Volatility-layered mechanical system with fixed contracts

An editorial reading of two locks

This article is a TradersWeek editorial reading of an archive mechanical construction. It is not a claim that the archive itself described the work as two locks.

In that editorial reading, construction proceeds in order. A volatility-state first selects the stop-and-target set so range defines the risk geometry. Size is then frozen at one contract so that geometry, not added units, bounds the loss before entry.

One testable buy, sell, or hold process

The archive specifies a mechanical procedure as one testable buy, sell, or hold process. That process encodes three operating rules: follow the prevailing trend, allow open gains to continue, and exit losses promptly.

The trading-window and the trend

Daily indicators are computed over a user-chosen trading-window of trading days. The procedure is shipped with a default of 20 days in every market. Trend state is taken from price change inside that window.

Volatility-state chooses the parameter-bundle

Each market is split into three volatility-state values: low, medium, and high. A different parameter-bundle is applied only after the current state is identified. Volatility-state thresholds are fixed inside the procedure and are not user-editable, even though other parameters remain adjustable.

In the 11-year historical sample used to set the construction, about one-third of days were assigned to each of the three volatility-state values.

After the trading-window, five further parameters remain adjustable: entry and exit rules, a filter, a standard stop, a variable stop, and a profit target. Those values may differ by long versus short side and by market. They are the parameter-bundle assigned once the current volatility-state is known.

Always-in-stance until a target

The procedure keeps an always-in-stance. It stays continuously long or short until a profit target is reached. It may reverse when the trend is weak or price reacts sharply against it.

Fixed-contract-size as the second lock

Exposure is specified as a fixed-contract-size of a single contract in each market. No pyramiding, compounding, or multiple-contract stacking is assumed.

In the TradersWeek editorial reading, that one-contract freeze is the second lock. After the volatility-state has chosen the stop-and-target set, size is not allowed to add units that would enlarge the loss before entry.

An independent-market-book and capital outlines

The construction is an independent-market-book. Each market is signaled and sized on its own, so the full set need not be traded together.

Capital outlines list 13 portfolio constructions from 10,000 to 100,000 account units. They name 40,000 as the minimum to run all seven independently traded markets. They also describe a 5,000-unit path that uses half-size bond or currency contracts. That half-size-path is a reduced-notional contract choice used to lower the stated minimum account needed to run the same rules.