A Test To Find The Best Moving Average Sell Strategy




In order to develop or refine our trading systems and algorithms, our traders often conduct experiments, tests, optimizations, and so on. One of our traders tested a variety of moving average-based sell strategies and we are now sharing some of those findings. Richard Donchian popularized the system in which a sale occurs if the 5-day moving average crosses below the 20-day moving average. R.C. Allen popularized the system in which a sale occurs if the 9-day moving average crosses below the 18-day moving average. Some traders feel they give up less of the gains they achieve if they use a shorter long moving average. These people prefer to sell if the 5-day moving average crosses below the 10-day moving average. Traders have used variations on these ideas (some touting the benefits of one variation and others touting the benefits of another). A friend told me about the crossover of the 7-day and 13-day exponential moving averages. Because that system was highly recommended, it was included in the tests for comparison purposes. The strategies covered in this particular series of tests were as follows and all involved simple moving averages except where otherwise noted. Sell if the stock's 9-day average crosses below its 18-day average,Sell if the stock's 10-day average crosses below its 18-day average,Sell if the stock's 10-day average crosses below its 19-day average,Sell if the stock's 9-day average crosses below its 19-day average,Sell if the stock's 9-day average crosses below its 20-day average,Sell if the stock's 10-day average crosses below its 20-day average,Sell if the stock's 4-day average crosses below its 18-day average,Sell if the stock's 5-day average crosses below its 18-day average,Sell if the stock's 4-day average crosses below its 20-day average,Sell if the stock's 5-day average crosses below its 20-day average,Sell if the stock's 5-day average crosses below its 9-day average,Sell if the stock's 4-day average crosses below its 9-day average,Sell if the stock's 4-day average crosses below its 10-day average, Sell if the stock's 5-day average crosses below its 10-day average, Sell if the stock's 7-day average crosses below its 13-day average (exponential),Sell if the stock's 7-day average crosses below its 14-day average (exponential).We wanted to avoid "curve-fitting." That is, we wanted to test these strategies over a wide range of stocks representing a variety of industries and market sectors. Also, we wanted to test over a variety of market conditions. Therefore, we tested the strategies on each of about 3000 stocks over a period of about 9 years (or over the period during which the stock has traded if it has traded for less than 9 years), factoring in commissions but not "slippage." Slippage results when the sell order is for $30 but the price at which the sale is executed is $29.99. In this case, the slippage would be one penny a share. The same "buy" strategy was consistently used for each test. The only variable was the rule for selling. For each strategy, we totaled the returns on all stocks. We performed a total of 47,312 tests. The idea behind this experiment was to find out which of these sell disciplines achieved the best results most of the time for most stocks. Remember that the profitability of a system that is applied to a single stock (even if this is repeated for 3000 stocks as in our test) does not paint the whole picture. Profitability per unit of time invested is a better way to compare systems. In designing this test, our stockdisciplines.com trader required that each system had to wait for a new buy signal in the particular stock being tested. In real life, a trader could jump to another stock immediately after a sale. Therefore the trader would have little or no "dead time" while waiting to make the next purchase. A system that is less profitable when trading a single stock but that exits a position earlier could therefore generate greater profits over a year by enabling a person to reinvest in a different security as soon as the first one is sold. On the other hand, it would be a poorer performer if it had to wait for the next buy signal on the same stock while another slower system was still holding and making money.The various sell systems were arranged in order of their profitability. We set up a table in which the left column was the short moving average and the middle column was the long moving average. The sell signals were generated when the short average crossed below the long average. The right column was the total profitability for all stocks tested. However, the key item of comparison was not the actual magnitude of gain for each sell system. This would vary considerably with different "buy" and "sell" system combinations. We were not testing for the profitability of any complete system, but for the relative merit of the various "sell" systems in isolation from their respective optimum "buy" disciplines. The main points can be briefly stated as follows. Any one of these systems may be the most profitable when trading a particular stock at a particular time. However, this experiment has shown to our satisfaction that selling when the 9-day moving average crossed below the 18-day moving average was generally not as profitable as selling when the 10-day moving average crossed below the 20-day moving average. Donchian's 5-day moving average cross of the 20-day average was also generally more profitable than the 9-day average cross of the 18-day average. All tests were identical. The only variable was the combination of moving averages selected for the selling system. This study supports the notion that a triple moving average system based on the 5-, 10-, and 20-day moving averages is likely to be more profitable than the similar 4-, 9-, 18-day moving average combination. It has the additional advantage of enabling us to monitor the crossing of the 5-day moving average with the 20-day moving average. The latter is Donchian's system, and it is a strong system in its own right. It also gives earlier signals than either the 9-18 or the 10-20 combinations, though the 10-20 combination tends to generate higher average returns. Therefore, including the 5-, 10-, and 20-day moving averages on our charts gives us an additional option. We can use the 5-, 10-, and 20-day triple moving average system or we can use Donchian's 5-, 20-day dual moving average system. If the stock pattern does not look or "feel" right to us, the 5-day moving average cross will give us an earlier exit. Otherwise, we can wait for the 10-20 crossover. Either will likely give a more profitable signal than the 9-, 18-day combination. The decision of which to use can be based on separate considerations related to stock behavior.Copyright 2009, by Stock Disciplines, LLC. a.k.a. StockDisciplines.com--Dr. Winton Felt has stock alerts, free tutorials, and market reviews at http://www.stockdisciplines.com Information and videos on volatility-adjusted stop losses are at http://www.stockdisciplines.com/stop-losses Information and videos on pre-surge "setups" and stock alerts are also provided.Source: http://www.articletrader.com
Photobucket

