Daily Close Comparison for Simple Directional Trend Following
Summary
This document explains a basic directional strategy that compares the current daily close with the previous daily close. It calculates their percentage difference and goes long when the change exceeds a positive threshold or short when it falls below the negative threshold. With the threshold set to zero, any increase or decrease changes the position direction; when the change is within a nonzero threshold, the prior direction is retained.
The example settings use BTC/USDT futures and two-hour bars over roughly a month, while sourcing daily closes. No quantitative performance figures are provided. The text calls its backtest results excellent but explicitly questions whether that performance would carry over to live trading, and the short test period offers limited evidence.
There are no stop-loss or take-profit rules, leaving outcomes dependent on continued directional movement. The article warns about losses during choppy markets and overfitting, and proposes trailing stops, volatility filters, alternative periods, and added trend confirmation. These are suggestions rather than tested enhancements.
Key ideas
- The strategy compares successive daily closes using their percentage change.
- A positive or negative threshold determines when the position switches direction.
- Changes inside a nonzero threshold leave the previous directional state in place.
- The published backtest settings cover BTC/USDT futures, but no performance metrics are given.
- Without stop-loss or take-profit rules, the approach is exposed to reversals and choppy markets.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.