ATR Volatility Filters, Drift Signals, and a Trailing Stop

Summary

This document presents a long-only strategy that combines an ATR volatility filter, a price-drift signal, and a trailing stop. Its prose describes elevated volatility as ATR exceeding its rolling average by one standard deviation, then confirms an uptrend when recent log-price changes stay positive and above their average for several days. Entry is intended when both conditions hold; the stop trails below recent lows by a multiple of ATR. The Pine source uses related but not identical rules: its volatility condition flags ATR outside a band, and its drift condition checks recent increases or a positive drift.

The accompanying description reports an annualized return of 159% for 2015–2021 versus 120% for buy and hold. However, the published backtest settings cover BTC/USDT futures for roughly one year in 2022–2023, so the stated result cannot be verified from those settings alone. The document itself warns about the short evaluation sample, parameter sensitivity, false trend signals, and unknown behavior in extreme markets. Further testing across markets and regimes is needed before drawing conclusions.

Key ideas

• The approach combines an ATR-based volatility condition with a price-drift trend condition for long entries.
• The stated trailing stop follows the low price at a distance based on ATR.
• The prose and source code define volatility and trend signals differently in important respects.
• The document reports historical returns, but its published backtest window does not match that reported period.
• The author identifies limited sampling, parameter sensitivity, false signals, and extreme-market behavior as open concerns.

Tags

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