Rank, filter, and stop the hedge sleeve as one procedure

One hedge-sleeve loop

The archive design is a combination: a two-sleeve book that keeps a static index holding while the second sleeve independently ranks, filters, and stops among low-correlation hedges or cash. It pairs a static half-portfolio index holding with a second half that may rotate among four low- or negatively correlated treasury and currency funds or cash.

Editorial reading: write rank rotation, a trailing-stop bound, and a moving-average-crossover veto as one hedge-sleeve loop. Entry, exit, and sitting in cash then become the same testable procedure, not three overlays added after the core holding.

What the hedge sleeve may hold

The hedge universe was limited to treasury and currency funds. Inverse-index, gold, and commodity alternatives were set aside.

The second sleeve may hold one of four low- or negatively correlated treasury and currency funds, or it may hold cash. The static index half does not join that rotation.

Rank rotation among funds and cash

The hedge sleeve buys the fund with the highest return over the prior 13 market days, and cash is included in that ranking.

In this article, rank rotation means: order hedge candidates by recent return and hold only the current leader until a better rank, a time limit, or a stop invalidates it.

Buy-filters that block a ranked fund

A ranked fund may be bought only if its 12-day exponential average is already above its 129-day exponential average, so the matching crossover stop cannot fire on entry.

A fund is blocked if its daily standard deviation exceeds 1.6 times the equity-index standard deviation measured over the prior 53 market days.

A buy-filter is a pre-entry screen that blocks a ranked candidate when volatility is too high or the crossover stop would fire immediately.

Abstention when no fund passes

If no candidate passes the purchase screens, the hedge sleeve holds cash instead of forcing a position.

Abstention is the rule that parks the hedge sleeve in cash when no candidate passes rank, trend, and volatility screens.

Stops and a time limit after entry

An open hedge is sold if price trips a 5 percent trailing stop. A trailing stop is a fixed-percentage retreat from a post-entry peak that forces the hedge sleeve to exit before the loss can widen without a bound.

An open hedge is sold if it violates the 12-day versus 129-day exponential-average crossover. The moving-average-crossover is a short-versus-long exponential-average condition used both to permit a new hedge and to force an exit once the short average falls back through the long average.

After 55 calendar days, a holding that is no longer the top-ranked fund is sold.

How extra options were limited

Option and parameter search used a genetic algorithm that could add common technical stops and filters and applied a penalty for each extra option to limit degrees of freedom.

Why the three rules share one procedure

Editorial view: the crossover is not a later chart overlay. It is the same short-versus-long condition that must already be true before a ranked fund can be bought and that later forces a sale if it fails.

Editorial view: the trailing stop does not sit outside rank rotation. It is the bound that can end the hedge sleeve before rank or the calendar limit does.