Multi-Period Moving Average Crossover Trend-Following Strategy

Summary

This strategy uses four moving averages, with default periods of 20, 50, 100, and 200, to identify medium- to long-term trends. It enters long when the shortest average crosses above the next-shortest and the close is above the longest average. It enters short on the opposite crossover when the close is below the longest average. The remaining average provides chart context but is not part of the stated entry rules. Positions can close on an opposing crossover or when price crosses the entry-bar low for a long or high for a short.

The document explains the rationale for combining a responsive crossover with a longer-term trend filter, and flags lag, whipsaws in sideways markets, parameter sensitivity, and stops that may be too tight. It proposes volatility-based stops, trend-strength and volume filters, and adaptive parameters as possible refinements. It supplies rules and code, but no performance results; the method relies on price and moving averages and would need testing across instruments and market conditions.

Key ideas

• A short moving average crossing a medium moving average generates a signal only when price also agrees with the long-term average.
• The default moving-average periods are 20, 50, 100, and 200, and the averages can use several calculation types.
• The stated stop is the entry bar's low for a long position or high for a short position.
• Lag and repeated crossovers in ranging markets can cause delayed entries, premature exits, and losses.
• The document suggests volatility-aware stops and trend filters, but provides no backtest performance evidence.

Tags

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