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Cross Above 200 SMA on Average Volume Strategy

by Brian Brown, 3641 days ago
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After a backtest, this trading system generated an average annual gain of 22.79%. The strategy Sharpe ratio for all period (2001-2011) is 0.77 and only 24.02% of trades were winners. Among the 11 years tested, only four showed a small negative return.

Here are the trading system settings:
- Number of positions: 5
- Buy Rules:
- Liquidity rule: Price must be higher than $5 and the average traded volume during the last 5 periods must be higher than $100,000.
- Cross Test 1: Stock price is crossing above its 200-Bar simple moving average
- Cross Test 2: The previous cross must not have occurred during the last 300 bars (More than one year in a daily chart).
- Performance: The return of the stock for the last 10 trading days must be lower than 50%. This allows the trading system to ignore stocks that had a recent big jump and are likely to experience a big drop.
- Volume: The volume must be lower than twice the average volume and higher than half the average volume of the last 5 days. No, I did not make a mistake. Backtests show (in this situation) that a high volume during the cross harms the performance of the trading system.

- Sell Rules:
- Cross Test 3: Stock price is crossing below its 200-Bar simple moving average

- Stop Rules:
- No stop rules were used in this trading system.

All U.S. Stocks, except those that are listed on OTC exchanges, were included in the simulation.
The average performance as well as the strategy Sharpe ratio can be improved by adding new buy or sell rules and tweaking or optimizing the indicator parameters.


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Type: Trading System

Object ID: 951


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Market: Stock Market

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Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.