Directional Index Reversal Strategy with Moving Average and Stop Entries
Summary
This stock strategy uses changes in a modified Directional Index to switch between long and short bias. A local turn in the indicator sets the desired direction; entry is then permitted only when the close is on the corresponding side of a moving average, with a stop order placed at the bar’s high for longs or low for shorts. The author describes it as continuously invested with reversals and notes that removing the short entries produces a long-only variant. They recommend considering a high CSI or, for lower volatility exposure, a high ADXR.
The evidence is limited to the author’s informal report that the system looked promising in a stock-market test assuming no spread and a stated commission of five euros. The author says they have not used it in live markets. No test period, instrument universe, execution assumptions beyond those costs, risk controls, or robust performance statistics are supplied, so the result should not be treated as evidence of live profitability.
Key ideas
- Indicator turns set a long or short bias, and the strategy reverses when the opposite signal appears.
- A moving-average filter requires price to be above the average for longs and below it for shorts.
- Entries use stop orders at the signal bar’s high or low.
- The reported stock-market result assumes no spread and a stated commission, and the author has not traded it live.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.