EMA20 Trend Filter with Stochastic Entry and Exit Rules

Summary

This long-only setup combines a 20-period exponential moving average with a stochastic oscillator. It enters when the bar's low is above the EMA, the stochastic %K is above %D, and the current EMA is higher than its value 20 bars earlier. The first condition places price above the trend reference, while the EMA comparison requires an upward slope. The position closes when the closing price drops below the EMA. The oscillator uses a 14-period %K, smoothing of 1, and %D smoothing of 3 in the published parameters.

The document frames the oscillator condition as an indication of an oversold market, although %K being above %D alone does not establish that the oscillator is in an oversold zone. Published backtest settings specify BTC/USDT futures on four-hour bars from September 2022 to September 2023, with 15-minute base data, but no results are included. The rules are therefore a strategy description rather than evidence of returns; performance, costs, and behavior across other markets or parameter choices are not assessed.

Key ideas

• The strategy only opens long positions when price is above the EMA20.
• The EMA must also be higher than its value 20 bars earlier.
• The stochastic entry filter requires %K to exceed %D.
• The position closes when the closing price falls below the EMA20.
• The %K above %D condition by itself does not confirm an oversold reading.

Tags

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