Moving averages crossover strategy

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Торговая стратегия Fast EMA Crossover для бинарных опционов, скальпинга и дейтрединга

Торговая стратегия Fast EMA Crossover дает четкие и понятные сигналы для торговли бинарными опционами, а также для скальпинга и внутридневной торговли.

Торговая стратегия Fast EMA Crossover предназначена для торговли бинарными опционами, но также может использоваться для скальпинга и внутридневной торговли. В ее основе лежит пересечение скользящих средних ЕМА с использованием индикаторов Стохастик, ADX и Koral в качестве фильтров.

Входные параметры

  • Валютные пары: любые (для скальпинга – с низким спредом)
  • Время экспирации: 5 свечей для М1, 2-3 свечи для М5
  • Время торгов: любое
  • Риск-менеджмент: выбирайте такой объем опциона, чтобы риск был не более 2-5% от депозита на одну сделку

Используемые индикаторы

  • Coral (R period 20, LSMA period 20)
  • Support and Resistance Barry
  • Ultimate Trend signal (ADX 14)
  • E 60 (fast EMA 4, slow EMA 8)
  • Binary Stochastic (5, 5.5)

Установка индикаторов и шаблона системы

  • Распаковываем архив с шаблонами и индикаторами
  • Копируем индикаторы в папку MQL4 -> indicators
  • Шаблоны копируем в папку templates
  • Перезапускаем терминал
  • Открываем график нужной валютной пары
  • Устанавливаем шаблон с именем Fast EMA Crossover

График должен выглядеть так:

Шаблон торговой стратегии Fast EMA Crossover

Сигналы, указывающие на покупку опциона Call (открытие позиции на покупку)

  • появилась зеленая стрелка вверх;
  • появилась точка голубого цвета;
  • цвет скользящих средних сменился с красного на синий;
  • зеленая линия индикатора Binary Stochastic пересекла красную снизу вверх;
  • цена оттолкнулась вверх от уровня поддержки.

Пример покупки опциона Call (вход в позицию на покупку)

Сигналы, указывающие на покупку опциона Put (открытие позиции на продажу)

  • появилась красная стрелка вниз;
  • появилась точка красного цвета;
  • цвет скользящих средних сменился с синего на красный;
  • зеленая линия индикатора Binary Stochastic пересекла красную сверху вниз;
  • цена оттолкнулась вниз от уровня сопротивления.

Пример покупки опциона Put (вход в позицию на продажу)

Установка стоп-лосс и тейк-профит при скальпинге

  • стоп-лосс устанавливается выше/ниже предыдущего локального максимума или минимума;
  • тейк-профит устанавливается в минимальном соотношении 1 к 1 со стоп-лосс. Допускается закрытие позиции при пересечении уровня поддержки/сопротивления или появления сигнала в обратном направлении.

Перед использованием торговой стратегии Fast EMA Crossover для бинарных опционов, скальпинга и внутридневной торговли на реальном депозите, мы рекомендуем протестировать ее на демо-счете.

How to Use a Moving Average to Buy Stocks

The moving average (MA) is a simple technical analysis tool that smooths out price data by creating a constantly updated average price. The average is taken over a specific period of time, like 10 days, 20 minutes, 30 weeks or any time period the trader chooses. There are advantages to using a moving average in your trading, as well as options on what type of moving average to use. Moving average strategies are also popular and can be tailored to any time frame, suiting both long-term investors and short-term traders.

Key Takeaways

  • A moving average (MA) is a widely used technical indicator that smooths out price trends by filtering out the “noise” from random short-term price fluctuations.
  • Moving averages can be constructed in several different ways, and employ different numbers of days for the averaging interval.
  • The most common applications of moving averages are to identify trend direction and to determine support and resistance levels.
  • When asset prices cross over their moving averages, it may generate a trading signal for technical traders.
  • While moving averages are useful enough on their own, they also form the basis for other technical indicators such as the moving average convergence divergence (MACD).

Moving Average

Why Use a Moving Average

A moving average helps cut down the amount of “noise” on a price chart. Look at the direction of the moving average to get a basic idea of which way the price is moving. If it is angled up, the price is moving up (or was recently) overall; angled down, and the price is moving down overall; moving sideways, and the price is likely in a range.

A moving average can also act as support or resistance. In an uptrend, a 50-day, 100-day or 200-day moving average may act as a support level, as shown in the figure below. This is because the average acts like a floor (support), so the price bounces up off of it. In a downtrend, a moving average may act as resistance; like a ceiling, the price hits the level and then starts to drop again.

