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2015issue C0159-60

Bandedge trend filter construction with inverse crossover rules

One trend filter is shown at bandedge 20 and at bandedge 50, then used for trend-following rules or inverse rules without changing the filter. Decision tables turn the active setting into buy or sell crossovers, fills are placed on the next bar after a close, and each strategy keeps its own long and short transaction summary.

  • A swing-oriented example sets bandedge to 20, and the same trend filter is also shown with bandedge 50 as an alternative lookback.
  • Inverse rules reverse the trend-following long and short assignments instead of changing the filter.
  • Decision tables encode both strategies from the active bandedge setting and issue buy or sell crossover signals.
  • Because signals are taken on the close, simulated fills are placed on the next bar, and each strategy has its own long and short transaction summary.
Entries in this reading3 entries
Trend following89 readingsCurrent trackMomentum strategy103 readingsTrend filter137 readings

A preprogrammed buy and sell procedure

The archive frames a trading system as a preprogrammed procedure that issues automated buy and sell signals instead of leaving the decision to discretionary interpretation.

The construction uses one trend filter. A trend filter is a bandedge-tuned construction that turns an ordered price series into a regime edge used for crossovers. Those crossovers then drive a trend-following procedure or inverse rules. The filter itself is not changed when the rule polarity changes.

Editorial: TradersWeek presents the filter, the rule polarity, the fill assumption, and the ledgers as separate design choices so each can be inspected on its own.

Bandedge settings for one trend filter

Bandedge is the lookback-style parameter that sets how quickly that filter edge responds. A swing-oriented construction example sets the filter's bandedge parameter to 20. The same filter construction is also shown with bandedge set to 50 as an alternative lookback.

Trend-following rules and inverse rules

Trend following is the rule set that takes a filter crossover in the direction of the indicated move. A momentum strategy is a complete long and short procedure driven by the same filter crossovers, including an inverted-rule variant.

Countertrend rules are formed by inverting the proposed trend-following entry and exit logic rather than by changing the filter itself. Inverse rules are the same crossover events with long and short assignments reversed for a countertrend procedure. Both rule sets can be inspected together at any chosen bandedge setting.

Decision tables and crossover signals

Decision tables encode the two strategies from the active bandedge setting and generate buy or sell crossover signals. A decision table is an explicit mapping from the current filter state to long, short, or flat actions.

Close confirmation and next-bar execution

Because the system is computed on bar close, simulated fills are placed on the bar after a crossover. Next-bar execution is the fill assumption that a close-confirmed crossover is acted on at the following bar.

Editorial: TradersWeek treats that following-bar fill as a stated execution convention, not as a description of live market impact.

Transaction summaries for long and short ledgers

Each strategy has its own transaction summary so long and short positions can be reviewed separately. A transaction summary is a per-strategy ledger that separates long and short trades for inspection.

Bandedge-20 inverse strategy: long versus short net change

On Raytheon from 10 June 2003 through 23 July 2014 the inverse (countertrend) rules at bandedge 20 produced a +38.25 net on 124 long trades and a −26.05 net on 124 short trades, for about +12.20 overall. Traders should notice the split: longs won 56 of 124 and shorts only 34 of 124, so the same filter and inverted crossovers did not treat both sides equally. Totals come from the Figure 12 transaction-summary tables, not from a redrawn equity curve.
On Raytheon from 10 June 2003 through 23 July 2014 the inverse (countertrend) rules at bandedge 20 produced a +38.25 net on 124 long trades and a −26.05 net on 124 short trades, for about +12.20 overall. Traders should notice the split: longs won 56 of 124 and shorts only 34 of 124, so the same filter and inverted crossovers did not treat both sides equally. Totals come from the Figure 12 transaction-summary tables, not from a redrawn equity curve.Raytheon Company (RTN) · Daily · 2003-06-10T00:00:00.000Z to 2014-07-23T00:00:00.000Z

