Dual SMA Trend Following with Dynamic Profit and Stop Levels

Summary

This long-only trend-following strategy uses a 5-period and a 12-period simple moving average. A cross of the faster average above the slower one opens a long position; a downward cross closes it. The described risk controls begin with a 10% take-profit level and 5% stop, then, when price rises above the entry, recalculate levels from the current price using a 20% profit target and a 2.5% stop distance.

The document supplies these settings and published daily BTC/USDT futures backtest dates spanning 2019 to 2024, but provides no performance statistics or evidence that the adaptive rules improve results. The source indicates that the recalculated levels are based on the latest close while price is above entry, rather than documenting a one-way trailing mechanism. The stated limitations include whipsaws in range-bound markets, reversal drawdowns, parameter sensitivity, and possible stop execution problems in illiquid markets. Suggested improvements include trend or volume filters and volatility-aware risk controls.

Key ideas

• A bullish 5-period versus 12-period SMA crossover opens a long position, and a bearish crossover closes it.
• Initial profit and stop levels are set at 10% and 5% from average entry price.
• When price is above entry, the source recalculates profit and stop levels from the current close using 20% and 2.5% distances.
• The document provides backtest settings but no performance results, and flags whipsaws, reversals, parameter sensitivity, and liquidity risk.

Tags

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