SMA Crossover Trend Trading with ATR Stops and Position Sizing

Summary

The document describes a trend-following approach that enters long when a 10-period simple moving average crosses above a 50-period average, and short when it crosses below. It uses a 14-period average true range multiplied by 1.5 to set stop and profit levels, while sizing positions from account equity and a configured capital allocation. The published settings also include a 2% risk tolerance, although the strategy logic shown sizes positions from the allocation input.

The approach offers explicit entry and exit rules and adjusts stop distances to prevailing volatility. The document warns that repeated crossovers in sideways markets can cause losses, and that fast price moves can create slippage. It also notes that allocating all or more than all available capital may limit flexibility; the published code sets allocation to 200%, despite prose describing 100%. No backtest results are reported, and the short stated test period does not establish how the strategy performs across market regimes. Suggested improvements include trend strength or volatility filters and further evaluation of average lengths and position sizing.

Key ideas

• A fast and slow simple moving average crossover determines long and short entries.
• ATR-based stop and profit distances scale with recent market volatility.
• Position size is tied to account equity and a capital allocation setting.
• Whipsaws in sideways markets and slippage during rapid moves are key risks.
• The document provides no performance results, and its allocation descriptions conflict.

Tags

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