Related Posts :



29 comments:

an Expert Rohman said...

Hiii fiend nice personal blog heee,beautifull girl on your template???wanna exchange link???

Anonymous said...

waschtrockner test
My family members always say that I am killing my time here at web, but I know I am
getting experience daily by reading such pleasant articles or
reviews. waschtrockner test

my web page :: hedonistisch Ede (dont-wanna-be-right.tumblr.com)

Anonymous said...

Très sympa cet article. Est-ce que vous êtes sur Google+
? J'aimerais vous suivre pour ne pas rater les prochains.


my page ... Auvairniton Bourgrire Certification

Anonymous said...

I'm not sure where you are getting your information, but
great topic. I needs to spend some time learning more or
understanding more. Thanks for excellent info I was looking for this info for my mission.

Here is my web-site; The Simpsons Tapped Out Cheats

Anonymous said...

Hi, i think that i saw you visited my blog so i came to “return the favor”.I'm attempting to
find things to improve my web site!I suppose its ok to use a few of your ideas!!


Also visit my web-site - male muscle Growth fiction

Anonymous said...

Avec Sound & Shot, vous enregistrez le son en même temps que
vous prenez la photo afin de transmettre l'histoire liée à un second précis.

Panorama Shot, quant à lui, permet de capturer plusieurs pictures afin d'être
ensuite associées ensemble pour un level de vue extremely grand-angle.
Et enfin, Story Album qui permet d'organiser vos pictures et de créer des albums en tenant compte de l'historique, du
lieu et des événements afin que les pictures retracent l'histoire de votre vie.
Pour en profiter, route PriceMinister après minuit , et n'oubliez pas
d'entrer le code FFJUI2013 pour bénéficier du tarif le plus bas du marché
(frais de port inclus).

Have a look at my webpage comparer prix s4 mini
[www.comparerprixs4mini.sitew.fr]

Anonymous said...

Howdy! I know this is kinda off topic but I was wondering which blog platform are you using
for this website? I'm getting tired of Wordpress because I've had issues with hackers
and I'm looking at options for another platform. I would be awesome
if you could point me in the direction of a good platform.

My webpage ... goji berry, youtube.com,

Anonymous said...

Write more, thats all I have to say. Literally, it seems as though you relied on the video to make
your point. You clearly know what youre talking about, why throw
away your intelligence on just posting videos to your site
when you could be giving us something informative
to read?

Also visit my page: weight lifting forum

Anonymous said...

Excellent, what a blog it is! This weblog presents useful information to us, keep it up.


Also visit my blog post - Gary Neinstein (http://www.pinterest.com/judyneinstein/judy-neinstein/)

Anonymous said...

Hurrah, that's what I was looking for, what a
stuff! existing here at this webpage, thanks admin of this site.


my homepage umorisreview.net (feministing.com)

Anonymous said...

Hello just wanted to give you a quick heads up. The text in your
content seem to be running off the screen in Firefox. I'm not sure if this is
a format issue or something to do with web browser compatibility but
I thought I'd post to let you know. The style and design look great though!

Hope you get the issue resolved soon. Cheers

Feel free to visit my homepage: replica watches

Anonymous said...

Having read this I believed it was very informative.

I appreciate you taking the time and energy to put this short article together.

I once again find myself personally spending a significant amount of time both
reading and commenting. But so what, it was still worthwhile!


my homepage - shoe bites

Anonymous said...

Lawat leaf extracts are traditionally used in preventing
hair loss, promoting hair growth and releaving itchiness and skin inflammation. Zinc absorption and vitamin C intake could
be synergistic. By observing all the above tips when faced with the problem of hair loss Minneapolis citizens
should be able to contain avoidable hair breakages.

Here is my web page ... i grow hair device

Anonymous said...

Low-calorie diets may be a fast way to lose weight in the beginning, but they are unsustainable and unhealthy.
Do you know anyone who went on a crazy diet, lost weight and kept it
off. Once again, your physician knows best, and will be able to diagnose the
prostate cancer more efficiently than a number on a sheet will ever be able to do.



