VIDYA Trend Following with CMO-Weighted Smoothing

Summary

This cryptocurrency trend-following strategy uses a Variable Index Dynamic Average (VIDYA), whose smoothing responds to a Chande Momentum Oscillator (CMO) derived from recent price changes. The strategy goes long when VIDYA rises and closes the long position when it falls. The supplied configuration sets a VIDYA length of 50 and defaults to an OHLC4 price source. It does not specify a short-entry rule or a separate stop loss.

The document gives BTC/USDT futures backtest settings for September to October 2023, but provides no performance figures. It describes the approach as capable of following longer trends while warning that it may lag during sudden moves, draw down when shorter reversals occur, and perform poorly in sideways markets. It also acknowledges that the backtest evidence is limited. Suggested next steps include testing across assets and timeframes, adding filters, and improving stops and position sizing; these are proposals rather than demonstrated improvements.

Key ideas

• VIDYA adjusts its smoothing according to CMO momentum derived from price changes.
• The strategy enters long when VIDYA rises and closes the long position when VIDYA falls.
• The default VIDYA length is 50, and the default price source is OHLC4.
• Published backtest settings cover BTC/USDT futures from September to October 2023, without reported performance results.
• The approach may lag sudden moves and struggle in sideways markets, while limited backtest data leaves robustness uncertain.

Tags

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