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2008issue C111-4

Weekly exponential-average crossover as a mechanical trend case study

The archive applied a weekly 10-week and 40-week exponential-average crossover as a long-only mechanical procedure to a diversified mix of sector mutual funds. Entry and exit waited for weekly confirmation, then used the close of the first session after that confirmation. Editorial reading: the testable lesson is sitting out still markets and keeping the rule on one weekly clock.

  • The mechanical weekly rule entered and exited only after the 10-week exponential average crossed the 40-week exponential average, then used the close of the first session after that weekly confirmation.
  • Trend following was framed as buying after confirmation that a major move was already underway, not as an attempt to call tops, bottoms, or reversal dates.
  • Non-trending, cycling, or low-volatility markets were to be skipped, while a diversified mix of sector funds left room to take a trend that appeared in some market.
  • The hardest operational demand was waiting for the weekly downside cross, which often meant watching open gains shrink until the 10-week average pierced the 40-week average.
Entries in this reading3 entries
Trend following89 readingsCurrent trackMoving-average crossover108 readingsMechanical trading system158 readings

One weekly rule for entry and exit

The archive applied a mechanical weekly rule. The long-only rule entered only after a 10-week exponential average crossed above a 40-week exponential average, then used the close of the first session after that weekly confirmation.

The same procedure exited when the 10-week exponential average crossed back below the 40-week exponential average, again at the close of the first session after weekly confirmation. Those rules were applied to a diversified mix of sector mutual funds over a 63-month window from January 2002 through 6 April 2007.

Buying after the move is already underway

Trend following was framed as buying after a breakout or other confirmation that a major move was already underway, not as an attempt to call tops, bottoms, or reversal dates.

The weekly 10-40 pair was presented as removing the need to judge overbought or oversold conditions because entry waited for momentum already pointing toward the intended side.

Skip still markets, keep a diversified roster

Non-trending, cycling, or low-volatility markets were to be skipped. A range of diversified, noncorrelated sector funds was used so an emerging trend in some market could still be taken.

The write-up suggested confirming a major-index 10-40 weekly crossover before new sector-fund entries, on the observation that many sector funds move with those broad indexes.

Waiting through the weekly exit

The hardest operational demand of the mechanical exit was waiting for the weekly downside cross, which often meant watching open gains shrink until the 10-week average pierced the 40-week average.

The precious-metals example noted that higher volatility than utility or natural-resource funds produced more entry and exit points on the same 10-40 weekly crossover.

Long-only weekly 10/40 EMA trades in Fidelity sector funds

Each bar is one long-only trade from the article’s Figure 1 backtest of a weekly 10-week versus 40-week exponential-average crossover on Fidelity Select sector funds, January 2002 through 6 April 2007. A few large winners in utilities, wireless, natural resources and defense carry the book; most losing trades stay near single digits. The reference series is the best intra-trade run-up, which is why staying through the weekly exit still leaves money on the table.
Each bar is one long-only trade from the article’s Figure 1 backtest of a weekly 10-week versus 40-week exponential-average crossover on Fidelity Select sector funds, January 2002 through 6 April 2007. A few large winners in utilities, wireless, natural resources and defense carry the book; most losing trades stay near single digits. The reference series is the best intra-trade run-up, which is why staying through the weekly exit still leaves money on the table.Fidelity Select sector funds · Weekly · 2002-01-01T00:00:00.000Z to 2007-04-06T00:00:00.000Z

Entries and exits use the close of the first session after the weekly 10/40 exponential-average cross is confirmed. Open trades are marked to 6 April 2007. Three trades never went positive, so they have no MaxProfit bar.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
46 of 57 in the Moving-average crossover track
201094-97 pp.Next on Moving-average crossoverEvaluating a 200-day crossover as long, short, and stand-aside rulesThe same 200-day moving-average crossover was logged as a mechanical long-or-short procedure and then rewritten as a stand-aside rule that held three-month Treasury bills after a downward cross.
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
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