Using Moving Average Signals to Time Entries in a Reversing Strategy

Summary

This article addresses a weakness in a reversing strategy: results may depend heavily on the exact time a trader begins a trade chain. It proposes using a moving average to choose both entry direction and timing. The direction follows whether the average is rising or falling, while an additional condition, such as a prior bar crossing the average, can restrict entries. The author compares this approach with immediate entries and with conventional moving-average trading without reversals.

The reported tests cover selected stocks across two brokers, plus an index and a commodity; the supplied excerpt includes detailed results for the first broker’s stock symbols. Outcomes vary by symbol: moving-average filtering improves some reported measures, while others decline, and trade frequency generally changes. The article describes historical strategy-tester results, not evidence of live performance, and the excerpt omits most market tables and charts. Broker-specific swaps and other trading conditions also differ, so the results do not establish a broadly reliable edge or resolve sensitivity to entry timing in all markets.

Key ideas

• The author argues that arbitrary entry timing can make a reversing strategy’s outcomes highly variable.
• A moving average can select long or short direction based on its slope.
• A bar crossing condition can further limit when a new trade chain begins.
• Tests compare immediate reversing entries, moving-average-filtered reversals, and moving-average trading without reversals.
• Results vary across symbols and brokers, so historical comparisons do not guarantee live performance.

Tags

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