Seykota-Style Trend Following with ATR Sizing and a Portfolio Heat Cap
Summary
The article presents a multi-symbol trend-following system built around fast and slow EMA crossovers, with the slow average providing trend direction. An ADX threshold filters out range-bound conditions. Position size is set from account equity and a fixed risk percentage divided by the ATR-based stop distance, so higher volatility leads to smaller positions. Positions exit on an opposing EMA crossover or a stop, without a fixed profit target.
Its central risk control is portfolio heat: the system sums the current stop-related risk across open positions and blocks new entries when that total reaches a cap. A scenario with several currency pairs moving together illustrates how correlated signals can compound losses and how a cap can limit accepted entries. The article describes a daily, multi-symbol EA and identifies limitations, including the possibility that residual-risk estimates understate danger during correlated volatility. It reports compilation and testing in MetaEditor, but supplies no backtest evidence for profitability.
Key ideas
- EMA crossovers set trade direction, while ADX screens out weakly trending conditions.
- ATR-based stop distances adjust position size to target a fixed equity risk per trade.
- Portfolio heat aggregates current risk across positions and can block additional entries.
- Opposing EMA crossovers and ATR stops provide exit rules without fixed take profit.
- The article describes implementation and a correlation scenario but provides no strategy performance results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.