RISK-04 · Trend Following

Trailing Stop Strategy

Uses ATR-based trailing stop that follows price higher. Stop is set at highest high minus ATR multiplier. Locks in gains during uptrends while allowing room for normal volatility.

Risk ManagementTrendStop Loss

Open interactive charts Compare with others

At a glance

Best onTrending markets

Signal frequencyDaily

Typical holding periodDays to weeks

Asset classesIndex, Commodity, FX

Markets tested10

Data through2026-11-10

What the backtest shows

Beat buy-and-hold on 4 of 10 markets by annual return over 5 years.
Had a smaller maximum drawdown than buy-and-hold on 9 of 10 markets.
Best market by Sharpe ratio: GLD (Sharpe 0.73, CAGR 10.3%).
Weakest market: UNG (Sharpe -0.16, CAGR -16.4%).

Equity curve

Trailing Stop Strategy Buy & hold · SPY, 2010-01-04 → 2026-11-10, growth of 1

Score and risk profile

Arena Score: 49.4SPY, 5 years

Return quality · 30%47

Drawdown control · 25%55

Consistency · 20%63

Robustness · 15%2

Significance · 10%84

Each bar is a percentile against every strategy on the same market and window (100 = best).

Time in market66%

Ulcer index4.9%

Longest drawdown299 days

Daily VaR (95%)-1.13%

Probability Sharpe > 084%

Beta vs buy & hold0.39

Alpha (annual)+0.0%

Positive months52%

CAGR after 10 bp costs1.2%

Deflated Sharpe (luck-adjusted)32%

CAGR, 90% bootstrap range-4.0% to 13.4%

Max drawdown, 90% bootstrap range-34.9% to -11.1%

How it held up in sell-offs (SPY)

Period	Strategy	Buy & hold
Q4 2018 sell-off	-8.6%	-19.2%
COVID crash (Feb–Mar 2020)	-1.4%	-33.7%
2022 bear market	-6.6%	-24.5%
Market above its 200-day average (annualized) · 81%	+5.1%	+12.5%
Market below its 200-day average (annualized) · 19%	+14.8%	+19.8%

Sell-off dates follow the US stock market. Above/below the 200-day average uses the previous day's position, so there is no look-ahead.

Out-of-sample check (SPY)

Check	Value
Chosen parameters on their 3-year training windows (average Sharpe)	0.79
Same parameters in the following 6 months, when traded (Sharpe)	0.67
Default parameters over the same months (Sharpe)	0.60
Parameter re-selections / changes	28 / 8
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.56 / 0.64 / 0.69

Out-of-sample periods start on 2013-01-04. Training-window figures are flattered by picking the best of 9 settings; the out-of-sample figure is what the strategy actually earned. A large drop, or a result that depends on one setting, points to overfitting. How walk-forward testing works.

Results by market (5 years)

Market	CAGR	Buy & hold CAGR	Sharpe	Max drawdown	Buy & hold max DD	Volatility	Arena Score
GLDSPDR Gold Shares	10.3%	16.4%	0.73	-19.8%	-28.3%	15.5%	62
SLViShares Silver Trust	14.2%	15.2%	0.62	-39.6%	-57.8%	29.3%	77
DBCInvesco DB Commodity Index	8.6%	10.8%	0.61	-16.9%	-27.3%	15.2%	80
DBAInvesco DB Agriculture	4.2%	8.8%	0.47	-15.9%	-15.9%	10.4%	63
SPYSPDR S&P 500	4.4%	11.6%	0.44	-14.8%	-24.5%	10.9%	49
ETH-USDEthereum	15.0%	-15.1%	0.43	-42.5%	-79.0%	39.3%	84
USOUnited States Oil Fund	6.9%	20.2%	0.36	-50.2%	-36.2%	29.9%	54
BTC-USDBitcoin	4.4%	2.6%	0.23	-52.6%	-75.9%	28.2%	52
EURUSD=XEUR/USD	0.5%	-0.7%	0.11	-10.1%	-17.2%	5.7%	67
UNGUnited States Natural Gas	-16.4%	-30.7%	-0.16	-81.0%	-93.3%	46.1%	43

Strategy metrics use daily returns without trading costs. Buy-and-hold figures are for the same market and window. Rows are sorted by Sharpe ratio.

SPY across time windows

Window	Total return	CAGR	Sharpe	Sortino	Max DD	Win days	Trades
1 year	-9.5%	-9.5%	-0.88	-0.99	-14.8%	30%	43
3 years	+21.6%	6.7%	0.79	0.91	-14.8%	40%	103
5 years	+24.3%	4.4%	0.44	0.49	-14.8%	35%	160
Full history	+204.5%	6.8%	0.68	0.72	-26.2%	38%	522

Rules

Entry

Price > MA (trend confirmation)

Exit

Price < Trailing Stop (Highest High - ATR * Mult)

Indicators

ATR for stop distance
Trailing high
MA for entry

Inputs

ATR_Period = 14
Multiplier = 2.5
Entry_MA = 20

Position sizing

Fixed 100% allocation

Risk controls

Trailing stop protects gains

Strategy evidence

Only available, validated bundles appear below. Missing evidence is not a passing validation result.

Evidence coverage

10 / 10 declared strategy–market pairs validated

Notes

Stop only moves up, never down
ATR adapts to market volatility
Captures big moves while protecting profits

Related strategies

RISK-03 · SPY 5Y Sharpe 0.45Stop Loss Overlay ADX-01 · SPY 5Y Sharpe 0.43ADX Trend Filter COMBO-04 · SPY 5Y Sharpe 0.38Trend + Mean Reversion Hybrid EVENT-01 · SPY 5Y Sharpe 0.89Trend + Macro Filter HMA-01 · SPY 5Y Sharpe 0.06HMA Crossover KC-01 · SPY 5Y Sharpe 0.67Keltner Channel Breakout

Embed this score

Add the live badge to a blog post, README or forum signature. It updates with the daily data.

<a href="https://quantarenas.com/strategy/risk-04-trailing-stop-strategy/"><img src="https://quantarenas.com/badge/risk-04-trailing-stop-strategy.svg" alt="Trailing Stop Strategy Arena Score on Quant Arena" height="20"></a>

[![Trailing Stop Strategy Arena Score](https://quantarenas.com/badge/risk-04-trailing-stop-strategy.svg)](https://quantarenas.com/strategy/risk-04-trailing-stop-strategy/)

Backtests are historical simulations on daily data and do not include commissions or slippage. They do not guarantee future results and are not investment advice. See the methodology for how every strategy is tested.