Strategy Verdict

Tag: Trend Following

  • Parabolic SAR Strategy Backtest: A Trailing Stop in Disguise

    Parabolic SAR Strategy Backtest: A Trailing Stop in Disguise

    The Parabolic SAR — those little dots that flip above and below price — is one of Welles Wilder’s original 1978 inventions. Here is the detail almost every tutorial skips: Wilder built it as a trailing stop, a “stop and reverse” tool to protect and exit an existing position. Somewhere along the way retail turned it into an entry signal: go long when the dots flip below, short when they flip above. Does a trailing stop make a good entry trigger? We ran the standard SAR (0.02 step, 0.20 max) through the 7-Gate Protocol. Verdict: reject — though it fails more honestly than most.

    Gate 0 — Fidelity

    Standard Wilder SAR: acceleration factor starts at 0.02, steps up 0.02 each time a new extreme prints, capped at 0.20. When price crosses the SAR, it flips and reverses. This is the exact recurrence from Wilder’s book, reproduced bar by bar.

    The Exact Rules

    • Signal: price closes across the SAR → flip. Above SAR = long, below = short (stop-and-reverse, always in the market)
    • Settings: 0.02 / 0.02 / 0.20 (the universal default)
    • Execution: on the bar close, no look-ahead; 0.06%/side; Binance spot Jul 2024–Jul 2026; BTC/ETH/SOL/BNB/XRP; 5m–1D; benchmark buy & hold
    Parabolic SAR BTC 4H equity minus 34 percent net, gross barely positive, narrower friction gap than oscillators

    BTC 4H settles at −34%. As with the other flippers, the gross line clears zero (+2%) and the net line sinks — but the gap here is narrower, and that hint matters: SAR is doing something real when a trend actually exists.

    Gate 6 — It Only Pays on Coins That Trended Hard

    Parabolic SAR only profits on hard trending coins, XRP plus 516 and SOL positive, BTC ETH BNB negative scatter

    This scatter is the honest picture of SAR. Its two profitable coins on 4H are XRP (+516%) and SOL (+56%) — the two names with the largest, cleanest directional moves in the sample. On XRP, SAR even beats buy & hold (+516% vs +163%). But on the choppier majors — BTC, ETH, BNB — it whipsaws to losses. Catching a big trend is necessary for SAR to work, and not sufficient: ETH fell 40% too, yet SAR still lost on it because the descent was choppy. A strategy that only prints on the two cleanest trenders is a trend-rider, not a general edge.

    Gate 2 — Friction Still Wins

    Parabolic SAR friction gate, plus 2 percent gross to minus 34 percent net on BTC 4H

    SAR’s gross 4H edge is a slim +2%, and a realistic 0.06%/side turns it into −34%. On fast timeframes it is a massacre — 5m and 15m both go to −100% on thousands of flips. The dots move on every minor wiggle, and every wiggle costs a fee. Its best clean timeframe is the daily, which finally turns positive at +8% — but even that still trails simply holding BTC (+13%).

    Gate 6b — Five Coins & Robustness

    Parabolic SAR five coins 4H, only XRP and SOL positive, both trend outliers

    Two of five coins positive on 4H, both trend outliers; the parameter sweep is 0 of 6. To its credit, SAR posts the least-bad out-of-sample result of the pure flippers — 4 of 5 coins positive out-of-sample — which is consistent with a genuine but narrow trend-capturing tendency. It just isn’t enough, often enough, to beat holding after costs.

    The Verdict: REJECT

    • Gate 0 — Indicator fidelity — pass (Wilder’s SAR, 0.02 step to 0.20 cap, reproduced bar by bar)
    • Gate 1 — Sanity — pass (signal on the closed bar, no look-ahead)
    • Gate 2 — Friction — fail (+2% gross → −34% net on 4H; 5m and 15m → −100%)
    • Gate 3 — Yearly consistency — fail (negative on the tradeable timeframes; only the daily scrapes +8%)
    • Gate 4 — Out-of-sample — partial (4 of 5 coins positive out-of-sample — its one genuine bright spot)
    • Gate 5 — Robustness — fail (0 of 6 acceleration × cap cells positive on 4H)
    • Gate 6 — Multi-market — partial (2 of 5 coins on 4H — but only XRP and SOL, the hardest trenders)
    • Gate 7 — vs Buy & Hold — fail (even the daily +8% trails holding +13%)

