RE: [Trading Strategy] Exponential Moving Average Cross
Good strategy for long term moves. Obviously works well in trending markets so you need to be prepared to get hammered when ranging (which is around 70-80% of the time).
The longer the time frame, the better this system works. If you're using it on small timeframes, you need to set your initial stop way outside the noise, preferably some multiple of ATR (at least 2 or 3) or based on some price action level (like a recent support or resistance level).
I think some people use the 200 EMA as a trailing stop, seems a bit extreme to me but I've never tested it so can't say. They say the 9 MA is like a sheet of paper, the 50 MA is like a wooden door, and the 200 MA is like the Great Wall of China. So if it breaks the 200 MA it's a major reversal.
If I used this, I think I would use the crossing back of the two smaller MA's to take profit and get out. If they cross back again then buy back in, there's no shame in taking the trade twice in the same direction, and getting two profits :-)
Like any system though I'd keep an eye on significant levels. No point risking a trade if your just about to touch a major support level or something. As long as you have a good money management / stop technique that can limit your ranging losses then it's an ok system. I think some long term investment funds use something similar, but it's over very long times.
That is actually the complement strategy i am using. When the price go down below ema 12, then turn back above It i use as another entry point.
As the SL, i use the ema 24 as base, plus some space added (wich is defined by backtrack test, wich i also do with the TP)
This strategy is the one i used as a First try as writting a bot, and even though the back had good profits, the drawdown is too big (i Will post some backtests also). I Will run some more tests this week with the SL fixed at the ema 24, and shorter TP.
Because so far, this strategy for the bot has been... Underwhelming. Because like you Said, crossing averages sucks on ranging markets.
I freak out as the price get Very close to TP, and then Go all way down.
The total profit Will probably be lower, but maybe i Will have a higher % of profitable trades?
I Will post a bit more about my bot experience, as soon as i have a bit extra time.
To be honest, I've tested a lot of moving average type systems as well and been totally underwhelmed. Something I did notice though, and you probably won't believe this - try reversing the signal direction :-)
Have a look at my post on backtesting, the 'profitable' chart I showed was actually a MA cross system in reverse. That is, when the Fast MA moved under the Slow MA it bought, and when it crossed back above it sold. Exactly the opposite of what the system is meant to do, but it made money...
https://steemit.com/trading/@tradergurl/the-benefit-of-backtesting
Will be interesting to hear about your bot experience, thanks.