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1989issue C121-4

Weekly high and low averages as stop-and-reverse levels

An always-in trend-following procedure replaces a close-only smoother with a weekly high average and a weekly low average. The opposite average is parked as the next week's intraday stop-and-reverse.

  • The construction is always-in: a simple weekly high average and a simple weekly low average replace a close-only smoother.
  • While short, an intraday buy stop sits at the weekly high average; while long, an intraday sell stop sits at the weekly low average. Either fill reverses the book.
  • Both averages are recomputed after the calendar week ends, so the next week's reverse levels are a fresh pair from the same lookback-n.
  • The two stops sit roughly an average-weekly-range apart, which makes small inside-week fluctuations less likely to flip the signal than many close-based moving-average crossings.
Entries in this reading3 entries
Current trackTrailing stop87 readingsTrend following89 readingsMoving average449 readings

An always-in pair of weekly averages

The construction is an always-in trend-following procedure. It replaces a close-only smoother with a pair of weekly high and weekly low moving averages taken from the most recently completed calendar weeks.

A stop-and-reverse is a single fill that closes the current side and opens the opposite side. The book never stands aside.

How each average is computed

Each average is a simple mean. Sum the last n weekly highs and divide by n to obtain the weekly high average. Sum the last n weekly lows and divide by n to obtain the weekly low average.

Lookback-n is the count of most recently finished calendar weeks used to compute both averages. The weekly high average is the buy-and-reverse level while the book is short. The weekly low average is the sell-and-reverse level while the book is long.

Where the reverse stops sit

While short, an intraday buy stop is parked at the n-week average of weekly highs. A fill reverses the position to long. While long, an intraday sell stop is parked at the n-week average of weekly lows. A fill reverses the position to short.

Because the reverse is an intraday stop rather than a close or next-open signal, a large same-session excursion can be captured without waiting for a daily settlement.

A weekly refresh, not a daily recross

After the calendar week ends, both averages are recomputed and the next week's stop-and-reverse levels are replaced with the new pair. The trailing-stop is that parked intraday order, refreshed once a week so exit distance tracks recent weekly range throughout the position.

For any given week the buy-stop and sell-stop sit roughly an average-weekly-range apart. Small inside-week fluctuations are therefore less likely to flip the signal than in many close-based moving-average crossings.

No extra confirmation layer

The design does not wait for extra pattern, oscillator, cycle, or wave conditions before a large directional move. A break of the relevant weekly average is sufficient to reverse.

Historical construction check

A historical construction check used lookbacks from 2 to 20 weeks, deducted 100 dollars per trade for slippage and commissions, and ended the sample in June 1989.

Net profit of the weekly high/low average by market

Coffee produced the largest net gain on a two-week lookback; the yen was next and was the only market with a winning-trade rate above half. Silver was the sole loser. The bars are the Total Profit column from the author's twelve-market test table, after a $100 charge per trade.
Coffee produced the largest net gain on a two-week lookback; the yen was next and was the only market with a winning-trade rate above half. Silver was the sole loser. The bars are the Total Profit column from the author's twelve-market test table, after a $100 charge per trade.Twelve US futures markets · weekly · 1983-02-01T00:00:00.000Z to 1988-06-30T00:00:00.000Z

Lookback n was chosen separately for each market from the two-to-twenty-week range the author scanned. Contract windows differ slightly and end in mid-1988. Slippage and commissions were taken as $100 per trade.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
3 of 36 in the Trailing stop track
19911-8 pp.Next on Trailing stopConstant false-alarm rate for dominant-cycle stopsA detection-style yes-or-no decision has four outcomes: correct acceptance, correct rejection, a false alarm, and a missed detection.
All readings on this track · 36 readings
  1. 1988Half-day bars, a midpoint gate, and a bar-based trail
  2. 1989Packaging two-bar reversals into testable entry and exit rules
  3. 1989Weekly high and low averages as stop-and-reverse levels
  4. 1991Constant false-alarm rate for dominant-cycle stops
  5. 1992Tick-index extremes as continuation and turn hypotheses
  6. 1993Constructing layered stops from equity and structure
  7. 1993Filter crossovers with moving-average slope
  8. 1993Precommit stop bounds from equity and structure
  9. 1998Evaluating a trendline barrier that can only tighten a capped stop
  10. 1999Constructing common-number support and resistance
  11. 2001Four-step opening-hour bias and trailing stops
  12. 2004Make the trading system the star
  13. 2005A beginner stock case: stop, trail, and the pre-trade checklist
  14. 2006Sell stops that trail support after the buy
  15. 2006Treat a wave-3 label as unfunded until the stop rails are written
  16. 2008Test medium-term divergence with a trendline break and a trailing stop
  17. 2010Rule-based forex entry, stop and trail
  18. 2012Precommitting stops when one currency range templates another
  19. 2012Cat-ears as a downtrend continuation hypothesis
  20. 2013Three-average swing entry and a trailing average exit
  21. 2014Construct a dual quotient-copy trend filter under a frequency roof
  22. 2014Stop distance, size, and trailing swing invalidation
  23. 2014Long-only RSI pullback, reversal-bar-entry, and staged-trail construction
  24. 2015Dual-average regime, trigger candle, and trail as one daily script
  25. 2015Three-gate trend system: filter, trigger, and trailing stop
  26. 2016Construct HHLLS crossover and breakout entry rules
  27. 2017An appointment-trade around a scheduled political close
  28. 2017Golden-cross breakout rules for a swing entry
  29. 2017Breakout confirmation above round numbers, with nines as sell shelves
  30. 2018Classify diamond geometry before the breakout
  31. 2019When trails and stops betray the support read
  32. 2019One-triggers-the-other pairs for preplanned swing entries
  33. 2019One-triggers-the-other orders for a breakout and its stop
  34. 2019When the second decision unbounds planned risk
  35. 2020Last-Hour Breakout With a Same-Session Flatten
  36. 2020Couple the slow period to stop-loss and trailing-stop settings
By fieldTrend and mean reversion93 readingsBy year198983 readings
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