    Parabolic SAR is a trailing stop wearing an entry signal’s costume. Used as Wilder intended — to ride and protect a position you already hold — it is a legitimate tool. Flipped into a stand-alone entry trigger, it only earns its keep on the cleanest, hardest trends (XRP, SOL), whipsaws on everything choppier, bleeds to fees on fast charts, and even at its best — the daily — still can’t beat holding. It fails more honestly than the oscillators, because when a real trend shows up it does catch it. But “catches trends, loses to chop and costs” is not a system you can trade blind.

    FAQ

    SAR was never meant to be an entry — you’re testing it wrong.
    That’s exactly the point, and we say so up front. Retail widely trades the flip as an entry, so we measured that. Used as a trailing stop on top of a separate entry, SAR can be perfectly reasonable — that’s a different system, and it would need its own test.

    XRP made +516% — isn’t that great?
    On one coin, in one direction, in a sample where XRP itself ran hard. Two of five coins profitable, a 0/6 sweep, and sub-holding returns on the daily are what tell you it’s a trend-rider that got one clean ride, not a repeatable edge.

    Can I replicate this?
    Yes — SAR(0.02, 0.02, 0.20), public Binance data, 0.06%/side, five coins, five timeframes.

    See also: RSI 30/70, Stochastic, MACD crossover, UT Bot, and the conditional passes VWAP and Ichimoku (daily).

    Disclaimer: educational research, not financial advice. Past performance does not guarantee future results. Never trade money you cannot afford to lose.

  • Range Filter Buy/Sell Strategy Backtest: the Viral 5-Minute Filter That Loses -100%

    Range Filter Buy/Sell Strategy Backtest: the Viral 5-Minute Filter That Loses -100%

    The “Range Filter Buy and Sell 5min” is one of the most forked, most screen-recorded indicators on TradingView. A single smooth line that turns green and prints “BUY”, turns red and prints “SELL” — and a thousand videos titled “this 5-minute strategy prints money.” Under the hood it is simply another ATR-style trailing filter, a close cousin of two strategies we’ve already buried: UT Bot and Triple SuperTrend. We ran guikroth’s version through the full 7-Gate Protocol. Same family, same verdict: reject.

    Gate 00 — Fidelity

    We reproduced guikroth’s public Pine exactly: an EMA of the absolute bar-to-bar price change, smoothed again and multiplied by the range multiplier (defaults: sampling period 100, multiplier 3.0). The filter trails price and flips color; you go long above it, short below. Nothing exotic — and nothing to get wrong.

    The Exact Rules

    • Signal: price closes above the (rising) range filter → long; closes below the (falling) filter → short. Stop-and-reverse (always in the market)
    • Settings: sampling period 100, multiplier 3.0 (the shared default)
    • Execution: on the bar close, no look-ahead; costs 0.06%/side; data Binance spot Jul 2024–Jul 2026, BTC/ETH/SOL/BNB/XRP, 5m–1D; benchmark buy & hold
    Range Filter 5min verdict reject, minus 100 on 5 minute, zero of five out of sample positive

    It’s a “5-minute” filter that returns −100% on 5 minutes

    Range Filter net return by timeframe, minus 100 percent on 5 minute the timeframe it is named after

    The indicator is literally named for the 5-minute chart. On the 5-minute chart it takes 6,465 trades and returns −100% — the account is gone. 15m: −91%. 4h: −37%. It loses to buy & hold on all five timeframes, and the “best” one (daily +11%) still trails simply holding. The trailing-filter family self-destructs on the fast charts it’s marketed on, exactly like UT Bot and SuperTrend before it.

    Range Filter on BTC 4H, ATR style trailing filter, buy above sell below with color change

    Gate 04 — Out-of-Sample (the tell)

    Range Filter out of sample, every in-sample winner collapses, zero of five positive out of sample

    This is the cleanest kill we’ve filmed. Split each coin 18 months in / 6 months out. In-sample, a couple of coins look brilliant — SOL +104%, ETH +50%. Out-of-sample, every single one turns negative (SOL −22%, ETH −34%, BNB −4%): 0 of 5 positive out-of-sample. When your winners exist only in the half of the data you fit to, you didn’t find an edge — you found the past.

