Moving Averages and Dual-Crossover Futures Strategies
Summary
The document explains moving averages as averages of recent closing prices and introduces Granville’s eight buy and sell signals. These compare price with a moving average, using line crossings, direction, and distance from the average to suggest entries or exits. It then describes a dual moving average strategy: a shorter-period average crossing above a longer one is treated as a bullish signal, while a downward crossing is treated as bearish.
The discussion identifies lag as a central limitation because signals may arrive after a move has begun. It suggests weighting recent prices more heavily or changing the averaging period as possible adjustments. The strategy also depends on period selection: averages that are too close together may cross frequently and generate costly trades, while widely separated averages may produce late or infrequent signals. The document provides conceptual rules and an illustrative average calculation, but no performance tests or evidence that any particular periods work reliably. It is framed around futures, though parts of the explanation refer broadly to security prices.
Key ideas
- A moving average smooths recent closing prices to help identify price direction.
- Granville-style signals use price position, moving-average direction, and distance to suggest potential entries and exits.
- A dual moving average strategy treats an upward short-average crossover as bullish and a downward crossover as bearish.
- Moving-average signals lag price changes, so they may arrive after a trend has already advanced.
- The distance between averaging periods affects signal frequency and timing, and unsuitable choices can lead to excessive or delayed trades.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.