Three Moving Average Crossovers for Trend Signals and Risk Exits
Summary
This trend following method combines short, medium, and long moving averages. It enters long when the short average crosses above the medium average while the medium average is above the long average; the reverse alignment and cross trigger a short signal. The averages can use several calculation types and independent price sources, with the example defaults set to lengths of 5, 20, and 100.
Optional percentage stop and profit levels close an open trade when the closing price reaches either threshold. The document recommends tuning periods and adding filters, but reports no performance results. Its backtest configuration uses BTC/USDT futures over a short January 2024 interval, while leaving the stop and profit levels disabled by default. Moving average crossovers can lag and produce false signals during sideways markets, and parameter selection or added filters would need independent testing; the stated risk controls do not establish profitability.
Key ideas
- A long signal requires the short average to cross above the medium average while the medium average is above the long average.
- A short signal uses the inverse crossover and average alignment.
- The strategy supports seven moving average types and separate price sources for each period.
- Percentage based stop and profit exits are optional and are off at the listed defaults.
- Sideways conditions and parameter choices can lead to false signals or unsuitable trading frequency.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.