Best Moving Average Crossover Trading Strategy? (for swing trading mostly) with David Moadel
hello friends and welcome to looking at the markets with David Modell want to
talk about moving average crossover strategies where you have two moving
averages on the chart and this is mainly for swing traders but you could also
apply this to day trading if you can make some adjustments all right so let's
say you like to use a moving average crossover strategy it's very popular you
put up a faster moving average and a slower moving average and you can buy
when the faster moving average crosses above the slower moving average and then
you can hold on to it and then don't sell until the faster moving average
crosses below the slower moving average that's your basic moving average
crossover strategy but what two moving averages do you use should you use
simple or exponential and what two numbers what to look back periods all
right so this is an article and I'll put the link to this article in the
description below this video in case you want to read it and it is not the 50 and
the 200-day moving average okay there was a study that they did according to
this article and supposedly according to the study in this article the the good
old fashioned 50 moving average and 200 period moving average is not the best
combination it might be one of the most popular combinations but supposedly
according to this study it's not the best one alright so and this is from
Yahoo Finance and Ben Zynga wanted to give them credit alright so here's the
50 and 200 and okay not the best supposedly according to this study
alright so and they talked about the 50 and the 200 so they used in this study
here 300 years worth of daily and weekly data from 16 different global indices to
determine which two moving averages would have produced the largest gains
for / trades so they crunched a lot of years
worth of data here and so I have to give them credit for that alright and also I
want to give credit to whoever did this study it is from ETF HQ ETF HQ
all right they conducted the study and all right first of all this is
interesting et fhq found that exponential moving
averages EMAS performed better overall than s mas simple moving averages so I
thought that's interesting okay I found them to be pretty similar in performance
maybe for day traders there's more of a marked difference between the EMAs and
the SMAS but for long-term and swing trading and that kind of thing I found
them to be pretty similar most of the time but hey they crunched the numbers
and they found that EMAS are generally overall better than SMAS okay so which
to emas did they choose as the best ones there it is
among short and long term EMAS they discovered that trading the crossovers
of the 13 day and the 48.5 day averages produced the largest returns so the 13
day EMA and the 48 and a half or 48.5 day EMA that's the big winner according
to this study here if you can even have put 48 and a half day the moving average
on your chart if your charting software allows for that if not then you'll just
have to put 48 or 49 I suppose alright so and they put a little chart here the
pink line that this represents three different strategies and the performance
of it over a period of years the pink line that's the 13 and 48.5
moving EMA moving average crossover that they found to be the best and you can
see it performed the best and then the second-best is the 50 and the 200 the
good old classic they're moving EAM a moving average crossover strategy
and then the one that did the worst out of the three strategies here the one
that did the worst is the blue line here dark blue which is just buy and hold of
the index all right so supposedly that one did the best so
let's see what that looks like all right so I just went to
stockcharts.com and I entered s py the daily candlestick chart for the this is
a fund in ETF that tracks the S&P 500 and first I I put in the 50 and the 200
ma s this is a 50 the faster-moving one and this is the slower-moving one the
200 day they exponential moving average and there's been looks like the makings
of a correction here some seriously big red candles here so you'd think this
would take you out you know yeah because if if you had a profited all the way up
this would be a great time to take profits so you don't lose it all right
but this with this 50 and 200 you know you're waiting for the death cross right
the good old death cross where the 50 crosses below the 200 but the 50 moves
so slowly I mean it barely even turned around here you've got some serious
bleeding in the markets and you want to be taken out but this isn't even close
the 50 and the 200 are still way far apart therefore it's possible for a lot
more red a lot more bleeding to occur you could lose a lot of money before
this one finally crosses below that one so maybe it's not that great all right
the 50 and the 200 so let's see what they recommend stockcharts.com I I don't
think I was able to put in the 48 and a half I tried it and it just did 48 so
that's fine so I put in the 13 and the 48 and look at that as soon as trouble
started it took you right out that 13 crossed below the 48 BAM alright so you
know it crossed above here and you would have enjoyed all this raw it almost
cross but didn't so you would have enjoyed all this right up here and then
as soon as these big red consecutive big red candles happened you want to be
taken out so you don't have to end up down here practically starting all over
losing months of gains as soon as trouble started BAM you're out so it
makes sense at least in this one example okay because you want to be taken out as
soon as real trouble starts as soon as you get those consecutive big red
candles a good moving average system should take you out so you can lock in
those profits early that you enjoyed and that you spent so much time gaining it
you know they say stairs up elevator down right okay so there it is according
to this article check the link in the description below this video if you want
to read the whole article but I gave you the gist of it you could try it out see
if you like it as a swing trader maybe try it as a day trader uh you might like
it alright but make your own decisions
don't do something just because an article told you to do it or just
because I told you where anybody told you alright
cool you like this video hey give it a thumbs up why not and leave a comment
what do you think of this strategy or what are your favorite moving averages
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gmail.com is my email address if you want more assistance with this thank you
so much I'll talk to you again soon
you