Constructing trend and swing rules from horizon to crossover

Write the rules as one procedure

Trend-following classifies market direction from rule inputs and stays aligned with that direction until the same procedure signals a change. Swing-trading takes the shorter advances and declines inside a larger trend instead of holding through every peak and valley.

Moving-average-crossover is a chart-scale rule that treats the meeting or crossing of moving averages, or a related pair of lines, as a testable entry, exit, or abstention condition. Moving averages and MACD, which can be adjusted to the chosen scale, are used as inputs for classifying trend direction.

Set trend-horizon first

Trend length is set by the selected chart timeframe, from minute bars to daily, weekly, or monthly bars, and is matched to the intended holding period. That timeframe is trend-horizon: it sets how long a classified trend is treated as current and how many trades the procedure will generate.

A longer selected trend length produces fewer trades; a shorter selected trend length produces more trades.

Classify direction on the chosen scale

A price trend can be classified by connecting successive major highs or lows and treating those lines as support and resistance. The same scale that sets trend-horizon is the scale at which moving averages and MACD are adjusted when they are used as direction inputs.

Some accepted trend-following indicators can signal an overbought condition while price continues in the same direction, so that signal is not a sufficient reversal rule.

Choose pullback-reentry or ride-through

Swing construction takes the shorter up legs and down legs inside a larger trend, while a longer-horizon construction holds through those peaks and valleys. Ride-through keeps the position until the classification method indicates a reversal.

One way to use an established uptrend is to wait for a pullback valley and enter only if price turns back in the prior direction. Editorial note: that pullback-reentry rule is a swing choice, not a change in the classified trend.

Fix crossover-timing and flatten-or-reverse

If the classification method uses lines that cross, the procedure must specify whether to enter when the lines touch, after they have crossed, or in anticipation of a cross. That choice is crossover-timing.

When the same method indicates a reversal, the procedure must specify whether to exit a long only or to exit the long and open a short. That choice is flatten-or-reverse.

Check security-suitability

A trend-following model is easier to apply to a security with relatively smooth price action and harder to apply when the history is choppy and erratic. Security-suitability is that difference: whether the series is smooth enough for the same rules to classify and follow, or too choppy for those rules.