Normal
Hi HowardI noticed you touched on moving average crossover systems in your book, and that they are backwards. Personally i have never come across a moving average crossover system that is profitable. This is a shame as most newcomers to system development and trading always seem to start with looking at MACD.. This may be why the systems are never profitable, because the amount of people using them is too much for the market and it can start to change.I believe there is a good reason moving average crossover systems are backwards, and maybe a slight addition to your system could make it profitable. If you have a 116 and a 15 moving average, which you optimized for CAR (which i personally use as a yard stick), if the market is trending well enough, like it was from say 2003-2007, they 15day moving average will allow you to buy in pullbacks in part of a larger trend, as long as the price reverses and then rockets ahead of the 15day moving average, as seen in the image attached, a profit can be made.*daily chart*weekly chart*monthly chartThere are some major simaliarites in all three of those charts, each one of them the price dips, and then rockets out of that dip before the moving average can catch up. Allowing us to swing trade - rather than following a trend.I really don't believe that moving average systems will ever be profitable, simply because of the number of people who revert to it at the start of trading. The only sort of system that uses a moving average crossover will be a backwards one, because that is the type of system that over the years, will be abused the least.I truly believe that if they are to be profitable, the focus needs to be shifted from trend following, buying when a fast ma crosses a slow ma, to being backwards and swing trading on fast price movements. The system needs to find minor pullbacks that will give the price action enough room to move up at a fast rate, so that once the fast MA catches up the price is already well ahead of both averages.CheersBrad
Hi Howard
I noticed you touched on moving average crossover systems in your book, and that they are backwards. Personally i have never come across a moving average crossover system that is profitable. This is a shame as most newcomers to system development and trading always seem to start with looking at MACD.. This may be why the systems are never profitable, because the amount of people using them is too much for the market and it can start to change.
I believe there is a good reason moving average crossover systems are backwards, and maybe a slight addition to your system could make it profitable. If you have a 116 and a 15 moving average, which you optimized for CAR (which i personally use as a yard stick), if the market is trending well enough, like it was from say 2003-2007, they 15day moving average will allow you to buy in pullbacks in part of a larger trend, as long as the price reverses and then rockets ahead of the 15day moving average, as seen in the image attached, a profit can be made.
*daily chart
*weekly chart
*monthly chart
There are some major simaliarites in all three of those charts, each one of them the price dips, and then rockets out of that dip before the moving average can catch up. Allowing us to swing trade - rather than following a trend.
I really don't believe that moving average systems will ever be profitable, simply because of the number of people who revert to it at the start of trading. The only sort of system that uses a moving average crossover will be a backwards one, because that is the type of system that over the years, will be abused the least.
I truly believe that if they are to be profitable, the focus needs to be shifted from trend following, buying when a fast ma crosses a slow ma, to being backwards and swing trading on fast price movements. The system needs to find minor pullbacks that will give the price action enough room to move up at a fast rate, so that once the fast MA catches up the price is already well ahead of both averages.
Cheers
Brad
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