SMA Trend Entries with ATR-Based Trailing Stops

Summary

This trend-following strategy combines a simple moving average with an ATR-based stop. It enters long when price is above the SMA after several consecutive falling closes, and short when price is below the SMA after several rising closes. The stop distance is based on ATR multiplied by a configurable offset; after entry, the stop is updated only in the direction that tightens risk. The stated defaults are a 100-period SMA, 10-period ATR, and an offset multiple of 4.

The document describes the logic and provides a BTC/USDT futures backtest configuration covering part of a single day, but gives no performance statistics. Its claims about drawdown control therefore remain unverified. The stated risks include loose stops when the multiplier is high, false breakouts, and parameter overfitting. It recommends evaluating parameter stability across instruments and timeframes, and considering volume or other filters. The rule set is presented as suitable for medium- to long-term trading, though the published backtest interval does not assess that use case.

Key ideas

• The SMA sets the broad price direction, while recent consecutive closes condition entry timing.
• ATR multiplied by a configurable offset determines the stop distance.
• After entry, the stop is adjusted to tighten rather than loosen as prices move.
• The document warns that false breakouts and parameter overfitting can undermine the approach.
• The published backtest setup has no reported results and covers only a short interval.

Tags

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