[Research][Testing] ATR-Based Exit Strategy Comparison #538
Description
Summary
Test volatility-adaptive exits using ATR multiples instead of fixed percentage stops.
Background
Current exit strategy analysis (scripts/research/exit_strategy_analysis/) uses fixed percentage exits (e.g., 5% SL, 8% TP). This approach has a documented gap:
Gap: Fixed percentages (e.g., 5% SL) are rigid. In high volatility (high VIX), a 5% move might just be noise, triggering premature stops. In low volatility, an 8% target might never be reached.
Professional systems typically use Average True Range (ATR) multiples to adapt to market "noise."
Objective
Create atr_exit_comparison.py to compare:
- Fixed % exits (current: 5% SL / 8% TP)
- ATR-based exits (e.g., SL = 2 x ATR, TP = 3 x ATR)
- Hybrid: ATR exits with fixed % bounds
Test Parameters
| Exit Type | Stop Loss | Take Profit |
|---|---|---|
| Fixed | 5% | 8% |
| ATR-Low | 1.5 x ATR | 2.5 x ATR |
| ATR-Med | 2.0 x ATR | 3.0 x ATR |
| ATR-High | 2.5 x ATR | 4.0 x ATR |
Metrics to Capture
- Expected Value per trade
- Sharpe ratio
- Win rate
- Average holding period
- Performance in high-vol vs low-vol regimes
Acceptance Criteria
- Script created at
scripts/research/exit_strategy_analysis/atr_exit_comparison.py - Test on same synthetic data as
performance_clarification.py - Test on 2024-2025 real market data (AAPL, SPY)
- Results documented in README.md
- Clear recommendation: when to use ATR vs fixed exits
Related
- Documented gap in
scripts/research/exit_strategy_analysis/README.md(Section 1: Volatility Normalization) - Issue [Research] Optimal Partial Exit Strategies - Academic Literature Review #417 (Partial Exit Strategies)