Wednesday, February 25, 2009

MT4 - Moving Average Crossover

Believe it or not I think I'm going to use a simple moving average crossover as a signal for my automated trading system.

Obviously, and testing verifies this, there are two issues to manage:

1) Getting whipsawed.
2) Entering the trend too late.

I believe that I can at least alleviate these issues somewhat. Technical indicators can provide clues about whether or not the market is currently trending -- such that if it isn't trending you can avoid opening positions. Additionally, I believe I can impose restrictions that will greatly reduce purchases near the end of a trend.

Even with these two problems I am able to see spectacular gains temporarily. Trends with few reversals and a slow conversion to the opposite direction yield very high profits... so I can see the potential that is available.

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