Next-Day Equity Rotation Using a 5-Day/10-Day Moving Average Filter

Summary

This short-term strategy selects stocks whose five-day average price is above their ten-day average, optionally applying market-index and company-size screens and excluding illiquid names. It buys the qualifying names, sells them the following day regardless of price movement, then repeats the screen. The broader market trend acts as a gate: when conditions are judged unfavorable, the strategy closes positions and stops opening new ones.

The document claims annual profit can exceed 100%, but supplies no test setup, data, costs, risk measures, or supporting results. It says smaller market-cap stocks performed better in its tests, while noting that this screen does not apply to digital currency pairs. The method is presented as adaptable to crypto markets, with Bitcoin as a possible market benchmark, but no crypto-specific evidence is provided. Short holding periods, turnover, liquidity, market-regime judgment, and the unspecified index rules could materially affect results.

Key ideas

• The strategy selects assets when the five-day average price exceeds the ten-day average.
• Qualifying positions are sold the next day regardless of whether they rose or fell.
• A market-index trend filter can prevent new entries and trigger position closure in unfavorable conditions.
• The document reports better performance from smaller-cap stocks in its tests but gives no supporting test details.
• Applying the idea to crypto pairs is suggested, but no results for that market are shown.

Tags

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