == "Roll"
            wantReenterS := true
            strategy.close("S", comment="Time Exit (Roll)")

// Re-enter after Roll
if inRange and not inPos and wantReenterL and longRegOK and trendQualityOK and (close > donHiPrev)
    N_entry := N
    float sh = sharesForUnit(strategy.equity, N_entry)
    strategy.entry("L", strategy.long, qty=sh)
    units       := 1
    lastAddLong := close
    wantReenterL := false

if inRange and not inPos and wantReenterS and shortRegOK and trendQualityOK and (close < donLoPrev)
    N_entry := N
    float sh = sharesForUnit(strategy.equity, N_entry)
    strategy.entry("S", strategy.short, qty=sh)
    units        := 1
    lastAddShort := close
    wantReenterS := false

//================ Plots
// Background color for trend quality
trendBgColor = trendQualityOK ? color.new(color.green, 95) : color.new(color.red, 95)
bgcolor(trendBgColor, title="Trend Quality")

float dHiPlot = plotDon ? donHi : na
float dLoPlot = plotDon ? donLo : na
plot(dHiPlot, "Donchian High", color=color.new(color.blue, 40))
plot(dLoPlot, "Donchian Low",  color=color.new(color.blue, 40))

plotshape(showSignals and longBreak,  title="Long",  style=shape.triangleup,   location=location.belowbar, size=size.tiny, color=color.new(color.green, 0), text="Quality↑")
plotshape(showSignals and shortBreak, title="Short", style=shape.triangledown, location=location.abovebar, size=size.tiny, color=color.new(color.red,   0), text="Quality↓")

plot(showSignals and inLong  ? stopL : na, "Long Stop",  color=color.new(color.red, 0), style=plot.style_linebr, linewidth=2)
plot(showSignals and inShort ? stopS : na, "Short Stop", color=color.new(color.red, 0), style=plot.style_linebr, linewidth=2)

// Trend quality indicators panel
var table infoTable = table.new(position.top_right, 3, 6, border_width=1)
if barstate.islast and showSignals
    table.cell(infoTable, 0, 0, "Filter:", text_color=color.white, bgcolor=color.gray)
    table.cell(infoTable, 1, 0, "ANTI-CHOP", text_color=color.white, bgcolor=color.purple)
    table.cell(infoTable, 2, 0, "", text_color=color.white, bgcolor=color.purple)

    table.cell(infoTable, 0, 1, "Quality:", text_color=color.white, bgcolor=color.gray)
    qualityStatus = trendQualityOK ? "GOOD" : "POOR"
    qualityColor = trendQualityOK ? color.green : color.red
    table.cell(infoTable, 1, 1, qualityStatus, text_color=color.white, bgcolor=qualityColor)
    table.cell(infoTable, 2, 1, "", text_color=color.white, bgcolor=qualityColor)

    table.cell(infoTable, 0, 2, "ADX:", text_color=color.white, bgcolor=color.gray)
    adxColor = adxOK ? color.green : color.red
    table.cell(infoTable, 1, 2, str.tostring(adx, "#.#"), text_color=color.white, bgcolor=adxColor)
    table.cell(infoTable, 2, 2, adxOK ? "✓" : "✗", text_color=color.white, bgcolor=adxColor)

    table.cell(infoTable, 0, 3, "Efficiency:", text_color=color.white, bgcolor=color.gray)
    erColor = erOK ? color.green : color.red
    table.cell(infoTable, 1, 3, str.tostring(efficiencyRatio, "#.##"), text_color=color.white, bgcolor=erColor)
    table.cell(infoTable, 2, 3, erOK ? "✓" : "✗", text_color=color.white, bgcolor=erColor)

    table.cell(infoTable, 0, 4, "Trend %:", text_color=color.white, bgcolor=color.gray)
    trendColor = trendStrOK ? color.green : color.red
    table.cell(infoTable, 1, 4, str.tostring(trendStrength, "#.#") + "%", text_color=color.white, bgcolor=trendColor)
    table.cell(infoTable, 2, 4, trendStrOK ? "✓" : "✗", text_color=color.white, bgcolor=trendColor)

    table.cell(infoTable, 0, 5, "Units:", text_color=color.white, bgcolor=color.gray)
    table.cell(infoTable, 1, 5, str.tostring(units) + "/" + str.tostring(maxUnits), text_color=color.white, bgcolor=color.gray)
    table.cell(infoTable, 2, 5, "", text_color=color.white, bgcolor=color.gray)