Supertrend Reversals Filtered by Rate of Change
Summary
This strategy enters when a Supertrend direction change coincides with a rate-of-change filter showing sufficient movement. The Supertrend bands are based on ATR, and the ROC calculation is smoothed with an exponential average. The default inputs shown are a three-period ATR with a 1.3 multiplier, a 30-period ROC, and a six-percent change threshold. Exits are handled through either a fixed percentage stop or an ATR-derived stop; the settings show six percent for the fixed stop and a 20-period ATR with a 1.5 multiplier for the alternate stop.
The document describes the approach as suited to daily or higher timeframes, yet the published backtest settings use hourly bars on BTC/USDT futures over about a month. It claims strong results in bull markets but gives no metrics or supporting evidence. Sideways action near support or resistance can generate misleading reversals, while volatility-based stops may widen during sudden events. Parameter selection and the difference between the stated intended timeframe and the example test limit the conclusions that can be drawn.
Key ideas
- A Supertrend direction reversal is eligible for entry only when the smoothed ROC passes its movement threshold.
- ATR determines the Supertrend bands and can also set an adaptive stop distance.
- The strategy offers fixed-percentage and ATR-derived stop options.
- The document warns of false reversals in sideways markets and potentially wide stops during volatile events.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.