Filtering Trend Signals with DEMA and Williams Moving Averages

Summary

This combined trend system requires agreement between two components before taking a position. One component derives a directional state from price action around an exponential moving average. The other uses three displaced moving averages of median price, with their ordering relative to price determining a bullish or bearish state. A trade is opened only when both states agree; otherwise the strategy closes positions. The example also includes an option to reverse the signals and a start date filter.

The document describes the approach as a way to reduce false signals and improve time in positions, while acknowledging that sharp moves can break stops and ranging markets can cause frequent turnover and fees. It recommends walk-forward parameter evaluation, stop-loss rules, and possibly a filter for market conditions. The published configuration is a short BTC/USDT futures backtest, but no results are reported, so claims about signal quality or performance are not supported by quantified evidence here.

Key ideas

• The strategy combines an EMA-based directional state with a three-line displaced moving-average state.
• Long or short entries require both components to indicate the same direction.
• The three-line component uses the ordering of price and moving averages to maintain a trend state.
• The document identifies sharp volatility and ranging conditions as sources of losses or excess trading costs.
• The published BTC/USDT futures settings include no performance statistics.

Tags

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