EMA Trend Filters, Engulfing Entries, and Pyramid Recovery Sizing

Summary

This strategy uses fast, medium, and slow exponential moving averages to classify bullish and bearish conditions, then looks for engulfing-style candles with a minimum body-to-range ratio. The description presents trend-following and reversal entries, fixed stop and target distances, and a trailing stop that activates after a profit threshold. Position size rises after consecutive losing trades according to a recovery multiplier, subject to a maximum level. It is described for a four-hour timeframe and major indices, though the visible source excerpt refers to a different market instrument; no backtest results are provided.

The recovery sizing rule is a central risk: losses can lead to rapidly growing exposure and substantial capital demands. The document also notes lag from moving averages, false candle signals in ranges, and the limits of fixed-distance stops as volatility changes. Its source implements long entries only, including a purported reversal buy during bearish conditions, despite the broader description of varied market adaptation. The excerpt is incomplete, so its behavior and claims cannot be fully assessed from the supplied material.

Key ideas

• EMA alignment and closing price relative to the slow EMA define bullish or bearish conditions.
• Engulfing-style candle conditions and a body-to-range filter qualify entries.
• The described risk controls combine fixed distances with a profit-triggered trailing stop.
• Position size increases after losses up to a configured recovery limit, which can magnify drawdowns.
• The supplied source shows long-only execution, and the document provides no backtest results.

Tags

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