A shared harness for trend-filter construction

Three constructions on one clock

Five-count swing-penetration, a random-walk-index, and a dual-average-crossover were coded as separate always-in mechanical procedures so each trend-filter could be judged on the same terms.

The comparison harness used one futures contract at a time over staggered multi-year windows. Each tool was initialized on earlier data. Only the last 150 sessions of each contract were scored. Any remaining position was flattened on that contract's last close.

Every rule-based-entry or exit printed on one session was filled at the next session's open. Lookbacks and flip logic were left unoptimized. Pyramiding was omitted.

How each filter printed a stance

The dual-average-crossover signaled when a 25-day average crossed a 55-day average.

The swing-penetration filter signaled when an intraday extreme pierced the five-count swing line and reversed the standing position.

The random-walk-index used a 65-day maximum lookback. It issued a directional signal only when one side of the index was above 1 and the other was below 1. Both sides above 1 produced no new signal.

A joint construction accepted both swing and random-walk alerts but acted only on whichever arrived first. It remained continuously positioned, like the three standalone filters.

How the random-walk index was built

Random-walk-up is built by taking the lowest low inside the lookback of k days, averaging range over those k days, and testing whether today's high minus that low is at least average range times the square root of k. Random-walk-down mirrors the test with the highest high versus today's low. A long is held while up is at least 1 and down is below 1, then reversed when those inequalities flip.

The spreadsheet form of the low-side index uses true-range, the greater of the session high-low span or the prior close versus today's low, so a gap is not recorded as a quiet day. Any lookback whose ratio exceeds 1 is treated as a trend reading. The largest ratio across lookbacks is the day's index.

Price-path shapes each construction can see

Construction-to-path notes assigned stair-step breakouts to swings, expanding-then-shrinking daily range to the random-walk-index, and flat or rounded turns to the dual average. Deep multi-stage pullbacks were described as reversing both swing and random-walk positions. All three filters were described as unsuited to meandering ranges.

Study adverse excursion before size

After a trend-filter construction is chosen, the suggested next construction step is to study maximum-adverse-excursion so a stop can bound the loss before size is applied.

Editorial: treat that later bound as atr-position-sizing. Choose size from stop distance and account risk before the fill, refined by how far trades typically run against the entry.