Using Long-Term Trend Filters to Buy Short-Term Pullbacks

Summary

This long-only strategy seeks short-term pullbacks during a broader uptrend, using a 200-day simple moving average as a long-term filter and a 10-day average to identify pullbacks. The described entry occurs when price is above the long-term average and below the short-term average. It also includes an optional contrarian entry after a sufficiently large drawdown. Exits use a move back above the short average, optionally constrained by a lower close, or a hard stop; a separate moving-average crossover stop can be enabled.

The document gives configurable defaults, including a 15% stop and a 14% drawdown threshold, and mentions index and stock examples. Its published backtest settings instead specify BTC_USDT futures over one month, without reporting results; the source comments recommend other markets and longer chart intervals. The rules therefore have a mismatch between their stated intended use and the supplied backtest setup. Range-bound conditions can cause false signals, and parameters or fixed stops may not transfer across instruments. The document suggests testing alternative averages, exits, and filters.

Key ideas

• A long-term moving average acts as a filter for buying pullbacks below a short-term average.
• The strategy includes an optional dip-buying entry triggered by a specified drawdown.
• Position exits may use a return above the short average, a hard stop, or an optional average crossover.
• The stated defaults include a 200-day long average, a 10-day short average, a 15% stop, and a 14% drawdown trigger.
• Range-bound markets and instrument-specific parameters may reduce the reliability of signals.

Tags

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