A Five and Ten Day Moving Average Crossover Strategy

Summary

This document explains a simple trend-following rule using five-day and ten-day moving averages of closing prices. It buys at the next session's open when the shorter average is above the longer average, then sells at the next open when the shorter average falls below the longer average. For a portfolio of stocks, it describes forming buy, sell, and rebalance lists, assigning equal capital weights to qualifying holdings, and accounting for transaction fees and slippage in a simulated backtest.

The text focuses on implementation steps: selecting a stock universe and date range, deriving signals, handling missing observations, and executing the resulting orders. It presents no performance statistics, benchmark, or comparison across markets or periods, so it does not establish whether the crossover is profitable. The rule can also generate delayed entries and exits and may be vulnerable to whipsaws in sideways markets; outcomes will depend on the universe, costs, and backtest assumptions. Repeated passages add little beyond the core specification.

Key ideas

• The strategy buys when the five-day closing-price average exceeds the ten-day average and sells when it falls below it.
• Signals are executed at the following session's open.
• For multiple stocks, qualifying positions are allocated equal capital weights, with fees and slippage included in simulation.
• The source provides no results to establish profitability or robustness.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.