Best period MA's for trading EUR/USD | Forex Factory

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Best period MA's for trading EUR/USD

  • #1
  • First Post: Feb 24, 2011 12:40pm Feb 24, 2011 12:40pm
though ma's are an important tool there are allways 2 questions when plotting them:
- what period should i use ?
- an what timeframe shall i use them?

below i tried to make an statistical backtesting test to answer the above questions.

The backtest uses 2 variables: T, for timeframe, and it is a multiple of 1h. So for exemple 24h is in fact a day. I must mention that the backtester engine automaticly converts 24h to a day, or 8h to one 8h candle.

P: this is the period for which the MA's will be drawn.

The condition is if Close > MA then buy, if Close < MA then short. Signal is given on close of the candle and price is Close.

Spreat is 3 pips. Backtesting period is 2000 - ian 2011.
margin is 1:1 (spot trading)

after the backtest (it took 1 h and a half) i got the following results which i imported in excel for charting convenience.



% profit of the system
http://profitbursier.ro/admin/upload...ma_24_2_11.jpg





dradown of the system (max system loss)
http://profitbursier.ro/admin/upload/dd_ma_24_2_11.jpg






Sharpe Ratio with a risk free ratio of 5%
http://profitbursier.ro/admin/upload...ma_24_2_11.jpg




periods of MA's
http://profitbursier.ro/admin/upload/per_ma_24_2_11.jpg




Timeframes of MA's
http://profitbursier.ro/admin/upload/tf_ma_24_2_11.jpg



So...



Acording to tests the optimum combinations converge to a period of 250 on a timeframe of 50-60 hours. In fact a MA of 250 ploted on a 2 day timeframe. is the most optimum combination. Or at least was form 2000 till ian 2011


But will this system work? This is why i used sharpe ratio.. The score on sharpe ratio on the best combinations conveges twoards 0.5. So it means it is STATISTICALY produces half of the risk free ratio (0.5*5%), meaning 2.5%. If 2.5% is ok with u, then this system is good to go.

But considering this is on a 10 year period, bany long term bonds offer much better return, so it is not really worth ur money.


In the end we could use a hicher margin, lets say 2:1. In this case reward should be 5% anualized, but DrawDown should also be double. In 1:1, DD is between 10 and 20%. Doubling, we get a max DD of 20-40%. So a 5% return for a max 40% DD. Not really worth it.


Meaning trading with ONLY 1 MA , no matter what period , no matter what TF suk.. is not worth it.



happy trading.


Radu Ciofu
  • #2
  • Feb 24, 2011 1:09pm Feb 24, 2011 1:09pm
sorry if i have missed an important point, but i really dont think there are any systems which only use MA. Therefore ... i hate to say it I think you have wasted both your time and my time.
  • #3
  • Feb 24, 2011 1:16pm Feb 24, 2011 1:16pm
if it helps a beginner not losing his/hers money i haven't wasted my time.

Regarding ur, time im sure that beying a very advanced trader as u are, u know u can extend my research by making a indicator from close dividing the best MA and then using BB to pick tops/ bottoms for an acceptable trading system

But u sure have done this and im wasting ur time again.
  • #4
  • Feb 24, 2011 1:34pm Feb 24, 2011 1:34pm
It has been statistically proven over and over that no indicator improves trading one bit, including moving averages.

So the only way you would save beginners money is to simply tell them, do not ever use any indicator, it will not lead to profits.
  • #5
  • Feb 24, 2011 2:05pm Feb 24, 2011 2:05pm
Hi Radu,

If I may say so, Dreamliner's statement is questionable, to say the least.

But I think you greatly underestimate the challenge of becoming a consistently profitable trader. It's a process that, for most of the few who make it, takes years. And it's not just about learning all about indicators, and beyond that about market structure and other things, but also learning about yourself, and if you and the markets are a good fit.

So be prepared for some hard work ahead.

Btw, your question doesn't belong in the trading systems section. Better location would be 'Trading Discussion' or 'Rookie Discussion'.
  • #6
  • Feb 24, 2011 2:08pm Feb 24, 2011 2:08pm
It's not my statement, it's proven fact. Simply do some research on the subject, study, discover. You'll find exactly what I did: indicators are entirely useless.

Quoting medici
Hi Radu,

If I may say so, Dreamliner's statement is questionable, to say the least.

But I think you greatly underestimate the challenge of becoming a consistently profitable trader. It's a process that, for most of the few who make it, takes years. And it's not just about learning all about indicators, and beyond that about market structure and other things, but also learning about yourself, and if you and the markets are a good fit.

So be prepared for some hard work ahead.
  • #7
  • Feb 24, 2011 2:09pm Feb 24, 2011 2:09pm
Quoting Dreamliner
It's not my statement, it's proven fact. Simply do some research on the subject, study, discover. You'll find exactly what I did: indicators are entirely useless.
What proof if I may ask? I have done my research, I should add.
  • #8
  • Feb 24, 2011 2:12pm Feb 24, 2011 2:12pm
It is not up to me to prove this research, feel free to either read it through research and study, or learn it from the market itself.

