Log-Scale Nadaraya-Watson Envelopes for Cross-Based Entries

Summary

This strategy smooths the logarithms of closing, high, and low prices with a configurable Nadaraya-Watson kernel, then exponentiates the results to form price-scale curves. A custom range measure based on log prices and an ATR-like smoothing step is also calculated, with near and far bands derived from it. However, the entry and exit rules use the smoothed high and low curves directly; the calculated ATR bands do not determine trades.

In long-only mode, the strategy enters when price crosses above the smoothed low curve and closes when the smoothed high curve crosses above price. Long/short mode adds short entries and exits using corresponding crossings of the high and low curves. The script exposes smoothing and range parameters and labels itself non-repainting, but the document supplies no backtest results or evidence that the signals are profitable. It advises testing and risk management; performance may depend on the asset, timeframe, settings, and execution costs.

Key ideas

• The script smooths log prices with a configurable Nadaraya-Watson kernel and converts the estimates back to price units.
• Long entries occur when price crosses above the smoothed low curve.
• Long exits occur when the smoothed high curve crosses above price.
• The long/short setting adds short entries and exits based on crossings of the smoothed curves.
• The document provides no performance evidence, so results require independent testing.

Tags

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