Kalman Price Tracking with a Tightening Trailing Stop

Summary

The strategy applies a Kalman-style recursive filter to track price and uses a stop line whose distance from the filtered value narrows over time. It starts with a wider percentage gap; as the line moves favorably, the permitted distance decreases toward a minimum, creating a tightening stop intended to protect accumulated gains. The document says the logic is mirrored for long and short directions and describes optional take-profit and stop-loss settings. It also specifies a BTC/USDT futures backtest period, but provides no results to assess performance.

The proposed method combines a smoothed price estimate with a ratcheting exit level. Its behavior depends on filter gain and stop parameters, and the text acknowledges that poor calibration can make tracking unstable. Slippage can cause fills beyond the stop level, while the document itself cautions that this stop approach may be triggered repeatedly in ranging markets and may hinder participation in strong trends. It suggests adding trend filters, adapting stop movement to volatility, and adjusting position size, but does not present evidence that these changes improve outcomes.

Key ideas

• A recursive Kalman-style filter provides a smoothed price reference.
• The stop begins at a configurable distance and tightens as the filtered price moves favorably.
• The stop logic is described for both long and short positions, with optional profit and loss exits.
• Filter settings, slippage, and ranging conditions can undermine the intended risk control.
• The stated backtest setup includes no reported performance results.

Tags

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