SMA Crossover Trend Following with ATR Stops and Targets

Summary

This strategy uses a fast and slow simple moving average crossover to define long and short trend entries. After entry, price crossing back through a moving average can signal trend failure and a position exit. Risk controls include stop losses based on ATR, configurable profit targets based on a percentage or ATR multiple, trailing exits, partial profit taking, position sizing, and an optional maximum drawdown limit. The parameters allow separate long and short settings and can also enable a higher-timeframe EMA filter.

The document explains the trade-offs of the approach: crossovers may enter late or whipsaw, and trailing stops may exit during ordinary pullbacks. It recommends testing parameter combinations and adjusting stop, target, and sizing rules, but supplies no performance statistics establishing an edge. The accompanying material describes a fairly configurable system, while also cautioning that tuning alone does not make its signals precise. The sample periods and order behavior should be assessed in backtests across varied market conditions before drawing conclusions about suitability.

Key ideas

• A fast and slow SMA crossover defines the initial trade direction.
• Price moving back through a moving average can signal that the trend has failed.
• Stops can use ATR, while profit targets can use percentages or ATR multiples.
• Trailing logic, partial exits, position sizing, and a drawdown limit are configurable risk controls.
• The document highlights lag, whipsaws, and premature trailing-stop exits, without reporting backtest results.

Tags

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