The price won’t always “respect” the moving average in this way. The price may run through it slightly or stop and reverse prior to reaching it.

As a general guideline, if the price is above a moving average, the trend is up. If the price is below a moving average, the trend is down. However, moving averages can have different lengths (discussed shortly), so one MA may indicate an uptrend while another MA indicates a downtrend.

Types of Moving Averages

A moving average can be calculated in different ways. A five-day simple moving average (SMA) adds up the five most recent daily closing prices and divides it by five to create a new average each day. Each average is connected to the next, creating the singular flowing line.

Another popular type of moving average is the exponential moving average (EMA). The calculation is more complex, as it applies more weighting to the most recent prices. If you plot a 50-day SMA and a 50-day EMA on the same chart, you’ll notice that the EMA reacts more quickly to price changes than the SMA does, due to the additional weighting on recent price data.

Charting software and trading platforms do the calculations, so no manual math is required to use a moving average.

One type of MA isn’t better than another. An EMA may work better in a stock or financial market for a time, and at other times, an SMA may work better. The time frame chosen for a moving average will also play a significant role in how effective it is (regardless of type).

Moving Average Length

Common moving average lengths are 10, 20, 50, 100 and 200. These lengths can be applied to any chart time frame (one minute, daily, weekly, etc.), depending on the trader’s time horizon.

The time frame or length you choose for a moving average, also called the “look back period,” can play a big role in how effective it is.

An MA with a short time frame will react much quicker to price changes than an MA with a long look back period. In the figure below, the 20-day moving average more closely tracks the actual price than the 100-day moving average does.

The 20-day may be of analytical benefit to a shorter-term trader since it follows the price more closely and therefore produces less “lag” than the longer-term moving average. A 100-day MA may be more beneficial to a longer-term trader.

Lag is the time it takes for a moving average to signal a potential reversal. Recall that, as a general guideline, when the price is above a moving average, the trend is considered up. So when the price drops below that moving average, it signals a potential reversal based on that MA. A 20-day moving average will provide many more “reversal” signals than a 100-day moving average.

A moving average can be any length: 15, 28, 89, etc. Adjusting the moving average so it provides more accurate signals on historical data may help create better future signals.

Trading Strategies – Crossovers

Crossovers are one of the main moving average strategies. The first type is a price crossover, which is when the price crosses above or below a moving average to signal a potential change in trend.

Another strategy is to apply two moving averages to a chart: one longer and one shorter. When the shorter-term MA crosses above the longer-term MA, it’s a buy signal, as it indicates that the trend is shifting up. This is known as a “golden cross.”

Meanwhile, when the shorter-term MA crosses below the longer-term MA, it’s a sell signal, as it indicates that the trend is shifting down. This is known as a “dead/death cross.”

MA Disadvantages

Moving averages are calculated based on historical data, and nothing about the calculation is predictive in nature. Therefore, results using moving averages can be random. At times, the market seems to respect MA support/resistance and trade signals, and at other times, it shows these indicators no respect.

One major problem is that, if the price action becomes choppy, the price may swing back and forth, generating multiple trend reversal or trade signals. When this occurs, it’s best to step aside or utilize another indicator to help clarify the trend. The same thing can occur with MA crossovers when the MAs get “tangled up” for a period of time, triggering multiple losing trades.

Moving averages work quite well in strong trending conditions but poorly in choppy or ranging conditions. Adjusting the time frame can remedy this problem temporarily, although at some point, these issues are likely to occur regardless of the time frame chosen for the moving average(s).

The Bottom Line

A moving average simplifies price data by smoothing it out and creating one flowing line. This makes seeing the trend easier. Exponential moving averages react quicker to price changes than simple moving averages. In some cases, this may be good, and in others, it may cause false signals. Moving averages with a shorter look back period (20 days, for example) will also respond quicker to price changes than an average with a longer look back period (200 days).

Moving average crossovers are a popular strategy for both entries and exits. MAs can also highlight areas of potential support or resistance. While this may appear predictive, moving averages are always based on historical data and simply show the average price over a certain time period.

Investing using moving average, or any technique requires an investment account with a stockbroker. Investopedia’s list of the best online brokers is a great place to start your research on the broker that fits your needs the most.

Moving Average Crossover

Understanding moving averages

Moving averages are one of the most commonly used technical indicators in the forex market. They have become a staple part of many trading strategies because they’re simple to use and apply. While they’ve been around for a long time, their ability to be easily measured, tested and applied makes them an ideal foundation for modern trading strategies which can incorporate both technical and fundamental analysis.

A moving average (MA) is a trend-following or lagging indicator because it is based on past prices.

