A Simple Start: Building a Moving Average Crossover Strategy in Pine Script

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Creating algorithmic trading strategies doesn’t have to be intimidating. With Pine Script, the programming language behind TradingView, you can build powerful tools to analyze markets and automate decisions—even as a beginner. In this guide, we’ll walk through building a Moving Average (MA) crossover strategy step by step, focusing on clarity, functionality, and real-world application.

Whether you're new to coding or just getting started with algorithmic trading, this tutorial will help you understand how to set up your first strategy using core Pine Script functions.

Understanding Pine Script Basics

Before diving into strategy creation, it's essential to know the foundation of Pine Script.

When you open the Pine Editor in TradingView (found at the bottom of any chart), you're greeted with a clean scripting environment. The very first line of any script must declare its version:

//@version=3

This tells TradingView which version of Pine Script you're using. While newer versions exist (like v4 and v5), starting with v3 ensures compatibility for basic learning.

Pine Script supports two main types of scripts:

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The key difference? If you want to test how well your idea would have performed historically, use strategy().

For example, the default plot(close) command draws a line following the closing price of each candle. You can modify this to plot other data points like high, low, or even custom calculations.

Setting Up Your Strategy Framework

To build a reliable backtestable strategy, proper setup is crucial. Replace study() with strategy() and configure key parameters:

strategy(title="A Simple Start - Strategy [CP]", shorttitle="MA Cross [CP]", overlay=true, 
         initial_capital=50000, default_qty_type=strategy.percent_of_equity, 
         default_qty_value=100, commission_type=strategy.commission.percent, 
         commission_value=0.075)

Let’s break down what each setting does:

Avoid enabling intrabar order calculations unless necessary—they can distort results.

Creating Dynamic Moving Averages

Our strategy hinges on two moving averages: a fast MA and a slow MA. We'll use the Simple Moving Average (SMA) for simplicity.

Core Formula:

sma(source, length)

We define both MAs with dynamic inputs so users can adjust settings without editing code:

lengthFastMA = input(5, type=input.integer, title="Fast MA Length")
lengthSlowMA = input(25, type=input.integer, title="Slow MA Length")
src = input(close, title="Source")

fastMA = sma(src, lengthFastMA)
slowMA = sma(src, lengthSlowMA)

plot(fastMA, color=color.blue, linewidth=2, title="Fast MA")
plot(slowMA, color=color.red, linewidth=2, title="Slow MA")

Using input() makes the script flexible—perfect for testing different timeframes or assets.

Defining Entry Conditions

A crossover strategy generates signals when the fast MA crosses above or below the slow MA.

Pine Script provides built-in functions:

We apply them as conditions:

longCondition = crossover(fastMA, slowMA)
shortCondition = crossunder(fastMA, slowMA)

These boolean conditions act as triggers for trade execution.

Executing the Strategy

Now that we have our signals, it's time to execute trades using strategy.entry():

if (longCondition)
    strategy.entry("MA Cross - Long", strategy.long)

if (shortCondition)
    strategy.entry("MA Cross - Short", strategy.short)

Each entry includes:

After saving and adding the script to your chart, you’ll see:

You can tweak MA lengths via the settings menu and instantly see updated results across any timeframe—ideal for optimizing performance.

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Frequently Asked Questions (FAQ)

Q: What is the difference between a study and a strategy in Pine Script?

A: A study is for visual indicators and supports alerts. A strategy allows backtesting and simulates trades with entry/exit logic.

Q: Why use version 3 of Pine Script instead of newer versions?

A: Version 3 is simpler and sufficient for beginners. Newer versions offer more features but come with increased complexity.

Q: Can I test this strategy on cryptocurrencies like Bitcoin?

A: Yes! Just ensure your initial_capital is high enough (e.g., $50,000) to handle BTC’s price volatility during backtesting.

Q: How do I reduce false signals in MA crossovers?

A: Consider adding filters—like volume thresholds or trend confirmation from other indicators (e.g., MACD or RSI).

Q: Is commission important in backtesting?

A: Absolutely. Fees eat into profits over time. Setting accurate commission values (like 0.075%) improves result realism.

Q: Can I make the MA source dynamic?

A: Yes—use input() with options like close, open, or hl2. Example:

src = input(close, title="Source", type=input.source)

Final Thoughts

You’ve now built a fully functional Moving Average crossover strategy using Pine Script. From setting up the environment to defining logic and executing trades, each step brings you closer to mastering algorithmic trading.

This foundational knowledge opens doors to more complex systems—multi-MA combos, volatility filters, risk management rules—and even automated bots.

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Remember: always test thoroughly across multiple assets and timeframes before risking real capital. And keep refining—great strategies evolve over time.

Happy coding, and happy trading!