Systematic trend-following strategies applied to equity markets are widely studied, yet most reported performance statistics are non-reproducible in live trading. This paper makes three contributions. First, we introduce a formal taxonomy of look-ahead bias organised around point-in-time correctness: a strategy is point-in-time correct if, for every decision time t, its information set lies in the natural filtration Ft. Three bias classes—universe-membership contamination, price-data forward leakage, and stop-exit sequencing violations—are characterised as filtration breaches. Second, we formalise the average true range (ATR) trailing stop as a stochastic recurrence and codify its monotonic non-decreasing ratcheting property (Lemma 1), providing a structural per-trade loss bound. Third, we exhibit a closed-form construction (Theorem 1) of two return sequences with identical Sharpe ratios but arbitrarily divergent maximum consecutive negative-year runs, establishing investor-experience metrics as independent optimisation objectives. We complement these contributions with an 18-year empirical study (2008–2025) on the NASDAQ-100 with reconstructed point-in-time index constituency (Class I compliant) and measured residual Class II exposure, applying combinatorially symmetric cross-validation (CSCV) to a 14-configuration ATR-multiplier grid. The grid exhibits a stop-multiplier-insensitive, CAGR-flat region across k∈3.5,7.0 (CAGR 10.28–10.39%, net of Dutch progressive tax) and a uniform maximum consecutive negative-year run of 1 across all 14 configurations. The correlation-matrix eigenvalue spectrum of the grid is dominated by a single mode (λ1=13.91 of 14), yielding an effective independent-test count of Meff=1.09. This near-degeneracy persists in a parallel grid with the regime classifier disabled, establishing the ATR multiplier as a structurally near-redundant parameter for this strategy class. The associated PBO value of =0.9351 co-occurs with this near-degeneracy under the CSCV maximum-selection rule. The plateau-level performance survives Bonferroni correction for both M=14 and Meff. The combined evidence supports a region-based interpretation of robust strategy parameters rather than single-point optimisation.
Xavier Fonseca (Wed,) studied this question.
Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context: