Secret #2: Moving Average Crossover Works Best When You Trade Many Different Markets
It’s simple.
A moving average crossover works best during trending periods, so you trade more markets to capture more trends, which will make you more money.
Tada!
Now before I move on…
Many traders make a big mistake because they focus a lot on the parameter.
For example, if the 50 MA and 200 MA don’t work…
They’ll change the 50 MA to 35 and change the 200 MA to 189 MA.
Here’s the thing…
If you keep adjusting the parameters to make the strategy work, what you’re doing is what we call “curve fitting.”
It’s like trying to memorize the question and answers from last year’s examination papers!
But what happens when you take that same exam this year?
Would the answers that you memorized help you?
Unlikely.
Why?
Because you can be damn sure that the questions on that exam this year are different!
So, you see, when the questions change a little, you don’t know how to answer them.
It’s the same for curve fitting in trading.
Makes sense?
But alright.
Let’s say you don’t memorize the answer from last year’s exam paper.
Instead, you try to understand the concept behind those questions.
So when you take the exam paper this year, no matter how much they twist and turn the question, if you understand the concept…
You can be damn sure that you’ll be able to answer it.
This leads me to my next secret.
Secret #3: Focus on The Concept, Not the Parameters
When your trading strategy is not working, stop fine-tuning the parameters; focus on the concept.
Let me prove this to you right now.
Instead of going with the 50 MA and 200 MA, let’s say we go with the 17MA and 189 MA.
The Rules
- Go long when the 17 MA crosses above the 189 MA
- Go short when the 17 MA crosses below the 189 MA
- 3 ATR trailing stop loss
- 1% risk
The markets we’ll trade are still the same.
Markets (2000-2018)
- Gold, Copper, Silver, Palladium, Platinum
- S&P 500, EURJPY, EURUSD, USDMXN, GBPUSD
- US T-Bond, Euro Bobl, Euro Buxl, Euro BTP, 10-Year Canadian Bond
- Heating Oil, Wheat, Corn, Lumber, Sugar
Finally, the results.
The results (20 markets)
- Number of trades: 3,801
- Winning rate: 39.46%
- Annual return: 12.91%
As you can see, it still beats the market.
If you want to see the breakdown of the results, it’s over here:
Now…
You can change the parameters to any way you like.
But if you got the concept right, chances are your trading strategy will still make money.
But if you get the concept wrong, then you know it’s tough luck
Again, we use the same parameters using the 17 MA and 189 MA, but we trade the same three markets this time.
What do the results look like?
The results (3 markets)
- Number of trades: 580
- Winning rate: 40.00%
- Annual return: 1.33%%
Can you see the point that I’m trying to bring across?
With that said…
Let’s do a quick recap, shall we?
Conclusion
- Moving Average Crossover doesn’t work when you trade a few markets
- Moving Average Crossover works best when you trade many different markets
- Focus on the concept, not the parameters
That’s pretty much it!
Now here’s what I want to know…
Are you currently using a moving average cross-over strategy right now?
If so, what improvements you’ll make to your strategy after reading this training guide?
Let me know your thoughts in the comments below!
