Probability of Moving Average Crossover Strategy
Can the Moving Average Crossover Strategy Indicator Be Profitable?
Learn the secrets and techniques of trading Moving Average Indicator strategies with real technical analysis examples in this tutorial guide. Whether you trade in the stock market or forex market, understanding these strategies can help you make money in intraday trading and swing trades.
Does the Moving Average Crossover Strategy Even Work?
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Testing the Moving Average Crossover Strategy 100 Times
In this video, I will back-test a very famous trading strategy called the Moving Average Crossover strategy 100 times. Yes, you heard it right. Testing 100 times takes time and will most likely prove whether you should risk your hard-earned money using this strategy! This video will be very similar to the RSI and MACD videos I made a while ago. If you want to know if those strategies work after testing 100 times, check those videos out.
Understanding the Moving Average Crossover Strategy
On TradingView, the Moving Average Crossover strategy will look something like this. I know, it’s one of the simplest strategies out there. I have already made a video on the basics. If you have never heard about this Moving Average Crossover strategy, check out my previous video where I explain this strategy in detail.
Filtering False Signals
In my last video, we modified this Moving Average Crossover strategy to filter false signals. To filter false signals, we will use the 200-period exponential moving average. You can use SMA too if you want. We will use this 200-period moving average to find the direction of the long-term trend. Remember, trend is your friend. Always take trades in the direction of the trend, especially if you are new. If the price is above the 200-period moving average, we will only look to buy. And if the price is below the 200-period moving average, we will only look to sell.
The Modified Moving Average Crossover Strategy
Here’s how our modified Moving Average Crossover strategy works:
Buy Setup: When the price is above the 200-period moving average and we see the 9-period moving average crossing above the 21-period moving average, we will buy as soon as the crossover happens.
Sell Setup: When the price is below the 200-period moving average and we see the 9-period moving average crossing below the 21-period moving average, we will sell as soon as the crossover happens.
In the last video, I said not to take trades when the entry is too far from the moving average crossover. During the backtesting, I found 2 to 3 trade setups that had entry signals far away from the crossover, so I skipped them.
Real Profit Potential
So, the question is: If you enter trades using the Moving Average indicator, will you become a profitable trader?
In the next few minutes, I will show you how the profit graph looks after taking 100 trades, the real winning percentage of the Moving Average Crossover strategy, and how many losers you can expect in a row. I will fast forward the next clip to save your time. The following clip can help you understand how this strategy looks in different market conditions, so watch carefully.
Backtesting Example
For backtesting, I have used the Euro/JPY chart. This strategy works on any time frame and also works on both Forex and stock markets. Here, I’m using a 30-minute time frame. I’m also taking sell setups in this example. The strategy for sell setups is very similar to buy setups.
Conclusion
Check out other videos where I tested MACD, RSI, and many other strategies 100 times to show their real win rates. After all, you don’t want to risk your money on something that doesn’t work.
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