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1989issue C061-3

Evaluating an always-in-the-market moving-average crossover

A dual simple-moving-average crossover can be specified as a trend-following system that stays always in the market and reverses on the next session open. Signal-lag, sideways-market reversals, and next-open-execution belong to that one procedure.

  • Two simple moving averages of closing prices, each with its own lookback, create a moving-average-crossover signal when the shorter average crosses the longer average.
  • The system stays always in the market: an upward cross is a buy for the next session open, and a downward cross is a sell for the next session open.
  • The averages are lagging smoothers and are not designed to buy bottoms or sell tops, so the same rules are better aligned with extended directional moves and loss-prone when price action is sideways.
  • Because the signal is computed after the close, a large same-session move or a next-session opening gap can occur before next-open-execution fills the reverse.
Entries in this reading3 entries
Trend following89 readingsCurrent trackMoving-average crossover108 readingsMechanical trading system158 readings

An always-in-the-market trend-following procedure

The procedure is specified as a trend-following system that stays continuously positioned and reverses instead of standing aside. Trend-following here waits for evidence of an established direction instead of aiming for turning points.

Always-in-the-market means the posture is long or short at all times. Each opposite signal closes the current side and opens the reverse side. There is no stand-aside state between crosses.

How the crossover is defined

Two simple moving averages of closing prices are computed on different day counts. A moving-average-crossover signal occurs when the shorter-lookback average crosses the longer-lookback average.

An upward cross of the shorter average through the longer average from below is a buy for the next session open. A downward cross from above is a sell for the next session open.

A simple moving average of closes is the arithmetic mean of the most recent n closing prices: the sum of those closes divided by n. A 3-day lookback is the arithmetic example, so that average is the sum of the most recent three closes divided by three.

The 3-day versus 10-day illustration

In the 3-day versus 10-day illustration, a long is held while the 3-day average stays above the 10-day average. After a downward cross, that long is reversed to a short on the following open.

Lag, sideways markets, and next-open fills

The averages are lagging smoothers of daily price movement. They are not designed to buy bottoms or sell tops. The same always-in-the-market crossover is characterized as better aligned with extended directional moves and as loss-prone when price action is sideways.

Signals are computed after the close rather than from intraday reversal points. Signal-lag follows because the averages update from completed closes and therefore trail current price.

Next-open-execution fills a close-generated reverse on the following session open rather than at the signal-bar close. A large same-session move or a next-session opening gap can occur before a reversing order is filled.

What the historical test design covered

The reported test design covers about five and a half years ending in May or June 1988 and deducts 100 dollars per trade for commissions and slippage. Shorter-average lookbacks from 3 to 19 days and longer-average lookbacks from 10 to 50 days were the parameter ranges examined.

Always-in-the-market dual-MA crossover: net profit and max drawdown by market

Every listed futures market finished the always-in-the-market dual simple-moving-average test in the black when each contract used its own best length pair, but the outcomes are not interchangeable: coffee’s $74,700 net stands far above live cattle’s $3,252, and the S&P 500’s $27,075 profit sits beside a $48,050 peak-to-trough drawdown. Dollar figures are the Total Profit and Max. Drawdown columns from Aan’s published results table.
Every listed futures market finished the always-in-the-market dual simple-moving-average test in the black when each contract used its own best length pair, but the outcomes are not interchangeable: coffee’s $74,700 net stands far above live cattle’s $3,252, and the S&P 500’s $27,075 profit sits beside a $48,050 peak-to-trough drawdown. Dollar figures are the Total Profit and Max. Drawdown columns from Aan’s published results table.About 5.5 years ending May or June 1988

