Guide · Breakouts & channels
Does Wilder Volatility System work?
Across 375 stocks, Wilder Volatility System cut the worst fall on 81%, beat buying and holding on risk-adjusted return on 17% and on raw return on 15%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
Wilder's stop-and-reverse system from the book that introduced average true range. Stay long until the close drops 3 average true ranges below the best close of the trade, then wait in cash until the close rises 3 ranges above the lowest close since.
- Out when a close falls more than 3 × the 7-day average true range (a typical day's range) below the highest close since going in.
- In when a close rises more than 3 × the 7-day average true range above the lowest close since going out.
Breakouts & channels plays bet that when price escapes the range it has held for weeks, the move that follows tends to run. The family guide
How to use it
- It trades often (about 8 switches a year per stock), so costs, spreads and taxes eat into it more than the backtest's 0.05% per switch suggests.
- Expect to be wrong more often than right: only 35% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It worked best on Micro caps (33% beat holding on risk-adjusted return) and worst on Big tech (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
Wilder Volatility System did best against holding in the COVID drop (+21% median gap) and worst in the 2020–21 rally (−28%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Wilder Volatility System | +16% | −10% | +21% | −28% | +6% | −10% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Micro caps | 33% | -0.35 |
| Indexes & ETFs | 29% | -0.10 |
| Real estate | 26% | -0.07 |
| Industrials & rentals | 22% | -0.07 |
| Financials | 19% | -0.12 |
| Energy & power | 19% | -0.14 |
| Industrials & materials | 18% | -0.22 |
| Healthcare | 17% | -0.17 |
| Software & devices | 15% | -0.24 |
| Semiconductors | 13% | -0.23 |
| Consumer & retail | 12% | -0.21 |
| Media & telecom | 10% | -0.12 |
| Metals & mining | 10% | -0.30 |
| Sectors | 8% | -0.23 |
| Big tech | 0% | -0.07 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Wilder Volatility System holds 143 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.