A Moving-Average and Volume Entry Strategy with Exit Rules

Summary

This trading exercise translates a discretionary method into explicit stock-selection rules. A candidate must close above its five-day moving average for three consecutive days and remain within ten percent above its lowest price over the previous twenty days. The entry day’s volume must also exceed 1.2 times the average volume over the previous ten days.

The proposed trade exits at a fifteen percent profit or when price falls more than eight percent from its peak. The document also outlines a basic quantitative research workflow: inspect candidate factors, evaluate them with IC and ICIR, filter correlated signals, backtest combinations, add broad-market risk controls, and proceed through simulation toward live trading. It presents no performance results, transaction-cost assumptions, universe definition, or testing evidence, so the rules are a strategy specification rather than a validated system.

Key ideas

• Require three consecutive closes above the five-day moving average before entry.
• Limit candidates to prices no more than ten percent above the previous twenty-day low.
• Require entry-day volume to exceed 1.2 times the prior ten-day average.
• Use a fifteen percent profit target and an eight percent peak-to-trough trailing exit.
• Evaluate factors, screen for correlation, backtest combinations, apply market controls, and simulate before live deployment.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.