EMA Crossover Trading with Stop-Based Position Sizing

Summary

This system uses a medium-term and a longer-term exponential moving average crossover as its entry signal. A bullish crossover opens a long position and a bearish crossover opens a short position. For each direction, the stop is placed at the recent two-candle low or high, and the take-profit distance is set from that stop distance using a user-defined reward-to-risk ratio. Position quantity is calculated from account equity, a chosen risk percentage, and the distance to the stop.

The document identifies choppy markets, slippage, consecutive losses, and sudden events that can undermine stop execution as risks. It proposes trend and volatility filters, alternative stop methods, and time or volume filters. It supplies parameters and a backtest configuration for ETH/USDT over several months, but provides no performance results. The sizing formula can target a nominal account risk, though actual losses may differ due to gaps, execution costs, and position or leverage constraints.

Key ideas

• Crossovers of the two EMAs provide long and short entry signals.
• Recent candle extremes define initial stop levels, and the reward-to-risk setting determines target distance.
• Position size scales with equity and inversely with the distance to the stop.
• The backtest configuration contains no reported results, and execution conditions can make realized risk differ from the target.

Tags

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