Trend-Filtered Donchian Breakouts with ATR Risk Sizing
Summary
This trend-following strategy enters when a confirmed close crosses above the highest high or below the lowest low of a prior lookback channel. A long-term simple moving average filters direction: longs require price above it and shorts below it, with shorting optionally disabled. Positions exit when price crosses an opposing exit channel or hits a protective stop.
The initial stop is set at a configurable ATR multiple from the signal close. Position quantity targets a chosen fraction of equity at risk, adjusted for point value, and is capped by a maximum exposure setting. An optional ATR trailing stop ratchets toward price without loosening. The chart can show initial risk and projected reward zones, but the projected reward multiple is only a visual guide; it does not trigger an exit. The document describes the rules and implementation but provides no empirical performance results. Actual losses may exceed the sizing target because of fees, slippage, or gaps, and the exposure cap can reduce risk below the target.
Key ideas
- Entries occur on a close crossing a prior-period high or low channel, subject to a long-term moving-average filter.
- Exits use an opposing channel or a protective ATR-based stop.
- Position size targets a fixed equity risk and is constrained by a maximum notional exposure.
- An optional trailing stop moves toward price and does not loosen.
- Displayed reward zones are illustrative and do not serve as take-profit orders.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.