Skip to main content

AdxSmas Strategy: The Trend Filter

Nickname: Trend Quality Inspector, ADX Filter King
Job: Trend Trading 101
Timeframe: Hourly (1h)

1. What is This Strategy?​

Simply put, AdxSmas is:

  • First use ADX to check "does this market have a trend?"
  • Only look at moving average crosses if there's a trend, lie flat if not
  • Simple enough to have only 50 lines of code, beginner-level strategy

It's like "a pedestrian who only crosses when there's a green light" 🚦—ordinary MA strategies rush without looking, this strategy waits for ADX to say "there's a trend (green light)" before going, otherwise stays put during consolidation (red light).

2. Core Configuration: "Trade Based on Trend"​

Take Profit Rules (ROI Table)​

Target ROI: 10%

Translation: Make 10% and leave, no greed.

Stop Loss Rules​

Fixed Stop Loss: -25%

Translation: Lose 25% and admit defeat. This stop is pretty wide, giving trends room to breathe.

3. Buy Condition: Double Confirmation Required​

🎯 The Only Buy Condition: ADX + SMA Golden Cross​

Code Logic:

Condition 1: ADX > 25              # Is trend strength enough?
Condition 2: SMA(3) crosses above SMA(6)     # Is direction right?

Plain English:

"First check ADX—this indicator tells us 'is there a trend right now'. ADX > 25 means clear trend, then look at moving averages. Short-term MA (3) crosses above long-term MA (6), means trend is going up, buy!"

Analogy: Like buying a house 🏠:

  • ADX > 25 = Confirms this neighborhood prices are rising (there's a trend)
  • SMA golden cross = Now is a good time to buy (entry signal)

Both conditions must be met to buy, can't miss either!

What is ADX?​

ADX (Average Directional Index) is an indicator measuring trend strength:

ADX ValueTrend StatusPlain English
0-25No trend/weak trend"This market is wobbling, don't touch"
25-50Strong trend"There's direction now, can look"
50-75Very strong trend"Trend very clear, good opportunity"
75-100Extremely strong trend"Too fierce, watch for reversal"

Strategy uses ADX > 25 as threshold, meaning:

"Only trade when trend strength is enough. Ranging market? Sorry, not even if you beg me."

4. Sell Logic: Leave When Trend is Gone​

4.1 Sell Condition: ADX Decline + SMA Death Cross​

Code Logic:

Condition 1: ADX < 25              # Trend strength weakening
Condition 2: SMA(6) crosses above SMA(3)     # Direction reversing

Plain English:

"ADX dropped below 25, trend is weakening. MA also death crossed, trend might reverse. Time to go, don't linger."

4.2 Buy vs Sell Comparison​

DimensionBuy SignalSell Signal
ADX Condition> 25 (has trend)< 25 (trend weakening)
SMA ConditionGolden cross (upward)Death cross (downward/reversal)
Market StateTrend just formedTrend ending

Plain English:

"When buying, need both conditions: strong trend, right direction. When selling also two conditions: weak trend, wrong direction. This is called 'strict in, strict out'."

5. This Strategy's "Personality Traits"​

✅ Pros (Praise Time)​

  1. Super Simple: Only 50 lines of code, beginners can understand
  2. Effective Trend Filtering: ADX really filters false signals in ranging markets
  3. Clear Logic: ADX judges trend + SMA judges direction, simple and clear
  4. Great for Learning: Perfect introductory case for Freqtrade strategy development

⚠️ Cons (Roast Time)​

  1. Stop Too Wide: 25% stop loss, some coins swing that much in a day
  2. SMA Too Short: 3 and 6 MAs are too sensitive to noise
  3. Take Profit Too Simple: Only one 10% target, not flexible
  4. No Trailing Take Profit: When trend is strong could make more, but only 10%

6. Applicable Scenarios: When to Use It?​

Market EnvironmentRecommended ActionReason
Strong Uptrend⭐⭐⭐⭐⭐ Full steam aheadADX high, perfect capture
Medium Trend⭐⭐⭐⭐☆ Normal useFiltering effective, high signal quality
Sideways Consolidation⭐⭐☆☆☆ Use sparinglyADX filters most signals, occasional misjudgment
High-Frequency Volatility⭐☆☆☆☆ Don't useShort SMA too sensitive, signals all over
Downtrend🚫 DisableLong only, downtrend is giving money away

7. Summary: How Good Is This Strategy?​

One-Line Review​

"Entry-level trend strategy, ADX filtering is the highlight, so simple you'll think 'that's it?'"

