1992issue C031-6
Weekly 4 percent close reversal case study
A long signal is a weekly close at least 4 percent above a reference trough, and the opposite signal is a weekly close at least 4 percent below a reference peak. The base specification keeps an always-on posture. A wider-threshold variant adds a cash-equivalent state.
- A long signal is a weekly close at least 4 percent above a reference trough; an exit or opposite signal is a weekly close at least 4 percent below a reference peak.
- After either flip, the new state stays in force until a later weekly-close excursion of 4 percent or more from a subsequent peak or trough.
- The base specification uses an always-on posture, so a range false flip can occur in a broad trading range while the rule is still intended to participate in a strong trend.
- A wider-threshold variant used an 8.4 percent advance to go long and a 7.2 percent decline to exit, and specified a cash-equivalent state during the declining-market state.
One weekly-close excursion
A weekly-close excursion is a signal that fires only after the latest weekly settlement has moved a stated percentage from a chosen prior weekly extreme.
A long signal is defined as a weekly close at least 4 percent above a prior weekly close used as the reference trough.
An exit or opposite signal is defined as a weekly close at least 4 percent below a prior weekly close used as the reference peak.
Worked weekly closes
A worked case uses a weekly-close trough of 175, which requires a weekly close of 182 or higher to turn long.
A worked case uses a weekly-close peak of 225, which requires a weekly close of 216 or lower to turn the other way.
What stays in force
After a long flip, that state stays in force until a later weekly close falls 4 percent or more from a subsequent peak. After the opposite flip, that state stays in force until a later weekly close rises 4 percent or more from a subsequent trough.
The base specification is always in one of the two market states rather than allowing a standalone flat interval. That design is an always-on posture: the specification is in one market state or the other at every date, with no separate skip or flat rule.
A wider threshold and a cash-equivalent state
A wider-threshold variant used an 8.4 percent advance to go long and a 7.2 percent decline to exit, and specified a cash-equivalent holding during the declining-market state.
A cash-equivalent state is a non-equity holding used by that wider-threshold variant while the declining-market state is in force.
Historical list and a parallel plot
A dated list of rule-generated buys and sells runs from April 1980 through a sell on 22 November 1991.
The same weekly-close percentage-reversal procedure was also plotted on a large-capitalization market index as a parallel case.
Editorial reading
Editorial: TradersWeek treats this case as a single-threshold habit. Trend following is turned into one weekly-close excursion test so entry, stay-with, and reverse are the same measurable rule.
Editorial: contrast the always-on 4 percent version, which stays in one of two market states, with the wider-threshold version that adds a cash-equivalent state while the declining-market state is in force.
All readings on this track · 38 readings
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- 1995Weekly long-only trend rules with a gated retracement exit
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- 2002Evaluating mechanical trend signals from ten-session average excursions
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- 2007One checklist for entry, exit and abstention after a market switch
- 2008Parallel listings and divergent trend behavior
- 2008Recovery headlines versus trend-regime rules
- 2008Constructing an intraday trend procedure with confirming close, retest, and planned exits
- 2010Mechanical trend-following system design, stops, and validation
- 2010A trading-plan that sets entry, stop, trail, and pause together
- 2010Multi-horizon cycle signals, trend filters, and stops
- 2012Weekly bear-market and shock signals as a mechanical procedure
- 2013A 2013 rates week as a structure-first exit drill
- 2013Trend following as one testable procedure
- 2013A forex veto checklist: trend, pair economy, and crowd bias
- 2015Relative-strength-index rules under a 20-percent trend filter
- 2015Trend-gated oscillator entry and exit rules
- 2016Trend process versus end-goal trading
- 2017Gold as a classroom for one midterm-trend procedure
- 2017Falling-knife FX longs wait for a four-hour trend turn
- 2018A closed procedure for quarterly sector rank slots
- 2018A recursive median as shared state for trend rules
- 2020Moving-average construction as an objective trend filter
- 2020Constructing first and second cross trend entries