Aan searched short simple averages from 3 to 19 days and long averages from 10 to 50 days and printed only the best pair per market. The test runs about five and a half years through May or June 1988 and deducts $100 from every trade for commissions and slippage. Coffee is listed as a 19-day / 14-day pair, as printed.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
3 of 57 in the Moving-average crossover track
19891-8 pp.Next on Moving-average crossoverConstructing symmetric market-breadth ratio accumulatorsA ratio is one series divided by another and, when the inputs share similar ranges, tends to oscillate around 1.0. A conventional advance-decline line is a cumulative difference, not that quotient.
All readings on this track · 57 readings
  1. 1988Constructing moving averages: weights, smoothing and crossovers
  2. 1988Constructing breadth and average trend states
  3. 1989Evaluating an always-in-the-market moving-average crossover
  4. 1989Constructing symmetric market-breadth ratio accumulators
  5. 1989Objective crossover tests of Fibonacci wave ratios
  6. 1990Volume-adjusted moving average construction
  7. 1991Constructing a mechanical crossover on a synthetic price series
  8. 1991A two-speed breadth reading for intermediate market direction
  9. 1992A Deutschemark yield map with dual-average and relative-strength timing
  10. 1992Confirming currency-fund trends with a crossover and a filter
  11. 1992A moving-average slope filter for crossover signals
  12. 1992Occupancy and split-sample tests for average crossovers
  13. 1994Gold-mining seasonality and bond-fund duration switching
  14. 1994Price oscillator from two moving averages
  15. 1995Explicit exponential weights and binary entry filters
  16. 1996Currency futures crossover with slope, bond filter, and stop
  17. 1996Two-market average crossover entry with a fixed stop
  18. 1997Construction of a filtered three-average crossover
  19. 1998Two-group exponential average compression as a trend filter
  20. 1998Constructing r-squared trend filters with dual lookbacks
  21. 1998Moving-average length is a habit, not a secret
  22. 1999Solving the close that triggers a moving-average crossover
  23. 2000Kagi yang and yin control versus crossover noise
  24. 2000Constructing simple moving average crossover filters
  25. 2000Building a vertical-horizontal filter to gate trend signals
  26. 2000Two-average crossover as a check on trend following
  27. 2003Stacked exponential-average retracement entries and extreme stops
  28. 2003Evaluating oscillator thresholds against optimized crossovers
  29. 2004Constructing a semicycle trend-quality filter
  30. 2004Commodity subgroups labeled by crossover, support, or convergence
  31. 2004Full-window evaluation of crossover trend systems
  32. 2004Two-average trend filters as a classroom critique of indicator stacking
  33. 2005Three-layer confirmation from a moving-average cross, candles, and Q-stick
  34. 2005Charting put prices beside an equity breakdown
  35. 2005Range-gated moving-average crossover construction
  36. 2007Anticipating a simple-average crossover with a threshold-close
  37. 2007Anticipating moving-average crossovers one bar ahead
  38. 2007Lead-series moving-average crossovers with a stochastic and relative strength index
  39. 2007Next-bar SMA crossover hypotheses from theoretical crossing values
  40. 2007Anticipating a moving-average crossover before confirmation
  41. 2007A three-horizon moving-average stack as a construction problem
  42. 2007Confirming trend with regression slope and r-squared
  43. 2008Constructing a multi-timeframe smoothed crossover
  44. 2008Best-day clusters versus trend filters
  45. 2008Allied markets as a confirmation gate for crossover and breakout signals
  46. 2008Weekly exponential-average crossover as a mechanical trend case study
  47. 2010Evaluating a 200-day crossover as long, short, and stand-aside rules
  48. 2010Read a 10-and-40 trend on two neighboring time frames
  49. 2012Sampling unit as a first-class parameter on dual simple moving averages
  50. 2012Constructing index-ETF entries from volatility-index persistence
  51. 2013Moving-average baselines versus crossover signals
  52. 2013Constructing a typical-price and heikin-ashi crossover as one mechanical procedure
  53. 2016A three-gate checklist for longs after a sharp drop
  54. 2016Weekly inflation-ratio crossover for commodity regimes
  55. 2017Normalized Laguerre zero-axis warning as a two-marker construction
  56. 2019Range-weighted construction of an adaptive exponential moving average
  57. 2020Construct a second-pullback entry after a moving-average crossover
By fieldTrend and mean reversion93 readingsBy year198983 readings
All 108 readings tagged Moving-average crossover
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