Fills are on the bar after a close-based crossover. Period is 06/10/2003–07/23/2014; size is one share; 28 longs and 6 shorts were still open and marked to the last bar. Inverse rules, not trend-following.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
40 of 51 in the Momentum strategy track
201724-26 pp.Next on Momentum strategyOpposite rules for index price and volatility momentumA short-horizon momentum procedure can buy overbought sequences and sell oversold sequences rather than fading those states.
All readings on this track · 51 readings
  1. 1984Half-cycle differencing for momentum signals
  2. 1987Relative strength evaluation under competing optimization criteria
  3. 1988Weekly MACD as a two-clock momentum confirmation stack
  4. 1989Equal-weight zero-cross from smoothed spreads
  5. 1989Testing relative-strength-index reversal rules against trend continuation
  6. 1989Smoothed three-day futures filter for index option bounces
  7. 1989Cycle-length windows for momentum, Relative Strength Index, and stochastic construction
  8. 1991Filtered rally magnitude as a bull-regime breakout
  9. 1992Constructing true strength from double-smoothed momentum
  10. 1992Constructing a double-smoothed true strength index
  11. 1993When momentum structure and breadth break together
  12. 1993Constructing double-smoothed range and momentum oscillators
  13. 1993Constructing a two-parameter relative momentum index
  14. 1993Building a bounded momentum oscillator with RSI smoothing
  15. 1993Two-speed oscillators with divergence and trendline gates
  16. 1993Constructing a relative momentum index from the relative strength index
  17. 1994Constructing daily advance-decline breadth tools
  18. 1994Building a composite regime score from monetary climate and weekly trend
  19. 1994Averaging Relative Strength Index and the stochastic oscillator into one reversal oscillator
  20. 1995Dividend-yield regression as a hold versus momentum gate
  21. 1996Jump and hold filters for long-term Treasury yield direction
  22. 1997Constructing extendedness from a 10 percent swing filter
  23. 1997A range-expansion oscillator that can refuse its own stretch
  24. 1997RSI trend permission and Fibonacci pullback rules
  25. 1998Nested midpoint construction for a range-normalized oscillator
  26. 1999Evaluating Relative Strength Index momentum with zero-line and threshold rules
  27. 1999Treat RSI and momentum as three mechanical procedures
  28. 2000Thrust strength figure from moving-average swings
  29. 2001Constructing a non-range-bound balance of market power score
  30. 2004Cleaned breadth oscillator and new-high divergence: a swing-market case file
  31. 2004Evaluating advance-issues-momentum on a fixed-symbol-basket
  32. 2004Constructing a trend filter from two adjacent high-low windows
  33. 2006A dollar-versus-commodity extreme as a regime case
  34. 2008Zero-centered stochastic bands and bracket stops
  35. 2012Evaluating engulfing momentum across hold windows
  36. 2012Staged stops as one mechanical entry and exit procedure
  37. 2012Stacking a relative-strength-index forecast, a trend filter, and long-only momentum
  38. 2013Constructing fair-value filters from averages and momentum
  39. 2014Constructing a multi-window slope divergence entry
  40. 2015Bandedge trend filter construction with inverse crossover rules
  41. 2017Opposite rules for index price and volatility momentum
  42. 2018A three-state overlay that colors a trend only after the line clears the bar
  43. 2018Half-cycle relative-strength index with a Fisher map for cyclic reversals
  44. 2018Emotion as a rule input when momentum breaks
  45. 2018Two-bar body expansion as a momentum breakout construction
  46. 2019Pair a two-day high breakout with a volume-weighted exit on the same chart
  47. 2020Building reflex and trendflex cross and extreme entry rules
  48. 2020Construct a dual-series price momentum oscillator overlay
  49. 2020A multi-timeframe stochastic as a panel of weekly voters
  50. 2020Centerline crossovers that compare index momentums
  51. 2020Multi-timeframe stochastic voting as one mechanical rule
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