StockFetcher Forums · General Discussion · Crossover Backtesting Study of 10/40 Weekly Plus More<< >>Post Follow-up
Dylan
27 posts
msg #103446
Ignore Dylan
modified
11/23/2011 9:47:17 AM

I wanted to validate using the 10/40 weekly crossover with a 3 week delay to define a bull or bear trend. So, I built a little spreadsheet that compared using several crossover entry and exit points. For my testing, I used the following:

SPX Daily Data from 1930-2011
I tested the following crossovers:

10/30 EMA using entry and exit points at 1 day, 5 days, 10 days, and 15 days
10/40 EMA using entry and exit points at 1 day, 5 days, 10 days, and 15 days
20/40 EMA using entry and exit points at 1 day, 5 days, 10 days, and 15 days
25/150 EMA (5/30 week) using entry and exit points at 1 day, 5 days, 10 days, and 15 days
50/200 EMA (10/40 week) using entry and exit points at 1 day, 5 days, 10 days, and 15 days
25/150 EMA using an entry point on the first day after the crossover and exiting after 15 days
50/200 EMA using an entry point on the first day after the crossover and exiting after 15 days

Here is a summary of my results:

Don't use the 10/30, 10/40, or 20/40 to determine a trend. They all underperformed buy and hold. Whipsaw City!
The top crossover methods were

50/200 EMA wait 15 days
25/150 EMA wait 15 days
50/200 EMA entry at 0 days exit at 15 days
Each strategy above outperformed buy and hold by about 44%.
The top 3 above were all within 5 points of each other. Yes, I said 5 points. That's a 5 point difference of 3 different entry and exit signals on a move of over 1000 points in 80 years on the SPX. What does this mean? Flip a coin and choose one, but be consistent.
These results are 100% mechanical and better entry and exit decisions could have been made. I did some spot checking and saw where the system gets you out of a move after it's been rising for 2 straight weeks.

I tried attaching the Excel sheets to this post, but it does not seem possible.




Eman93
4,659 posts
msg #103459
Ignore Eman93
modified
11/24/2011 10:01:52 PM

Nice work..

I tend to have the 13 20 34 and 50 sma on my charts.

On TOS charts you can plot the Daily SMA on any time frame chart.. Its really eye opening the power of the 20 and 50.

When you get at 13 34 cross it will usually bounce back in the opposite direction of the cross. hence you have a wait of 15 days.

At this point you should start to think about where you want to enter a short trade.. pick some price points off of former support or other moving averages.. like the 20 sma.


Eman93
4,659 posts
msg #103460
Ignore Eman93
11/24/2011 10:37:47 PM

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saico
55 posts
msg #103465
Ignore saico
11/25/2011 11:35:50 AM

Dylan,

by waiting 15 days you mean after the cross you wait 15 days, then you enter the trade in the direction of the cross and if the ma's cross back you wait again to exit the position and enter the next trade into the new direction?

Thanks
Saico

Dylan
27 posts
msg #103469
Ignore Dylan
modified
11/25/2011 5:17:14 PM

Dylan,

by waiting 15 days you mean after the cross you wait 15 days, then you enter the trade in the direction of the cross and if the ma's cross back you wait again to exit the position and enter the next trade into the new direction?

Thanks
Saico

Eman93 is right about the crossover and having to wait 15 days.

Correct! The backtesting revealed it was better to exit 15 days after you get the crossover. I did some spot checking as to why this would be. I found that you will almost always get a retracement bounce right at the cross or 10-15 days after the cross. Exiting 15 days after the cross seems to work better simply because the market has to breath before continuing down or it consolidates before resuming the bull trend. Either way, waiting 15 days is often better than getting out right as the market is tumbling. This of course is easy to say, but would be extremely difficult to put into practice when the market is crashing.



Eman93
4,659 posts
msg #103531
Ignore Eman93
modified
11/30/2011 1:17:39 AM

This is great data and proves a simple cross over method works.. it defines the trend and the trend is always your friend.

What helps in trading this method is also knowing where is support and resistance? Trading is not about the when, Trading is all about the where.




blumberg
27 posts
msg #103675
Ignore blumberg
12/7/2011 11:56:17 PM

Great work, thanks for sharing. Have you tried 50/200 EMA entry at 0 days and exit on a retest of the 200 EMA?

Dylan
27 posts
msg #103686
Ignore Dylan
12/8/2011 10:37:27 AM

No I have not. If you want to test different tickers, all you have to do is download the data from yahoo, copy it into a new worksheet, calculate the EMA (use the formual in the existing xls), change the values in the VBA code to indicate which crossover column and days delay you want to test. Then, run the code.

Here is the link to the test results:

https://docs.google.com/open?id=0B8robyfcaZMqNTM2ZGZmZmEtM2JkMS00ZjNjLTg5MDMtZjlhOTNmNTdmZjkw

- Thx


Brassear
8 posts
msg #103747
Ignore Brassear
12/13/2011 7:18:12 PM

>>25/150 EMA wait 15 days

Does not surprise me as Stan Weinstein's book relies heavily on the 30 week weighted MA. That book was written in 1988 and is still considered a landmark work on TA.

There's nothing new under the sun.

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