Three-SMA Trend Following with a Long-Term Direction Filter

Summary

This trend-following strategy uses 50-, 100-, and 200-period simple moving averages. It enters long when the fast average crosses above the medium average while price is at or above the slow average; the corresponding downward crossover with price at or below the slow average opens a short. Positions are closed when the fast and medium averages cross in the opposite direction. The slow average acts as a directional filter, and the faster pair controls entries and exits.

The document emphasizes clear rules and warns that moving averages lag and may generate repeated false signals in sideways markets. It notes that there is no explicit stop-loss mechanism, and suggests adding volatility-based risk controls, trend-strength or volume filters, and adaptive parameters. Published settings describe a BTC-USDT futures backtest from 2019 to 2024, but no performance figures are given. The strategy therefore remains a rule-based framework whose effectiveness across markets and costs is not established by the supplied material.

Key ideas

• A 50-period SMA crossing a 100-period SMA generates the directional signal, filtered by price relative to the 200-period SMA.
• An opposite crossover closes an existing position.
• The slow average is intended to reduce entries against the broader direction.
• Lag and whipsaws in ranging markets are key limitations, and the described rules lack a defined stop loss.
• The published backtest settings do not include performance results.

Tags

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