Download: Trading Rules PDF
Objective#
Design a complete entry + exit system using z-score signals. The entry (z > 2.0) was established in Labs 1–3. Lab 10 focuses entirely on the exit.
Exit Design — What We Explored#
Volume MA crossunder (explored, rejected): MA(3)/MA(10) and MA(7)/MA(21) crossunders fired too fast — average hold of 4.7 and 6.9 bars. Real trends run 30–60+ bars. Volume alone can’t time the peak.
Z-score exit calibration: Computed average price change by z-score band post-entry:
| z-score band | Avg price change | Decision |
|---|---|---|
| [−1, 0) | +0.06% | Noise — don’t exit |
| [−2, −1) | −1.02% | Mild pullback — hold |
| < −2 | −4% to −10% | Genuine reversal — exit |
Final exit rules (checked in priority order):
| Priority | Condition | Meaning |
|---|---|---|
| 1st | return ≥ TP% | Take profit |
| 2nd | z_score < −2.0 | Z-score reversal stop |
| 3rd | bars_held ≥ 60 | Time cap |
Exit Timing Analysis#
Trends consistently peak between t+30 and t+60. The 20-bar lookahead used in early analysis was too short.
Backtest Results (Lab 10-B)#
Config: Z_ENTRY=2.0, Z_EXIT=−2.0, TP=10%, MAX_HOLD=60
| BTC | SOL | |
|---|---|---|
| Starting capital | $10,000 | $10,000 |
| Ending capital | $215,828 | $257,768 |
| Total return | +2,058% | +2,478% |
| Trades | 76 | 56 |
| Win rate | 67% | 82% |
| Avg trade return | +4.9% | +7.5% |
Parameter Sweep (Lab 10-C)#
Tweak 1 — Rolling window: Tested 14 / 20 / 30 days for both assets (TP=10% fixed).
Tweak 2 — SOL take-profit: Tested 10% / 12% / 13% (window=20 fixed).
Window=20 confirmed optimal for both BTC and SOL. SOL TP=13% wins at $320k vs TP=10% at $258k — SOL’s higher volatility supports a larger take-profit target.
Final Confirmed Config#
| Parameter | BTC | SOL |
|---|---|---|
| Rolling window | 20 days | 20 days |
| Entry threshold | z > 2.0 | z > 2.0 |
| Take-profit | 10% | 13% |
| Z-score stop | z < −2.0 | z < −2.0 |
| Time cap | 60 bars | 60 bars |
| Position sizing | Flat binary (100% in/out) | Flat binary (100% in/out) |
Final Results with SOL TP=13%#
| BTC | SOL | |
|---|---|---|
| Starting capital | $10,000 | $10,000 |
| Ending capital | $215,828 | $320,000 |
| Total return | +2,058% | +3,100% |
What We Don’t Know Yet#
- Optimal exit timing — take-profit and time cap are reasonable but not optimised. A momentum-exhaustion study is needed (future lab).
- Transaction costs — slippage and fees not modelled. Real-world returns will be lower.
- Multi-asset coordination — BTC and SOL currently run independently.