    Gate 06 — Five Coins & Gate 02 — Friction

    Range Filter five coins 4H only one of five positive

    On 4H only 1 of 5 coins is profitable (SOL, the same coin that then dies out-of-sample). And the friction test shows there was never a gross edge to erode:

    Range Filter 4H negative even at zero fees, no gross edge

    −23% on BTC 4H at zero fees. The parameter sweep is just as bleak: only 1 of 16 period/multiplier combinations is positive.

    The Verdict: REJECT

    • Gate 0 — Indicator fidelity — pass (faithful reproduction of guikroth’s public Range Filter, period 100 / multiplier 3)
    • Gate 1 — Sanity — pass (signal on the closed bar, no look-ahead)
    • Gate 2 — Friction — fail (negative even at zero fees on 4H; 5m → −100%)
    • Gate 3 — Yearly consistency — fail (no consistently positive year)
    • Gate 4 — Out-of-sample — fail hard (0 of 5 coins positive out-of-sample — SOL +104% in-sample → −22% out)
    • Gate 5 — Robustness — fail (only 1 of 16 period × multiplier cells positive)
    • Gate 6 — Multi-market — fail (1 of 5 coins positive on 4H)
    • Gate 7 — vs Buy & Hold — fail (behind on every timeframe)

    Range Filter is the third ATR-style trailing indicator we’ve tested, and the third to fail the same way. UT Bot, Triple SuperTrend, and now Range Filter all promise “5-minute” signals and all return roughly −100% on the 5-minute chart once you pay fees. The lesson isn’t about any one indicator — it’s that a smoothed trailing stop is not a strategy, and repackaging it with new colours and a new name doesn’t change the maths. Range Filter also fails the one test the others occasionally survived: out-of-sample, it’s 0 for 5.

    FAQ

    Isn’t this different from UT Bot?
    Cosmetically. The smoothing differs (EMA-of-absolute-change vs ATR), but both are trailing filters that flip long/short on a crossing. They share the same failure mode: constant flipping on fast charts, fees bigger than the edge.

    The in-sample SOL result was +104% though.
    And it went to −22% out-of-sample. That’s the entire point of an out-of-sample test: in-sample numbers are the strategy describing the data it was fit on. Only the out-of-sample number is a prediction, and here it’s negative on all five coins.

    Can I replicate this?
    Yes — guikroth’s public Range Filter (period 100, mult 3), Binance data, 0.06%/side.

    See also the rest of the trailing-filter family: UT Bot, Triple SuperTrend; and our one conditional pass among trend systems, Ichimoku cloud breakout.

    Disclaimer: educational research, not financial advice. Past performance does not guarantee future results. Never trade money you cannot afford to lose.

  • Ichimoku Cloud Strategy Backtest: a Real Edge on the Daily, a Disaster Intraday

    Ichimoku Cloud Strategy Backtest: a Real Edge on the Daily, a Disaster Intraday

    Ichimoku Kinko Hyo — “one glance equilibrium chart” — is the indicator that looks like a weather map and scares beginners away. Clouds, five lines, a signal from the future and one from the past. The most-taught, most-mechanical piece of it is the cloud breakout: go long when price closes above the cloud, short when it closes below. The claims swing wildly, from “70–75% win rate with full alignment” to one study’s brutal “10% win rate across 15,000 trades.” We ran the plain cloud breakout through the 7-Gate Protocol — and it earned something rare on this site: a conditional pass. Only our second, after VWAP. Because this one, unlike the last three, actually works — just not where it’s sold.

    Gate 00 — Fidelity

    Standard Ichimoku: Tenkan 9, Kijun 26, Senkou B 52, cloud displaced 26 forward — identical to TradingView’s built-in. Crucially, we use the no-look-ahead cloud: the cloud sitting under today’s price was projected 26 bars ago, so the signal only ever uses information that existed at the time.

