A simple Moving Average Based Strategy

Let us take a look at a very simple moving average based strategy. This strategy is discussed in Beyond Technical Analysis

STRATEGY RULES :

Rule 1 : Go LONG at next days' open if 3-day SMA crosses over 65-day SMA

Rule 2 : Close LONG position and Go SHORT next days' open if 3-day SMA crosses under 65-day SMA

Rule 3 : Cover SHORT position. Back to Rule 1.

Since moving averages are lagging indicators of trend, rule 1 indicates in the last three days, the short-term price action for the
security is positive and it may be time to jump in.

This strategy is an long/short strategy is always takes a position. There is no "time-out" period. You are either long or
short with the security.

The back test results are shown below. The strategy was back tested on 5 year data with S&P 100 stocks



All TradesLong TradesShort TradesBuy & Hold 
Starting Capital$10,000.00$10,000.00$10,000.00$10,000.00
Ending Capital$11,151.13$11,326.72$9,824.41$12,685.16
Net Profit$1,151.13$1,326.72($175.59)$2,685.16
Net Profit %11.51%13.27%-1.76%26.85%
Annualized Gain %2.21%2.53%-0.35%4.88%
Exposure54.66%24.41%30.89%79.77%
Total Commission($55.50)($33.96)($21.54)($4.90)
Return on Cash$0.00$0.00$0.00$0.00
Margin Interest Paid$0.00$0.00$0.00$0.00
Dividends Received$0.00$0.00$0.00$0.00
     
Number of Trades62040421695
Average Profit$1.86$3.28($0.81)$28.26
Average Profit %2.35%3.80%-0.38%32.62%
Average Bars Held127.3786.60203.611,238.99
     
Winning Trades2511628962
Win Rate40.48%40.10%41.20%65.26%
Gross Profit$3,935.18$2,500.72$1,434.46$3,470.93
Average Profit$15.68$15.44$16.12$55.98
Average Profit %19.27%18.52%20.62%65.73%
Average Bars Held204.39156.62291.351,229.94
Max Consecutive Winners1414126
     
Losing Trades36924212733
Loss Rate59.52%59.90%58.80%34.74%
Gross Loss($2,784.05)($1,174.00)($1,610.05)($785.77)
Average Loss($7.54)($4.85)($12.68)($23.81)
Average Loss %-9.16%-6.06%-15.09%-29.57%
Average Bars Held74.9739.73142.121,256.00
Max Consecutive Losses1619193
     
Maximum Drawdown($1,846.04)($854.87)($2,264.80)($6,304.03)
Maximum Drawdown Date10/28/20097/7/20094/14/20103/9/2009
Maximum Drawdown %-15.20%-7.87%-18.73%-43.94%
Maximum Drawdown % Date10/28/20097/7/20094/14/20103/9/2009
     
Wealth-Lab Score3.439.55-1.363.43
Sharpe Ratio0.220.40-0.200.35
Profit Factor1.412.130.894.42
Recovery Factor0.621.550.000.43
Payoff Ratio2.103.061.372.22

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