Moving Average Crossovers Filtered by Stochastic Extremes

Summary

This stock strategy pairs a 5-day and 20-day simple moving average crossover with the Stochastic oscillator. It proposes a long entry when the fast average crosses above the slow average while %K is below 20, and a short entry when the fast average crosses below the slow average while %K is above 80. The oscillator uses a 14-period lookback with smoothing settings of 3 for %K and %D. The combination aims to align a directional crossover with an extreme oscillator reading.

The prose describes a 1% profit target after buying and a 1% stop after selling, but the provided source code does not clearly implement those exits as described; its profit parameter calculations and opposite-condition entries warrant careful review before use. Published test settings instead specify BTC/USDT futures on five-minute bars over a short January 2024 interval, which does not match the stock framing. No backtest performance is given, so claims of robustness or suitability are unsupported by reported evidence. The document identifies ranging markets and news-driven moves as risks.

Key ideas

• A 5-day and 20-day SMA crossover provides the directional signal.
• The Stochastic %K must be below 20 for a long setup and above 80 for a short setup.
• The oscillator is configured with a 14-period lookback and smoothing values of 3.
• The prose and source code differ on exit behavior, so the implementation needs review.
• Published backtest settings use BTC/USDT futures rather than stocks and provide no results.

Tags

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