    The Exact Rules

    • Signal: close above the cloud (top of Senkou A/B) → long; close below the cloud → short; inside the cloud → flat
    • Settings: 9 / 26 / 52, displacement 26 (the universal default)
    • Execution: on the bar close, no look-ahead; costs 0.06%/side; data Binance spot Jul 2024–Jul 2026, BTC/ETH/SOL/BNB/XRP, 5m–1D; benchmark buy & hold
    Ichimoku cloud breakout conditional verdict, works on daily 5 of 5 coins, fails on intraday

    Where it genuinely works: the daily

    Ichimoku cloud breakout daily 5 coins all positive 4 of 5 beat buy and hold profit factor 1.4 to 2.6

    On the daily timeframe the cloud breakout is profitable on all five coins — BTC +79%, ETH +90%, SOL +16%, BNB +102%, XRP +66% — with profit factors of 1.4 to 2.6, and it beats buy & hold on four of the five. This is not an artifact: it’s a real, generalizable trend-following edge. Note how it shines on ETH and SOL, where buy & hold lost 40%+: the short side caught the alt bear market. That is exactly what a trend system is supposed to do.

    Why it works: it’s an honest trend-follower

    Ichimoku cloud breakout on BTC daily, genuine trend follower, buy above cloud sell below, with Tenkan Kijun

    There’s no mysticism here. Long above the cloud, short below it — the strategy simply rides established trends and flips when the regime changes. It buys the 2024 breakout, holds the run to 125k, and shorts the 2025–26 decline. The win rate is low (~28%), which surprises people, but the payoff ratio is high: a few big trends pay for many small stop-outs. That is the correct shape for trend-following — the opposite of the high-win-rate mean-reversion traps like Bollinger reversion and RSI.

    The catch: every timeframe it’s actually sold on

    Ichimoku net return by timeframe, plus 78 percent on daily but minus 100 on 5 minute, dies intraday

    Here’s why it’s conditional and not a clean pass. Drop below the daily and the edge inverts: 4H −43%, 1h −56%, 15m −99%, and on the 5-minute “cloud scalping” setup the videos love, −100% — the account is gone. The cloud is a slow, smoothed structure; on fast charts price chops across it constantly, and fees plus whipsaw shred you. The strategy works precisely where nobody makes hype videos (patient daily swing trading) and detonates precisely where everybody does.

    Ichimoku 4H loses on 4 of 5 coins, intraday whipsaw and fees

    On 4H it loses on 4 of 5 coins. And the friction test confirms the intraday version has no real edge to begin with:

    Ichimoku 4H negative even at zero fees

    −25% on BTC 4H even at zero fees. The daily edge simply does not exist on the 4-hour chart, at any cost level.

    The Verdict: CONDITIONAL

    • Gate 0 — Indicator fidelity — pass (standard 9/26/52 Ichimoku with a no-look-ahead cloud)
    • Gate 1 — Sanity — pass (signal on the closed bar, no look-ahead)
    • Gate 2 — Friction — fail intraday / pass daily (5m → −100%; on the daily its few trades survive fees easily)
    • Gate 3 — Yearly consistency — conditional (on the daily it captures multi-year trends in both directions; on 4H it loses)
    • Gate 4 — Out-of-sample — partial (4H out-of-sample is 3/5 positive — the least-bad intraday result on this site)
    • Gate 5 — Robustness — fail on 4H (0 of 12 Tenkan × Kijun sweep cells positive intraday)
    • Gate 6 — Multi-market — pass on daily (5/5 coins) / fail on 4H (1/5)
    • Gate 7 — vs Buy & Hold — pass on daily (beats on 4/5 coins) / fail intraday

    Ichimoku’s cloud breakout is a legitimate trend-following system — on the daily. There it is profitable on every coin we tested, beats buy & hold on four of five, and behaves exactly like a trend-follower should (low win rate, high payoff). But it is marketed as an intraday “cloud scalping” tool, and on the 5-minute to 4-hour charts it ranges from a slow bleed to a full account wipe. The indicator isn’t the problem; the timeframe the internet sells it on is. Use it on the daily as a swing/trend framework, expect ~28% win rate and 25–40% drawdowns, and never take it down to the scalping charts.

