Kalman Trend Strength Entries with Staged Exits and ATR Swing Stops

Summary

This strategy uses a simplified Kalman state-space filter to estimate a smoothed price and a normalized trend-strength oscillator. It enters long when trend strength is strongly positive, the signal is green, and price is above the filtered estimate; short entries use the corresponding negative conditions. Exits combine staged reductions on a neutral color change and oscillator zero-crossing with a final close when trend strength weakens. Stops are placed beyond recent swing lows or highs by an ATR adjustment.

The document reports a backtest on USD/JPY at the one-hour timeframe over a stated date range: 924 trades, a 41.67% win rate, a 1.108 profit factor, positive net profit, and a maximum drawdown of 31.87%. These figures are claims from the script description, not independent validation. The text gives no comparison benchmark or evidence across other markets and periods. Position sizing, costs, and implementation details may affect results, and the stated drawdown underlines that profitable historical performance does not remove substantial risk.

Key ideas

• A Kalman filter estimates smoothed price and a normalized oscillator used to characterize trend direction and strength.
• Long and short entries require strong oscillator readings, matching signal colors, and price on the corresponding side of the filtered estimate.
• The strategy reduces positions in stages using a neutral signal and oscillator zero-crossing, then exits when trend strength weakens.
• ATR-adjusted recent swing highs and lows define protective stop levels.
• The reported USD/JPY backtest is limited evidence and includes a sizable maximum drawdown.

Tags

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