12/17/2023 0 Comments Bet ema moving average crossoverWhile it does not produce returns any where near as good as the best FRAMA, it certainly out performs the traditional Golden Cross of 50 / 200. The profile of the trades produced by the true Golden Cross have many very desirable features a significant average trade duration (94 days), a high probability of profit (45%) and solid returns across the board (even on the difficult, bear savaged Nikkei 225). Reality is very different from the 50/200 SMA Golden Cross that someone made up once upon a time and that is why we must test everything. There is a zone of dark green on the grid above but the very best from our tests, the True Golden Cross has a slow EMA of 48.5 and a fast EMA of 13. So what is the “True Golden Cross” that proved the best returns during our tests? In other words you are better to use daily data and EOD signals on a Moving Average Crossover Strategy.Īfter getting a better idea of the ‘sweet’ spot from our first round of testing, we refined our range and instead of continuing with ratios of fast and slow EMA crossovers, we progressed in a liner fashion. When we used EOW signals the returns dropped by 0.5% on average while the trade duration increased by just 10 days and the probability of profit increased by only 2%. What about Weekly data you ask? We didn’t test with Weekly data but we did test using End Of Week (EOW) signals on Daily data ( previous tests on the EMA revealed that the two produce almost identical results). Daily vs Weekly Moving Average Golden Cross Based on these results we will run more refined tests on fast moving averages in the range of 8 – 17 and slow moving averages 20 – 56. The best returns came from an fast EMA of 10 days with a slow EMA of 50 (ratio of 5 because 10 * 5 = 50). But “technical analysis doesn’t work” they say.īelow are the all the individual Annualized returns from the EMA chart above: Further more it should be noted that every single EMA combination tested (and most SMAs) outperformed the buy and hold annualized return of 6.32% ^ during the test period (before allowing for transaction costs and slippage). This unequivocally confirms that the EMA is superior to the SMA. As you can see the EMA outperforms the SMA by well over a percentage point on average. The chart above fades between the results from the EMA and the SMA crossover tests. If the same proves to be true with the ‘Golden Moving Average Crossover’ then this will further validate the EMA as being of higher-caliber than the SMA. Exponential we revealed that the Exponential Moving Average (EMA) was superior to the Simple Moving Average (SMA). In our original MA test Moving Averages – Simple vs. Simple vs Exponential Moving Average Crossover Hopefully by using this tactic we can identify the multiples or ratios that deserve more targeted testing. The tests against a FC of 50 had a multiple as low as 1.2… (50 * 1.2 = 60) and as high as 6… (50 * 6 = 300). e.g The traditional Golden Cross with a SC of 50 and a FC of 200 has a multiple of 4 (because 50 * 4 = 200). So each of the ten FC settings were tested against twenty five SC settings based on a multiple of the FC. To cast our testing range wide but intelligently we have used progressions of a ratio slow/fast MA:įast Moving Averages (FC) = 5, 10, 15, 20, 25, 30, 35, 40, 45, 50 There are endless combinations of moving averages that we could test in search of the best. Daily vs Weekly Moving Average Golden Cross.Simple vs Exponential Moving Average Crossover.Golden Cross, Moving Average Crossover – Test Results: Michael Stokes over at MarketSci has also written a great series on Trading The Golden Cross.ĭownload A FREE Spreadsheet With Data, ChartsĪnd Results For all 1750 Moving Average Crossovers Tested We have done the hard work and you get the benefits for free… aren’t you lucky. In order to answer these questions we applied some brute mathematical force and tested 1750 different combinations through 300 years of data across 16 different global markets ~. One has to ask, which is better, a SMA Golden Cross or an EMA Golden Cross? Are the settings of 50 & 200 really the best? What is the profile of the trades that this strategy generates as far as duration, probability of profit, draw downs etc. It is not wise however to risk your money in the market on the assumption that such a theory is true. When the shorter term average moves above the longer term average this is seen by many as the beginning of a sustained bullish period and vise versa. The Golden Cross typically referrers to the crossing of the 50 and 200 Day Simple Moving Averages.
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