Trend Persistence Score (TPS)

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Trend Persistence Score (TPS) | Risk-Adjusted Trend Strategy | TradingSimuLab
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Trend Persistence Score (TPS)

Risk-adjusted trend analysis combining Sharpe ratio with directional consistency to evaluate trend quality and persistence

Your 1:30 minute TPS strategy explanation video will be embedded here

Risk-Adjusted Trend Analysis

TPS goes beyond simple trend identification by incorporating risk-free rate adjustments and directional consistency. This creates a more sophisticated measure that evaluates not just trend direction, but trend quality and sustainability.

Use Case: Identify high-quality trends with strong persistence characteristics, helping distinguish between noise and genuine directional momentum in various market conditions.

Key Calculation Components

Risk-Free Rate Integration

Fetches current T-bill rates from Yahoo Finance API for accurate risk-adjusted calculations using institutional-grade methodology

Sharpe Ratio Calculation

Measures excess return per unit of risk by comparing mean returns against the risk-free rate, divided by return volatility

Directional Consistency

Calculates the percentage of positive returns within the 20-day analysis window to measure trend reliability

TPS Final Score

Multiplies Sharpe ratio by directional consistency to create a unified quality score that balances return efficiency with trend persistence

TPS = Sharpe Ratio × Directional Consistency

Risk-Adjusted Calculation Process

TPS follows a systematic 4-step process to generate institutional-quality trend analysis:

1

Risk-Free Rate Integration

Automatically fetches current Treasury bill rates from Yahoo Finance API to ensure accurate risk-free rate adjustments for institutional-grade calculations.

2

Daily Returns Analysis

Calculates daily price changes over the 20-day lookback period, providing optimal sensitivity to recent market conditions while filtering short-term noise.

3

Sharpe Ratio Calculation

Computes excess returns (mean return minus risk-free rate) divided by standard deviation, creating a risk-adjusted performance measure.

4

Directional Consistency Integration

Multiplies Sharpe ratio by directional consistency percentage to generate final TPS score that balances return efficiency with trend reliability.

TPS Score Interpretation

Higher scores indicate stronger trends with better risk-adjusted returns and directional consistency:

≥ 15 Strong upward trend with high persistence
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Exceptional Trend Quality: Outstanding risk-adjusted returns combined with highly consistent directional movement. These conditions represent the strongest trend-following opportunities with minimal noise and maximum efficiency.
5 to 14 Moderate positive trend
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Good Trend Quality: Solid upward momentum with decent risk-adjusted performance. Directional consistency is present but may require careful monitoring for sustainability and potential reversal signals.
0 to 4 Weak positive or sideways trend
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Marginal Trend Quality: Limited upward bias with mixed risk-adjusted performance. Trend may be in early formation or experiencing consolidation. Requires additional confirmation signals.
-5 to -1 Near neutral with slight weakness
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Neutral Territory: Minimal directional bias with poor risk-adjusted characteristics. Market may be range-bound or experiencing high volatility without clear trend direction. Trend-following strategies typically underperform.
-15 to -6 Moderate downward trend
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Negative Trend Quality: Consistent downward pressure with negative risk-adjusted returns. Directional consistency favors bearish outcomes, suggesting defensive positioning or contrarian opportunities.
< -15 Strong downward trend
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Severe Bearish Conditions: Strong negative momentum with highly consistent downward movement. These conditions represent significant risk for long positions and potential opportunities for defensive strategies.

Why Choose Trend Persistence Score?

  • Combines return efficiency with directional consistency for comprehensive trend evaluation
  • Risk-adjusted calculations using current Treasury bill rates for institutional-grade analysis
  • Integrates institutional-grade risk management principles with accessibility for educational use
  • 20-day lookback period provides optimal sensitivity to recent market conditions
  • Real-time calculation with current market data for up-to-date trend assessment
  • Works across all asset classes: Stocks, Crypto, Forex, ETFs with consistent methodology

Ready to Try Trend Persistence Score?

Experience this risk-adjusted trend analysis in our educational trading app

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Educational purposes only
All strategies are for learning and simulation. No financial advice provided. Market data refreshes on app reload. Past performance does not guarantee future results.