Joint channel design with a trend filter and stop-loss orders

From a channel to a joint procedure

The archive builds a price channel and then writes a Trend filter, a Stop-loss order, and System optimization inside a single test procedure.

How the channel is built

A channel can be built from a linear-regression centerline plus the largest deviations above and below that line. The input series can be the close, typical price, or the high-low midpoint.

Permission from the slope

The sign of the regression slope can serve as a Trend filter that permits long exposure when the slope is positive and short exposure when it is negative.

A stop at the channel edge

A close through the opposite band can flatten a position before the slope itself reverses, placing a loss bound at the channel edge. That bound is the Stop-loss order in this workflow.

One procedure for entry, exit and abstention

Slope-as-trend, band-breakout, and inside-band rules can be selected as alternative rule sets inside a single test procedure covering entry, exit, and abstention. That joint writing is System optimization.

The shared search space can include regression lookbacks from 20 to 150 observations and, for inside-band trades, buy and sell zones from 5% to 50% of channel width.

Inside-band entries can require the slope to agree with the trade, while exits trigger at the opposite zone or when the slope changes sign.

Exposure, timing and robustness

Futures exposure can be sized from a fixed notional divided by a 20-day average true range times the contract point value, so stop distance and size are set before entry.

Averaging every tested lookback, rather than keeping only the single best cell, can be used as a robustness check on the whole procedure.

Equity tests can be constrained to long-only entries on the next open, while futures tests can allow both directions on the current close.