The two main types of moving averages are:

  • Simple Moving Averages (SMA)
  • Exponential Moving Averages (EMA)

Both SMA and EMA are averages of a particular amount of data over a predetermined period of time. While Simple Moving Averages aren’t weighted towards any particular point in time, Exponential Moving Averages put greater emphasis on more recent data.

Let’s dig into Simple Moving Averages

Define: For example: A 10-day SMA is calculated by getting the closing price over the last ten days and dividing it by 10. When plotted on a chart, the SMA appears as a line which approximately follows price action – the shorter the time period of the SMA, the closer it will follow price action.

Using SMA Crossover to Develop a Trading Strategy

A popular trading strategy involves 4-period, 9-period and 18-period moving averages which helps to ascertain which direction the market is trending. We’ll focus on SMAs because they tend to indicate clearer signals and we’ll use it to determine entry and exit signals, as well as support and resistance levels.

Entry

A buy/sell signal is given when the 4-period SMA crosses over the 9-period SMA AND they both then cross over the 18-period SMA. Generally, the sharper the push from all moving averages the stronger the buy/sell signal is, unless it is following a substantial move higher or lower. Hence, if price action is wandering sideways and the 4-period and 8-period SMAs just drift over the 18-period, then the buy/sell signal is weak, in which case we keep an eye on price to ensure it remains below/above the 18-period SMA. Whereas if the first two moving averages shoot above/below the 18-period SMA with a purpose, then the buy/sell signal is stronger (in this case a confirmation of a strong upward/downward trend can come from an aggressive push higher/lower from the 18-period SMA).

Aggressive traders may enter the position if they see a strong crossover of the 4-period and the 9-period SMAs in anticipation of both crossing the 18-period SMA. We suggest ensuring that all moving averages are running in the direction of the break and that you keep a close eye on momentum. If momentum starts to dwindle early it can be an indication of a weak trend.

You should be aware of the overall trend by using medium-term and long-term timeframes. If the market is trending in either direction, then you should be watchful of retracements in the opposite direction.

Sometimes price action can retrace sharply which causes the 4-period and 9-period SMAs to cross over the 18-period quickly, but because it’s a retracement and not part of the overall trend, price action can run out of steam fairly quickly. A trend that is losing momentum will become evident sooner in the short-term SMAs.

This is where the strategy becomes more subjective – judge the strength of the trend and proceed accordingly. You can wait for the aforementioned moving averages to re-cross each other or you can use your own judgement to determine when to exit the position. In a strong trend you may choose to exit the trend when it starts to head in the wrong direction over a few time periods, as sharp pushes in either direction can be subject to retracements.

In weak trends we suggest utilizing trailing stops. In any case, a big warning sign is when the 4-period and 9-period SMA cross back over the 18-period SMA, especially if the trade isn’t working out as planned. It may be a good time to get out to prevent possible further losses.

Ideally a stop should be placed far enough away that it isn’t triggered prematurely but close enough to minimise losses. The goal of a stop is to attempt to protect you in case of a sharp spike in the wrong direction. In many cases the 4-period and 8-period SMAs will cross over the 18-period SMA before a stop is trigged, which should be an indicator to cut your losses.

Buy example: USDJPY 10-minute chart
Notice that there is a strong push higher in price action after the crossover and then are a few opportunities to exit the trade. It’s also interesting to note that when the 4-period and 8-period SMAs cross back under the 18-period SMA it is a very un-interesting crossover (price action and the SMAs are very flat), so it wouldn’t entice us to get short.

SMA Tips

  1. Shorter time frames tend to hug price action more closely than longer ones because they are focused more on recent prices
  2. Shorter time frames will be the first to react to a movement in price action
  3. Look at short and multiple time frames; for instance, look at both the 10 and 15 minute charts simultaneously.

Using Moving Average Cross-Over as strategy in cryptocurrency trading

Abstract

In trading, we often tend to rely upon over-complicated strategies that over promise gains and undermine risks. However, the key to find a balanced trading strategy is simplicity. In this article, we present a systematic back-testing of a well-known, simple yet profitable strategy called Moving Average Cross Over (MACO) in the trading of the top-18 cryptocurrencies. In our study, we screen for the best combination of short-term and long-term moving averages and we set the basis for a potentially automatic strategy. MACO with optimal parameters reports (a) more than 50% profit over investment in 10 out of 18 cryptocurrencies, (b) more than 100% USD return (no value loss) in 16 out of 18 cryptos and (c) better performance than “holding” in 17 out of 18 cases.

