Wednesday, July 23, 2008

Clueless 20

My buddy Clueless mentioned a simple system yesterday that bought the cross above the 20MA and exited on the 20MA cross down (I think that's what he meant).
Since I have a lot of time on my hands I tested the system on my little ETF short list both long and short using the 20 MA on the 10 and 60 minute and daily bars over the past 500 bars. The results are shown above.
As suggested, the system does have considerable whipsaws and although a simple stop loss will help control drawdown, the number of false starts will also increase. In every case except 2 the system made better money (sometimes much better money) than a buy and hold strategy. Worth a closer look.

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