Range Filter Breakouts with ATR Position Sizing and Trailing Stops

Summary

This trend-following framework builds a range filter from a simple moving average and a smoothed measure of price deviation. It confirms an uptrend when price closes above the upper band for two consecutive periods and a downtrend after two closes below the lower band. ATR is used to scale position size inversely with volatility and to place a trailing stop at an ATR multiple from the current price; the stated defaults include a 1% risk allocation per trade and a 1.5 ATR trailing distance.

The document warns that sideways conditions can produce repeated false breakouts, rapid reversals can outrun stops, and parameter choices, slippage, and commissions can affect results. It recommends adding market-regime filters, testing robust parameters, and considering higher-timeframe confirmation or time-based exits. Published settings specify SOL/USDT futures from February to May 2025, but no performance figures are provided. The claimed low drawdown is therefore an assertion rather than a result demonstrated in the document.

Key ideas

• The range filter uses a moving average and smoothed absolute deviation to form upper and lower bands.
• Two consecutive closes beyond a band confirm a directional breakout.
• Position size is calculated from equity risk and ATR, while the trailing stop follows price at an ATR multiple.
• The method may generate false signals in ranging markets and should be evaluated with trading costs included.

Tags

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