US Stock Trend Following with Lifetime Highs and ATR Stops

Summary

This document describes a long-only trend strategy for US-listed stocks. It enters when a stock closes at or above its highest historical closing price and exits when a 10-period average true range trailing stop is reached. The portfolio holds qualifying stocks equally weighted, rebalances daily, and applies minimum price and liquidity filters. Its stated transaction cost assumption is 0.5% round-turn per trade.

The cited study tested a survivorship-bias-adjusted US stock universe that included delisted firms, applied liquidity screens and realistic trading costs, and covered more than two decades. Its findings suggest positive mathematical expectancy for the approach. The rationale is that investor herding and delayed or excessive reactions can create persistent price moves, while trailing stops may reduce exposure to severe losses. The strategy remains exposed to broad equity-market risk: it is long-only and is not presented as a bear-market hedge. The document provides no detailed performance statistics for this specific rule set, so its claims should not be read as a guarantee of future results.

Key ideas

• The entry signal is a close at or above the stock’s historical closing high.
• A 10-period average true range trailing stop determines exits.
• The portfolio holds qualifying stocks equally weighted and rebalances daily.
• Price and liquidity screens, plus estimated transaction costs, are included in the strategy description.
• The strategy is long-only and remains highly exposed to equity-market declines.

Tags

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