ATR Thresholds and an EMA Filter for Short Mean Reversion

Summary

This short-only mean-reversion system looks for price extensions using a volatility-adjusted threshold. It adds a multiple of ATR to the closing price, smooths that level with an SMA, and enters short when the close rises above the resulting trigger. An optional trend filter requires price to be below a long-period EMA. The position closes when price falls below the previous bar’s low. The listed defaults use a 20-period ATR, a multiplier of one, a 10-period smoothing average, and a 200-period EMA filter.

The document gives published settings for a two-day ETH/USDT backtest over roughly a year, but reports no performance measures. The threshold and EMA rules are described, while the summary’s mention of a trading window is not reflected in the supplied strategy logic. Short mean reversion can lose in sustained rallies; results may also be sensitive to parameters and execution costs. The material recommends further testing and stronger exit and risk controls, such as trailing stops and drawdown limits.

Key ideas

• The short entry triggers when the close exceeds an SMA-smoothed threshold built from close plus an ATR multiple.
• An optional EMA filter allows shorts only when price is below the selected EMA.
• The exit occurs when price falls below the preceding bar’s low.
• The document provides ETH/USDT two-day test settings but no performance results, and sustained rallies pose a key risk.

Tags

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