200ema and 50ema

[Mathemagician]

You might consider re-evaluating your estimation of the significance of a 50 day moving average crossing over a 200 day moving average.

Here is a plot of the equity curve produced by trading a 50/200 MA Crossover both long and short on a properly constructed portfolio of futures markets with appropriate risk management. It's a 21% return (zero riskless) with a 28% maximum drawdown over a ~25 year period.

jj

 

[Rhody Trader]

You might consider re-evaluating your estimation of the significance of a 50 day moving average crossing over a 200 day moving average.

Here is a plot of the equity curve produced by trading a 50/200 MA Crossover both long and short on a properly constructed portfolio of futures markets with appropriate risk management. It's a 21% return (zero riskless) with a 28% maximum drawdown over a ~25 year period.

No one said it didn't/couldn't work - though the caveats about properly constructed and appropriate risk doesn't make it sound like such a simple thing. I know what you're driving at, though.

Still, that sort of trading isn't for everyone, which was my larger point earlier.

 

[Rhody Trader]

We should ALL be trading with the trend ........ !!

I personally do tend to follow that line of thinking, but it's not the only path to profits.

 

[dbphoenix]

You might consider re-evaluating your estimation of the significance of a 50 day moving average crossing over a 200 day moving average.

Here is a plot of the equity curve produced by trading a 50/200 MA Crossover both long and short on a properly constructed portfolio of futures markets with appropriate risk management. It's a 21% return (zero riskless) with a 28% maximum drawdown over a ~25 year period.

jj

Why begin with 1984?

 

[Mathemagician]

Why begin with 1984?

Because in an attempt to convince you that a totally random method has merit I've secretly hidden a 120% drawdown that ends in 1984, obviously.

Seriously, though, that's where my data begins.

jj

 

[dbphoenix]

Because in an attempt to convince you that a totally random method has merit I've secretly hidden a 120% drawdown that ends in 1984, obviously.

Seriously, though, that's where my data begins.

jj

The fact that the longest-running bull market began in 1983 may have something to do with your endproduct. Try 1966 to 1986.

 

[TheBramble]

All the penetration of support and resistance indicates is a change in investor expectation and a shift in supply/demand lines -

Except in FX where supply & demand do not function....it's ALL 'expectation'....

 

[Mathemagician]

The fact that the longest-running bull market began in 1983 may have something to do with your endproduct. Try 1966 to 1986.

Longest running bull market in what? That EC is produced using 80 liquid futures markets from all over the world.

jj

 

[Rhody Trader]

Except in FX where supply & demand do not function....it's ALL 'expectation'....

I'll agree that expecation plays probably more of a role in forex than in other markets - probably the dominant one most of the time - but there's the supply/demand element in there too. The movement in carry trade pairs over time is a good example.

 

[theroguetrader]

no, no, i didnt say it was the only path to profits, just maybe a different way of looking at it....


its just that usually people who swim against the tide end up drowning -

 

[TheBramble]

. The movement in carry trade pairs over time is a good example.

RT - have you checked the profit potential on carry against outright?

Anyone of a mindset to make their money on carry would probably be putting their cash in a bank savings account at 7% deposit - not trading FX.

 

[TheBramble]

I'll agree that expecation plays probably more of a role in forex than in other markets - probably the dominant one most of the time - but there's the supply/demand element in there too.

OK. Where's the supply? It's practically infinite. You can't corner the market on USD or GBP or EUR...

It's like Apples. Even if you don't want to buy/sell the physical commodity, you know there's always going to be plenty. All you can do is take a position on the future expectation of others' expecations of price - not demand or supply.

 

[TWI]

a properly constructed portfolio of futures markets with appropriate risk management.

Mathmagician. Care to expand on this? I would certainly be interested to know what you mean.

 

[Rhody Trader]

RT - have you checked the profit potential on carry against outright?

Anyone of a mindset to make their money on carry would probably be putting their cash in a bank savings account at 7% deposit - not trading FX.

Leverage can generate returns well in excess of that 7% - if one's willing to take the exchange rate risk, of course.

 

[Rhody Trader]

OK. Where's the supply? It's practically infinite. You can't corner the market on USD or GBP or EUR...

It's like Apples. Even if you don't want to buy/sell the physical commodity, you know there's always going to be plenty. All you can do is take a position on the future expectation of others' expecations of price - not demand or supply.

It's not a physical supply that I'm talking about. It's the actual buying and selling of currencies in question driving prices. When a carry trade is being executed one is selling the low interest currency and buying the high interest one. That means "creating" a supply of the former and demand for the latter - in the market, not in economic aggregate as in the case of your apple example.

 

[JTrader]

200 & 50 Ema

Does it have to be an EMA, or can it equally be 200 & 50 SMA - as an industry type standard?

 

[Rhody Trader]

Does it have to be an EMA, or can it equally be 200 & 50 SMA - as an industry type standard?

EMAs are a bit more reactive than SMA in general, but when you start talking about long-term averages the differences become small. As such, it doesn't really matter which you go with. There will only be relatively slight differences.

 

[Lightning McQueen]

Does it have to be an EMA, or can it equally be 200 & 50 SMA - as an industry type standard?

That would be a better set to look at, also think about fib numbers so thats 55 & 233 perhaps ...rather good the 55 as a dynamic turn point in the market, eg only go long when price above 55 or short when price below.

 

[Mathemagician]

Mathmagician. Care to expand on this? I would certainly be interested to know what you mean.

This just means a portfolio construction / risk management framework that balances risk properly across markets and sectors, so that no one market or sector dominates the results. (e.g. 1 corn + 1 nat gas is not a properly constructed portfolio)

jj

 

[TWI]

Yes, I get that but how do you balance it out? volatility , underlying value?
For example if you wanted to make money this year you may want to go long gold and short silver. What would you consider an appropriate ratio for this trade?