High Minus EMA as a Directional Trend Signal

Summary

This strategy uses the difference between the prior period’s high and the prior period’s exponential moving average of closing prices. With the default EMA length of 13, a positive difference selects a long position and a negative difference selects a short position; the code maintains the corresponding directional state until the sign changes. The idea is to use the relationship between a recent high and a smoothed price reference as a simple trend signal.

The document describes the method as capturing new highs and breaks below an average, but the formula itself only tests whether the previous high lies above or below the previous EMA. It does not explicitly test a new high or a close crossing below the average. A BTC/USDT futures backtest configuration is included, but no results are reported. The notes identify possible false signals in ranging markets, lack of volatility-aware risk controls, and the absence of a stop-loss. Additional filters and parameter tuning are proposed, not tested.

Key ideas

• The signal is the prior high minus the prior close’s EMA, with a default EMA length of 13.
• A positive difference selects long exposure, while a negative difference selects short exposure.
• The formula does not explicitly detect a new high or a price crossing below the EMA.
• The document supplies a futures backtest setup but no performance results.
• Ranging markets and the lack of a stop-loss can expose the strategy to false signals and large losses.

Tags

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