Constructing breakout entries with trailing and time stops

The construction on one page

The long entry is a conjunction of filters. If every filter is true, the procedure buys. If any filter fails, the procedure abstains. Entry and abstention are therefore the same written step.

The exits are named on that same page. A trailing-stop ends the long when the close falls a fixed percentage below the prior close. A time-stop ends the position when holding age exceeds a bar limit, independent of the price path.

The specified replay also writes the fill, the delay, the share of equity, the interest charge, the per-transaction deduction, and the bar used to size the order. Those items sit inside the procedure that is being constructed.

The long entry as a stack of vetoes

The rule-based-entry is a long signal that fires only when every listed filter is true at once.

The volume-flow-filter must read above -1. Slope-band checks apply on 35-bar, 70-bar, and 170-bar windows. The MACD histogram has a floor of -0.003. A three-bar normalized-volatility oscillator must read below 20. The close must sit above a 10-bar exponential average. The volatility-trend-cap must stay below 1.3. A 10,3 stochastic must read above 30.

Slope bands on three lookbacks

A slope-band is a linear-regression slope of price, expressed as a percent of a lagged close, and required to stay inside stated bounds on several lookbacks.

The 35-bar slope, scaled as a percent of the close 35 bars earlier, must lie between -0.35 and 0.4. The 70-bar analogue must lie between -0.4 and 0.4. The 170-bar analogue must be greater than -0.2.

Normalized volatility and the trend cap

Normalized-volatility is close standard deviation divided by a moving average of the close. It is used as a scale-free volatility input.

Inside the entry procedure, 30-bar close standard deviation is divided by a 30-bar moving average of the close. That ratio times a 25-bar directional index is the volatility-trend-cap and must stay below 1.3. A three-bar range transform of that ratio versus its 150-bar high-low span must stay below 20.

The volume-flow filter

The volume-flow-filter is a signed volume accumulator that ignores bars whose money-flow increment falls inside a volatility-scaled cutoff.

The version used at entry is a 14-bar signed-volume sum with a 0.1 coefficient on combined intra-bar and inter-bar log-range volatility. Bars inside that cutoff contribute zero volume. The conjunction requires the resulting reading to stand above -1.

How the long is closed

The trailing-stop sells the long when the close is less than 82 percent of the prior close. That is an 18 percent decline from the previous close. The open loss is therefore bounded before the next bar.

The time-stop closes the position when holding age exceeds 70 bars. Older tester versions encode the same bound as a 70-period inactivity stop, with the minimum-change field set high enough that a small price change is not the binding condition.

Fills, costs, and signal-day sizing

The specified replay is long-only. It uses 100 percent of available equity. It buys at the open and sells at the close. In the general case it applies a one-day delay. It charges a 3 percent interest rate and deducts 10 points per transaction.

Signal-day-sizing computes the order from the signal-day close rather than from the fill bar. A valid next-day order can then go unfilled if the rise in price leaves too little cash. One case was replayed with zero delay. The write-up flags that zero-delay case as less realistic than updating near the close or trading after hours.