Who Should Use It?​

  • ✅ Quantitative trading beginners (simple code, clear logic)
  • ✅ People wanting to learn Freqtrade
  • ✅ People who like simple strategies
  • ✅ People wanting to understand ADX indicator

Who Shouldn't?​

  • ❌ Low risk tolerance (25% stop too wide)
  • ❌ People wanting fine control (only one ROI target)
  • ❌ Ranging market traders (will get filtered out)
  • ❌ People seeking complex strategies (this is too simple)

My Recommendations​

  1. Learning purpose: Use as first strategy to understand Freqtrade framework
  2. Parameter optimization: Can change SMA periods to 5/10, less noise
  3. Add stop mechanism: Add trailing stop yourself to protect profits
  4. Combine with others: Use with other strategies to add signal filtering layer

8. What Markets Can This Strategy Make Money In?​

8.1 Core Logic: Using ADX to Filter False Signals​

AdxSmas is like "a picky eater" 🍽️:

  • ADX > 25 = "This dish has meat (has trend), can eat"
  • ADX < 25 = "This dish is vegetarian (consolidation), don't want"
  • SMA golden cross = "Meat is cooked, can dig in"

Its Money-Making Philosophy:

"I don't chase up and down, I only trade when trend is clear. Ranging? Sorry, not even if you invite me."

8.2 Performance in Different Markets (Plain English Version)​

Market TypePerformance RatingPlain English Explanation
📈 Strong Uptrend⭐⭐⭐⭐⭐ADX high up, MA obediently golden crosses, perfect
🔄 Medium Trend⭐⭐⭐⭐☆Filtering effective, good signal quality
📉 Strong Downtrend⭐⭐⭐☆☆Strategy defaults to long, can't use in downtrend
⚡️ Sideways Consolidation⭐⭐☆☆☆ADX filters signals, basically no trading
🌀 High-Frequency Volatility⭐☆☆☆☆SMA too sensitive, buy today sell tomorrow

One-Line Summary:

"Trending markets are its home turf, ranging markets it chooses to lie flat."

9. Want to Run This Strategy? Check These Configurations First​

9.1 Trading Pair Configuration​

Configuration ItemRecommended ValueNotes
Timeframe1h (default)Can try 4h, signals more stable
Stop Loss-0.25Wide, but gives trend room
Take Profit0.110%, no greed

9.2 Areas for Optimization​

# Original parameters
dataframe['short'] = ta.SMA(dataframe, timeperiod=3)   # Too short
dataframe['long'] = ta.SMA(dataframe, timeperiod=6)    # Too short

# Recommended change
dataframe['short'] = ta.SMA(dataframe, timeperiod=5)   # Slightly longer
dataframe['long'] = ta.SMA(dataframe, timeperiod=10)   # Reduce noise

9.3 Hardware Requirements​

Number of PairsMinimum MemoryRecommended MemoryExperience
1-101GB2GBSmooth
11-302GB4GBComfortable
31+4GB8GBPerfect

Note: This is one of the lightest strategies, minimal computation, old computers can run it.

9.4 Backtesting vs Live Trading​

Backtesting: Looks okay, ADX filtering effective Live Trading: ADX has slight lag, may miss trend starting points

Recommended Process:

  1. Backtest first to see results
  2. Small capital live test
  3. Observe signal quality
  4. Consider optimizing SMA parameters
  5. Can add trailing stop

10. Bonus: The Author's "Little Thoughts"​

Look carefully at the code, you'll find some interesting things:

  1. Code Origin: Comments say this was converted from C# version

    "This is a 'ported' strategy, translated from another platform"

  2. Minimalist Design: Whole strategy is only about 50 lines

    "Author might be saying: simplicity is beauty"

  3. ADX Threshold: Chose the classic value of 25

    "Textbook parameter, nothing fancy"

  4. Wide Stop Loss: 25% stop space

    "Gives trend enough breathing room, won't get shaken out easily"

11. Final Words​

One-Line Review​

"Entry-level trend strategy, simple code, clear logic, great for learning. ADX filtering is the essence."

Who Should Use It?​

  • ✅ Quantitative trading beginners
  • ✅ People wanting to understand ADX indicator
  • ✅ People who like simple strategies
  • ✅ People learning Freqtrade framework

Who Shouldn't?​

  • ❌ Low risk tolerance (stop too wide)
  • ❌ Ranging market traders (will get filtered)
  • ❌ People seeking complex strategies (too simple)
  • ❌ People wanting fine control (too few options)

Manual Trading Recommendations​

If you want to manually execute this strategy:

  1. Add ADX(14) indicator in TradingView
  2. Add SMA(3) and SMA(6)
  3. Wait for ADX > 25 and SMA golden cross to buy
  4. Set 25% stop loss or observe ADX decline to sell

12. ⚠️ Risk Re-emphasis (Must Read)​

Backtesting Looks Okay, Live Trading Needs Caution​

AdxSmas historical backtesting looks okay—but there's a problem:

ADX is a lagging indicator, by the time it confirms a trend, the trend may have already moved for a while.

Simply put: "Trend started a while ago, ADX then tells you it's time to enter."

Strategy's Hidden Risks​

In live trading, watch out for these risks:

  • ADX lag: Trend confirmation has delay, may miss best entry points
  • Stop too wide: 25% may not suit volatile coins
  • SMA too short: 3 and 6 MAs are noisy, frequent signals
  • Single take profit: 10% target may be too rigid

My Recommendations (Real Talk)​

1. Use this strategy as a learning template
2. Optimize SMA periods (suggest changing to 5/10)
3. Add trailing stop to protect profits
4. Adjust ADX threshold for different markets
5. Small capital test, don't go all in right away

Remember: No matter how simple the strategy, the market isn't simple. Test with light positions, survival comes first! 🙏