    FAQ

    A 28% win rate — isn’t that terrible?
    For mean reversion, yes. For trend-following, it’s normal and fine: you lose small often and win big rarely. Judge a trend system by profit factor and return, not win rate — the exact opposite of how you’d judge Bollinger reversion.

    Why does it die on 5-minute charts?
    The cloud is a heavily smoothed, lagging structure. On fast timeframes price crosses it dozens of times a day with no follow-through, so you pay fees and whipsaw on hundreds of fake breakouts. Trend tools need room to trend.

    Would the full alignment (TK cross + Chikou + future cloud) do better?
    On 4H, the TK-cross and full-alignment variants were also negative (−9% and −18%). Adding conditions didn’t rescue the intraday version; the timeframe is the deciding variable, not the filter stack.

    Can I replicate this?
    Yes — standard 9/26/52 Ichimoku, public Binance data, 0.06%/side. Daily cloud breakout, five coins.

    See also our one other conditional pass, VWAP trend-pullback, and the rejects: UT Bot, Lorentzian, Bollinger reversion.

    Disclaimer: educational research, not financial advice. Past performance does not guarantee future results. Never trade money you cannot afford to lose.

  • VWAP Strategy Backtest: 5 Coins, 16 Parameter Sets, Full Out-of-Sample Test

    VWAP Strategy Backtest: 5 Coins, 16 Parameter Sets, Full Out-of-Sample Test

    Last time, the RSI 30/70 strategy died at gate 2 — fees ate it alive before we even got to the interesting questions. This strategy is different. It’s the first one to make it deep into the 7-Gate Protocol: five symbols, sixteen parameter sets, and a full out-of-sample split.

    It survived more gates than anything we’ve tested. It still didn’t survive all of them. Here’s the complete autopsy — including exactly where it works and where it dies.

    The Exact Rules

    • Timeframe: 4H candles
    • Trend filter: EMA(100) — longs only above it, shorts only below it
    • Entry: price pulls back and touches the daily VWAP, then closes back in the trend direction
    • Stop loss: fixed at entry ± 2.0 × ATR(14) — never trailed
    • Exit: close crossing back through the EMA(100) (trend over), or the stop
    • Fees: 0.06% per side, intrabar stop fills
    • Data: 2 years (July 2024 – July 2026), Binance public data

    One counterintuitive detail from our earlier testing: a trailing stop destroys this strategy (PF 0.76). Pullback entries get shaken out by noise. The fixed stop is not a preference — it’s the difference between profit and ruin.

    The Baseline: BTC, 4H

    VWAP trend pullback strategy backtest tear sheet BTCUSDT 4H with trade markers

    Look at that win rate: 22.7%. Three losses out of four trades — and it still made +25.5%, double Buy & Hold. This is the exact mirror image of the RSI lesson: average win +6.77%, average loss −1.45%. Win rate is a vanity metric. Payoff asymmetry is the business model.

    Gate 03 — Monthly Consistency

    VWAP strategy monthly returns heatmap by symbol

    Not pretty, not terrible. Long flat-to-red stretches punctuated by big green months — the classic trend-following profile. You don’t get paid monthly; you get paid when trends happen.

    Gate 04 — Out-of-Sample

    VWAP strategy in-sample vs out-of-sample returns by symbol

    We split the data: first 18 months in-sample, last 6 months untouched. 3 of 5 symbols stayed positive out-of-sample. BTC actually got better (PF 2.46 out-of-sample). SOL and XRP flipped negative. Partial pass — the edge doesn’t evaporate on unseen data, but it’s not universal either.

    Gate 05 — Parameter Robustness

    VWAP strategy parameter sweep heatmap EMA ATR robustness

    Sixteen combinations of EMA length (50–200) and ATR stop multiple (1.5–3.0): 13 of 16 positive. This is what a real edge looks like — it degrades gracefully when you wiggle the knobs. A curve-fit strategy shows one green cell in a sea of red.

