quant-factor-research/docs/ETF_TREND_SYSTEM.md

ETF Trend System (K<=4, no leverage) - v2

This is a daily-signal / daily-rebalance trend-following system on a configurable ETF universe.

It is designed for:

• K<=4 holdings
• no leverage (net exposure <= 100%)
• portfolio vol cap (de-risk only), remainder parked in a rates ETF
• practical execution hygiene (cooldown / new listing protection / turnover band)

Signals

• Trend filter (entry universe): MA(fast) > MA(slow)

  • default: MA5 > MA20

• Ranking score (higher is better):

  score = (0.5*R20 + 0.3*R60 + 0.2*R120) / max(vol20, floor) + 0.5*trend_strength

  where trend_strength = ma_fast/ma_slow - 1.

Entry

On each rebalance day (daily):

• Candidate must satisfy:
  • trend_ok == True (MA cross)
  • score >= min_score
  • min_history_days protection (skip too-new series)
  • cooldown_days protection (after exit, avoid immediate re-entry)

Position Sizing

• Risk parity on vol20 across selected holdings.

• Per-asset cap: max_weight_per_asset (default 0.50)

• Portfolio vol cap (no leverage):

  scale = min(1, target_ann_vol / port_vol(port_vol_window))

  Remaining weight (1 - sum(weights)) is parked in rates_fallback.

Exits (checked daily)

A position exits if any triggers:

• Trend break: MA(fast) < MA(slow)
• Chandelier stop: close < highest_close - atr_mult*ATR
• Stop loss from entry: close < entry_price - stop_loss_atr*ATR
• Take profit from entry: close > entry_price + take_profit_atr*ATR

Trading Hygiene

• rebalance_band: ignore small weight changes to reduce churn.
• min_hold_days: do not rebalance-sell a very fresh position (risk exits still apply).
• new_asset_days/new_asset_max_w: cap weight of a newly-eligible asset for its first N tradable days after it passes the history gate.

Outputs

Backtest runner writes 3 artifacts:

• equity curve parquet: data/etf_trend_equity_*.parquet
• weights parquet: data/etf_trend_equity_*_weights.parquet
• trades parquet: data/etf_trend_equity_*_trades.parquet