Quoting medici
What proof if I may ask? I have done my research, I should add.
  • #9
  • Feb 24, 2011 2:13pm Feb 24, 2011 2:13pm
Quoting Dreamliner
It is not up to me to prove this research, feel free to either read it through research and study, or learn it from the market itself.
My dear, I am familiar with much of the academic literature on this. And I am also acquainted with a lot of pros who make money in ways that contradict your statement.

The burden of proof is on you...
  • #10
  • Feb 24, 2011 2:16pm Feb 24, 2011 2:16pm
My dear? What, are you queer?

Anyway, I have no dog in this fight, no experience either good or bad with indicators, merely restating what has been proven, or what will be by those who refuse to accept.

I have no need to communicate with you further on this, "my dear." So feel free to have the last word "honey", as I have no need to respond further "sweetie."

Quoting medici
My dear, I am familiar with much of the academic literature on this. And I am also acquainted with a lot of pros who make money in ways that contradict your statement.

The burden of proof is on you...
  • #11
  • Feb 24, 2011 2:19pm Feb 24, 2011 2:19pm
Quoting Dreamliner
My dear? What, are you queer?

Anyway, I have no dog in this fight, no experience either good or bad with indicators, merely restating what has been proven, or what will be by those who refuse to accept.

I have no need to communicate with you further on this, "my dear." So feel free to have the last word "honey", as I have no need to respond further "sweetie."
That's what it sounded like. Second-hand information undigested...
  • #12
  • Edited 3:19pm Feb 24, 2011 3:07pm | Edited 3:19pm
Which tool you have used for that backstest ? I ask cos i did the same Only difference that i only backtested GPD/USD on D1 frame , the last ten years, just one MA no stop no tp no other indicator , lot size was fixed at 1 and i got totaly different results .
I did this while i was experimenting with Nanostation.

Anyway i dont now if i can trust the backtesting tool in nanostion , allthough its obviously far superior to that very basic thing in mt4 , some of the experiments were far to good , like two different psars on renko chart , would make you rich in no time
  • #13
  • Feb 24, 2011 3:25pm Feb 24, 2011 3:25pm
No, you can't trust the back-testing tools in free software packages.

Attached you can find a paper on, among other things, moving average rules, as well as statistically solid ways of testing them.
Attached File(s)
File Type: pdf TechTrade_JMCB.pdf   275 KB | 693 downloads
  • #14
  • Feb 24, 2011 3:37pm Feb 24, 2011 3:37pm
Damn now i need to cancel my order at the porsche dealer
Anyway ill put a few cents on this automated Renko Strat and see what the market has to offer .

Thanks for the pdf by the way , iam realy interested in valid backtesting
  • #15
  • Feb 24, 2011 3:40pm Feb 24, 2011 3:40pm
Quoting blutkehlchen
Damn now i need to cancel my order at the porsche dealer
Anyway ill put a few cents on this automated Renko Strat and see what the market has to offer .

Thanks for the pdf by the way , iam realy interested in valid backtesting
Then I recommend that you read this book:

http://www.amazon.de/Evidence-Based-...8583585&sr=8-1
  • #16
  • Feb 24, 2011 4:09pm Feb 24, 2011 4:09pm
i used amibroker as backtester. I trust him to do a very good job backtesting within the conditions i specify. I dont trust me to give him corect conditions though...
  • #17
  • Feb 24, 2011 4:12pm Feb 24, 2011 4:12pm
Thanks again Medici i didnt even heard of this book , but seems exactly the kind of information i was looking for .

Ok thanks Radu , i had best results with a MA of 43 on daily.It was profitable even with a hit rate of just 34%
  • #18
  • Edited 4:42pm Feb 24, 2011 4:41pm | Edited 4:42pm
Quoting medici
No, you can't trust the back-testing tools in free software packages.

Attached you can find a paper on, among other things, moving average rules, as well as statistically solid ways of testing them.
Hi the PDF doesn't save or open on my computer. I tried from post and paper clip in rt corner. According to my computer I have the latest Adobe upgrade. Message- "there was a problem opening doc. There was problem reading this doc" Any help, thanks Paul
  • #19
  • Feb 24, 2011 4:45pm Feb 24, 2011 4:45pm
Quoting plind
Hi the PDF doesn't save or open on my computer. I tried from post and paper clip in rt corner. According to my computer I have the latest Adobe upgrade. Message- "there was a problem opening doc. There was problem reading this doc" Any help, thanks Paul
Sorry about that. Opens on my pc. I have Adobe Reader 9.4.2. Let's try it zipped.
Attached File(s)
File Type: zip TechTrade_JMCB.zip   169 KB | 499 downloads
  • #20
  • Feb 24, 2011 4:50pm Feb 24, 2011 4:50pm
Quoting Dreamliner
My dear? What, are you queer?

Anyway, I have no dog in this fight, no experience either good or bad with indicators, merely restating what has been proven, or what will be by those who refuse to accept.

I have no need to communicate with you further on this, "my dear." So feel free to have the last word "honey", as I have no need to respond further "sweetie."
This post says a lot about your character, be careful what you write in public forums.

Saying indicators don't work is like saying guns cannot kill people.

The only way you can say for sure that it is a PROVEN FACT is if you know every trader on this planet who makes money. You are definately not God so it is highly unlikely that you know every trader on the planet.

Please don't make ridiculous statements and force other people to believe you.
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