    Gate 06 — Five Symbols, Same Rules

    VWAP strategy tested on five crypto symbols vs buy and hold
    Symbol Trades PF Total return Max DD Buy & Hold Verdict
    BTC 128 1.37 +25.5% 36.7% +12.1% beats holding
    ETH 128 1.51 +83.3% 41.8% −39.8% crushes holding
    SOL 133 1.15 +4.2% 51.1% −40.2% beats holding
    BNB 165 0.80 −50.8% 60.6% +16.8% fails
    XRP 148 1.68 +1.5% 75.9% +163.2% loses to holding

    This is why gate 06 exists. Test on BTC alone and you’d call it a winner. Test on BNB and you’d call it garbage. Both would be wrong: the edge is real on majors and absent elsewhere. Anyone selling you a strategy that “works on everything” hasn’t run this test.

    Every timeframe (why 4-hour is the whole story)

    A conditional pass comes with a condition, and for VWAP pullback it is the timeframe. The identical rules, run from 5-minute to daily:

    Timeframe Trades Win rate Profit factor Net return
    5-minute 9,124 11.7% 0.22 −100%
    15-minute 3,097 15.1% 0.37 −100%
    30-minute 1,442 18.4% 0.54 −93%
    1-hour 709 20.3% 0.71 −68%
    4-hour (baseline) 159 22.6% 1.20 +21%
    1-day 30 20.0% 0.73 −28%

    Every intraday interval loses — a total wipe on 5-minute — and the edge appears only on the 4-hour. Push to daily and the sample thins and it slips back to −28%. This is not a strategy you can run anywhere; it is a 4-hour phenomenon, which is precisely why the verdict is conditional.

    Take-profit to stop-loss (4-hour)

    Swapping the exit for a fixed stop (2×ATR) and a swept target:

    TP : SL Trades Win rate Profit factor Net return
    1 : 0.5 102 69.6% 0.93 −8%
    1 : 1 77 57.1% 1.15 +13%
    1 : 1.5 72 50.0% 1.29 +31%
    1 : 2 61 41.0% 1.16 +14%
    1 : 2.5 55 38.2% 1.29 +27%
    1 : 3 53 32.1% 1.11 +5%

    Unlike the rejects on this site, VWAP’s edge survives the exit sweep: for every reward-to-risk from 1:1 to 1:3 the profit factor holds above 1.0, peaking at 1.29. That resilience across exits is what separates a conditional pass from a rejection — though a very tight 1:0.5 target still tips it slightly negative.

    The Verdict: CONDITIONAL

    Adding up the gates:

    • Gate 0 — Indicator fidelity — pass (standard daily VWAP with an EMA trend filter and ATR stop)
    • Gate 1 — Sanity — pass (signals on closed bars, no look-ahead)
    • Gate 2 — Friction — pass (still profitable after 0.06%/side — the gate where RSI died)
    • Gate 3 — Yearly consistency — partial (trend-dependent, with long flat stretches)
    • Gate 4 — Out-of-sample — partial (3 of 5 positive)
    • Gate 5 — Robustness — pass (13 of 16 sweep cells positive)
    • Gate 6 — Multi-market — partial (works on majors; BNB fatal)
    • Gate 7 — vs Buy & Hold — partial (beats it on 3 of 5 coins)

    Our verdict stamp says CONDITIONAL, and now the conditions are precise:

    Majors only (BTC/ETH). Reduced position size — the 37–42% drawdowns are real. As a portfolio component, not a standalone system. Traded outside those conditions, expect the BNB outcome.

    That nuance is the whole point of this site. A YouTube title would say “this VWAP strategy made 83% on ETH!” A different YouTube title would say “I tested VWAP and lost 50%!” Both are technically true. Neither is the truth.

    FAQ

    Why does it fail on BNB?
    BNB spent much of the window in choppy, range-bound conditions where trend filters generate false regime signals. The strategy needs trends; BNB didn’t provide them.

    Would a different VWAP (weekly, anchored) help?
    In our earlier tests, weekly VWAP performed worse as a touch level. Volume-profile POC levels also degraded results — daily VWAP carried all the edge.

    What about the low win rate — can I handle 3 losses out of 4?
    That’s the real question. Statistically it works; psychologically most people abandon it during the losing streaks. That’s a you-parameter, not a strategy parameter.

    Can I replicate this?
    Yes — the rules above are complete, data is public Binance OHLCV, fees 0.06%/side. Every number in this article falls out of those inputs.

    Disclaimer: This is educational research, not financial advice. Past performance does not guarantee future results. Never trade money you cannot afford to lose.