My site - hcg weight loss oklahoma city

Anonymous said...

Hi there, just became aware of your blog through Google,
and found that it's really informative. I am going to watch out for
brussels. I'll appreciate if you continue this in future.

Many people will be benefited from your writing. Cheers!



Stop by my webpage :: euston massage (hybridathleticsystems.com)

Anonymous said...

What's up to all, as I am truly keen of reading this
website's post to be updated regularly.
It consists of pleasant material.

my website bali escorts (http://Www.Sualcavab.com/14953/need-to-relax-try-a-wonderful-massage)

Anonymous said...

Every bit help they give out marrakech quad inc. you is worthwhile.
Furthermore, in a situation to have either a 7mm axle using bearing number 608.
The Shelter is 21 and up can also bring their badge to get in your face and the aroma of
the earth in your nose. 2 Inches in size on a QVGA screen and provides a better workout if your purpose is
fitness. Step 6 Setting up the DrivesThis is the crucial step.


my weblog - wiki2.ttdrussia.net []

Anonymous said...

I was suggested this blog by my cousin. I am not sure whether this post
is written by him as nobody else know such detailed about my trouble.
You're incredible! Thanks!

Also visit my web site make insane (Https://Delicious.com/)

Anonymous said...

Why visitors still use to read news papers when in this technological world
everything is accessible on net?

My website ... Chinese translator

Anonymous said...

Otherwise, hair may recede and erode further beyond your
transplant, requiring additional surgeries in the future, because male pattern baldness is a progressive condition of hair loss over time.

It conditions the scalp as well as nourishes and strengthens the hair follicles, stimulating the
growth of fuller, thicker, and healthier hair strands.

Buy hair care products online for a rich hair repair experience.


Visit my web page ... hair care products in uae

Anonymous said...

Yes! Finally something about Contract Wars cheats.

Also visit my site :: Contract Wars Hack (blogspot.com)

Anonymous said...

Magnifiсent goods from you, man. I havе havе iin mind your stuf prior tto and you're jսst tooo excellent.
I really like what you haѵe got here, ceгtainly like what you're
stating and the way by which үou are saying it.You
are mɑking it enjoyable and you stіll takе cɑгe of to
stay it sensible. I cant wait to leɑdn much more from yoս.
This is really a wonderful web site.

Also visit my homepage: maintenance flooring system

Anonymous said...

There is definately a lot to learn about this issue.

I like all the points you have made. http://worldofsensations.com/affiliate

My web blog :: pornstar movies

Anonymous said...

Billions of dollars are spent each year on testing internal
combustion engine the strength and durability.
On the outside of your car to someone that knows
a lot about them. The idea of the right car parts. That's our show You
can internal combustion engine also go for the used car parts.
Automobile manufacturers can thus make or break companies in our new maeket economy, how
companies like Google, Facebook, internal combustion engine
Twitter.

my web blog ... serwisy samochodowe (Http://www.wordpressforum.co.uk/)

Anonymous said...

Do you mind if I quote a couple of your posts as long as I provide credit
and sources back to your site? My blog is in the exact same area
of interest as yours and my visitors would genuinely benefit from some of the information you provide
here. Please let me know if this alright with you. Thanks!


My webpage ... adult halloween costume ideas

Anonymous said...

Spot on with this write-up, I seriously believe this web site needs a lot more
attention. I'll probably be returning to read through more, thanks for
the info!

Also visit my weblog - whatsapp pc

Anonymous said...

Boxer Technician's supplements are certainly created with particular functions
and it shows. Garcinia Cambogia complement is among the best-selling weight reduction services and products since 2003.
HCA is a derivative of citric acid and can be found in plant
species native to South Asia such as Garcinia cambogia, Garcinia indica, and
Garcinia atroviridis.

My weblog; eating healthy on the go

Anonymous said...

Today, I went to the beach front with my children. I found a sea shell and
gave it to my 4 year old daughter and said "You can hear the ocean if you put this to your ear." She placed the shell to her ear and screamed.
There was a hermit crab inside and it pinched her ear.
She never wants to go back! LoL I know this is totally off
topic but I had to tell someone!

Here is my web page ... vodafone customer services

Anonymous said...

Automotive professionals are revealing that the brand-new BMW X5 will add a third row
of seats to fit two even more travelers and also
to set apart the model from its a little smaller, but
also 5 guest capability X3 stable mate. Rates for the existing BMW X5 start at simply over $42,000 and
top out at greater than $70,000 with all options consisted of.
Principal rivals for the BMW X5 consist of the Mercedes M Course,
the Porsche Cayenne, and the Acura MDX.

My website :: bmw motorcycles san francisco

Post a Comment