The MACO strategy

The moving average cross over trading strategy is fairly simple. We calculate two different moving averages (MA): one long and one short. The long one, or long-termed, represents the overall trend of the market: either bullish (when it goes up) or bearish (when it goes down). The short one, or short-termed, represents the more immediate price fluctuation and reacts quicker when the price changes. Now, when the fast MA crosses the slow MA we detect a potential change of trend. As traders, we can leverage the detected change of trend and buy when the trend becomes bullish, and sell when the trend becomes bearish. These concepts are represented in the following example for the BTC-USDT trading pair.

In the previous example, we buy when the fast MA goes over the slow MA (green area) and we sell when the fast MA goes under the slow MA (red area). So far so good.

MACO performance on successive trading windows

As we saw in the previous example, MACO is quite simple to apply in appearance. In practice is a little bit more complicated because we have to find a successful combination of lengths for the short and long moving averages. One way we can address this issue in retrospective is by trying all or a representative set of combinations and see which ones performed better on past data (a.k.a. back-testing).

There are different ways to assess the performance of each short/long MA combination. For this analysis, we have decided to take windows of 20 days (20*6 candles of 4h) and moving them along the time axis in jumps of 4 days (4*6 candles of 4h). For each window, we calculated:

(a) The return over investment following the aforementioned MACO strategy to buy and sell according to the cross-overs and the cross-unders, respectively.

(b) The return over investment by following a “holding” strategy, i.e. buying at the beginning of the window and selling in the end of the window.

The ratio between the two (MACO/holding) was computed for each window and for each combination of long-term MA (20, 30, 40, 50, 60, 70 candles of 4h) and and short-term MA (1, 2, 3, 4, 5, 6, 7, 8, 9 candles of 4h). The results for the BTC-USDT pair look like this:

The lines/simulations that go over 1 mean that MACO strategy was, for instance, 1.2 (20%) more profitable than just holding for that particular window. The legend on the right show all combinations of long/short MA (first parenthesis). The price of BTC is shown as reference.

Although all combinations of long/short MA seem to follow a similar pattern, there are clearly some winners and some losers. In order to discriminate the best strategy, we have calculated the area under the curve (AUC) above 1 (positive AUC) and the area under the curve below 1 (negative AUC). Finally, the profitability of a specific combination of MAs can be calculated as:

Total_AUC = MA _positive – MA_ negative

A positive total AUC means that following the MACO strategy is better than holding on average. The winner combination of short/long MA with maximum total AUC is depicted in red. Individual total AUCs can be found on the legend.

Two final remarks. First, notice that each simulation or predicted return has an associated error bar. This is because, to make it more realistic, once the strategy tells us to buy or sell, we use a random price comprised between the open and close of the following candle. Additionally, for each buy/sell action we take into account a 0.1% commission.

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Second, notice that no combination is particularly profitable during exponential growths such as the one that BTC experienced in late 2020. In these situations, holding is clearly the best strategy to follow. Notice, however, that when markets enter a side-ways or bearish trend, trading becomes a handy tool to maximize profits by hedging on downtrends. This becomes even more evident in the following plots shown in this article.

Screening profitable MACO long/short combinations among the top-18 cryptocurrencies

In this final analysis, we applied the techniques explained in the previous sections to the top 18 cryptocurrencies by volume in the Binance cryptocurrency exchange. In particular, we ran the previous analysis to detect the best and worst long/short MA combination and we ran 1000 different simulations following the MACO strategy to buy and sell cryptocurrency during the duration of one year using 4h candlesticks. These are the results:

From the plots we can conclude that MACO with optimal parameters yield:

(a) more than 50% profit over investment in 10 out of 18 cryptocurrencies,

(b) more than 100% USD return (no value loss) in 16 out of 18 cryptos (this means that trading is good to hedge funds in downtrends) and

(c) better performance than “holding” in 17 out of 18 cases.

Finally, the best performing cryptocurrency pair has been the ZRXBTC pair with over 800% on returns. Interestingly, the top 3 cryptocurrencies were also particularly profitable.

Conclusions and personal opinion

  • Moving average cross over is a simple yet profitable strategy to follow.
  • Using back-testing to see which was the profitable combination of long/short MA gives us a good idea on what worked in the past and what could work in the future, but with little guarantee.
  • MACO strategy can be used to trade cryptocurrencies but would probably work optimally when in combination to other indicators. I personally use price action as confirming indicator.
  • MACO seems to work quite well for the current top 3 cryptocurrencies (BTC, ETH, XRP).
  • Trading with a solid strategy in hand is a good practice in all occasions except during meteoric and parabolic growths.
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