At The Close  |  MAR 2010

At The Close by Wayne Whaley

At The Close by Wayne Whaley Can a simple and popular strategy such as the 200-day moving average crossover outperform a buy & hold strategy? The trend is your friend” is one of the first rules in trading. Given the big moves in commodities in 2009, I wouldn’t be surprised to discover that a lot of trend-following systems had a good year. One trend-following strategy that is followed by many technicians is the 200-day moving average crossover strategy. That is when you would go long when the tradable in question is above its n-day moving average and either move to cash or go short when it is below the average. Given that hardly a day goes by without an analyst mentioning the market’s position relative to its 200-day moving average, I thought it would be worth the effort to restudy the significance, or lack thereof, for not only the 200-day moving average, but other moving average trend-following system lengths as well. TEST APPROACH I evaluated the 50‑, 100‑, 150‑, 200‑, 250‑, 300‑, and 350‑day moving average crossover strategies (prices crossing the MA) for the following Standard & Poor’s 500 strategy: (CONTINUDED)

by Wayne Whaley