ZLSMA Trend Signals with Chandelier Stops and Relative Volume

Summary

This trend-following system combines a Zero-Lag Smoothed Moving Average (ZLSMA), Chandelier-style ATR stop calculations, and relative volume (RVOL). The written rules call for long entries when price crosses above ZLSMA and RVOL exceeds a threshold, and short entries on the reverse condition. Positions are closed when price crosses back over ZLSMA in the opposite direction. The supplied defaults include an RVOL lookback of 20 bars and a threshold of 1.5; the ZLSMA length is 50. The code also calculates ATR-based directional stop levels and recent swing highs or lows.

The document warns that frequent reversals can increase trading costs, that results depend on parameter choices, and that position sizing is not addressed. Its code adds an important distinction: entries require a change in Chandelier direction as well as the ZLSMA and volume conditions, and use swing extremes as entry stop prices. The stated exit rules are based on ZLSMA crossings, not the Chandelier levels. Published BTC/USDT futures settings cover May 2024, but no performance results are reported, so the approach is a specification rather than evidence of profitability.

Key ideas

• The described entries combine ZLSMA crossovers with an RVOL threshold filter.
• The implementation also requires a reversal in the Chandelier direction before entry.
• The code calculates ATR-based directional stops and uses recent swing extremes for entry stop prices.
• Positions are closed when price crosses ZLSMA against the position direction.
• The document notes transaction costs, parameter sensitivity, and missing position management; it reports no backtest results.

Tags

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