Strategy with 3 MAs?

[ben]

Is it possible to write a strategy with three moving averages?

 

[mashume]

Of course! Almost anything you can imagine can be coded. Some are ... easier than others. however.

Let's take three moving averages, a short, a medium and a long.
If the short crosses above the middle, we enter long but only if the long MA is trending upward.
similarly, we enter short if the short crosses below the mid and the long is trending downward.

declare upper;
input short = 10;
input medium = 50;
input long = 150;

def SMA = Average(CLOSE, short);
def MMA = Average(CLOSE, medium);
def LMA = Average(CLOSE, long);

def trend = if LMA > LMA[1] then 1 else if LMA < LMA[1] then -1 else 0;
def enter_long = if SMA crosses above MMA AND trend == 1 then low else double.nan;
def enter_short = if SMA crosses below MMA AND trend == -1 then high else double.nan;

AddOrder(OrderType.BUY_AUTO, !isNaN(enter_long), open[-1], 50, Color.ORANGE, Color.ORANGE, "Sample buy @ " + open[-1]);
AddOrder(OrderType.SELL_AUTO, !isNaN(enter_short), open[-1], 50, Color.ORANGE, Color.ORANGE, "Sample sell @ " + open[-1]);

I'm not sure this answered your question, but it certainly is a strategy that uses three moving averages. I doubt it would be too profitable, but one never knows. Perhaps your Holy Grail is in there somewhere.

Good luck and happy trading,
mashume

 

[ben]

Thank you for your reply and for your help.
A friend swears by 9-SMA, 20-EMA, and 50-SMA he said it's a "Johnny Bravo swing strategy" and I wanted to backtest it against my strategy. I included a picture to show where a buy order was and then circled where a buy and sell order should be relative to the strategy.

Edit: To clarify, you would be a net buyer when the 9SMA is above the 50SMA and a net seller when 9SMA below the 50SMA. Example - when 9SMA is above 50SMA (UpTrend) and 9SMA is above the 20EMA it initiates a buy to open, and when 9SMA is above 50SMA (UpTrend) and 9SMA is below 20EMA it initiates a sell to close (stop). In reverse; when 9SMA is below 50SMA (DownTrend) and 9SMA is below the 20EMA it initiates a sell to open, and when 9SMA is below 50SMA (DownTrend) and 9SMA is above 20EMA it initiates a buy to close (stop).

https://photos.app.goo.gl/ovHFKr4dUXAM9uRJ8

I modified your code to fit the strategy defaults; however, I do not know how to write the code to meet all the conditions. This was my confusion around 3 MAs, haha it gets tricky in the details. Note, SMA is now slowMA not shortMA:

declare upper;
input Fast = 9;
input AverageTypeFast = AverageType.SIMPLE;
input Medium = 20;
input AverageTypeMedium = AverageType.EXPONENTIAL;
input Slow = 50;
input AverageTypeSlow = AverageType.SIMPLE;

plot FMA = MovingAverage (AverageTypeFast, CLOSE, Fast);
plot MMA = MovingAverage (AverageTypeMedium, CLOSE, Medium);
plot SMA = MovingAverage (AverageTypeSlow, CLOSE, Slow);

def trend = if SMA > SMA[1] then 1 else if SMA < SMA[1] then -1 else 0;
def enter_long = if SMA crosses above MMA AND trend == 1 then low else double.nan;
def enter_short = if SMA crosses below MMA AND trend == -1 then high else double.nan;

AddOrder(OrderType.BUY_AUTO, !isNaN(enter_long), open[-1], 50, Color.GREEN, Color.Green, "Sample buy @ " + open[-1]);
AddOrder(OrderType.SELL_AUTO, !isNaN(enter_short), open[-1], 50, Color.RED, Color.RED, "Sample sell @ " + open[-1]);

FMA.SetDefaultColor(Color.YELLOW);
MMA.SetDefaultColor(Color.ORANGE);
SMA.SetDefaultColor(Color.RED);

 

[scott69]

Most trading / investing strategies are completely dependent on the time frame you want to work in, and adjust your systems / indicators accordingly. For example, I trade NQ futures, and although you could "try" to use futures for longer term "investing", you are really well advised to keep your time frames within the minutes, hours, or at most a few days. My typical holding period is minutes to hours maximum. Lately, at $20 per point per contract, NQ has moved 100 points ($2000) in minutes, and 500 points ($10,000) during the day. So, I will use moving averages in my strategy, but they are on a 2 minute chart. Shorter time MAs ( 3, 5, 9, 10) for entries, longer term MAs (20 & 50) for trend and direction. The crosses are quick, and the signals are clear. (Please note that I also use ADX and RSI very heavily in my trading system.) Because of the lag, I could never use MA crosses on a 15 minute, hour, or daily chart to trade for minutes to hours.

For longer term investors ( years holding), you can certainly use a daily chart and watch for longer term MA crosses such as 50, 100, 200 day MA crosses. This strategy has helped some longer term investors avoid big declines after a big rally (like we have just seen, 2008 - 2022) and get in long after a big decline ( such as after 2000 & 2008 declines) or very possibly after the potential big decline that we are currently working out. More so than any MA crosses, the overall economy and investing climate is much more important than any technical system you could use for "investing."

Using MAs to build a trading system is a good start, but should be enhanced with other indicators to fine tune them for trend and direction and entry triggers.

I also agree with @mashume that some strategies using MAs will not have extremely generous outcomes.

 

[Butler]

Most trading / investing strategies are completely dependent on the time frame you want to work in, and adjust your systems / indicators accordingly. For example, I trade NQ futures, and although you could "try" to use futures for longer term "investing", you are really well advised to keep your time frames within the minutes, hours, or at most a few days. My typical holding period is minutes to hours maximum. Lately, at $20 per point per contract, NQ has moved 100 points ($2000) in minutes, and 500 points ($10,000) during the day. So, I will use moving averages in my strategy, but they are on a 2 minute chart. Shorter time MAs ( 3, 5, 9, 10) for entries, longer term MAs (20 & 50) for trend and direction. The crosses are quick, and the signals are clear. (Please note that I also use ADX and RSI very heavily in my trading system.) Because of the lag, I could never use MA crosses on a 15 minute, hour, or daily chart to trade for minutes to hours.

For longer term investors ( years holding), you can certainly use a daily chart and watch for longer term MA crosses such as 50, 100, 200 day MA crosses. This strategy has helped some longer term investors avoid big declines after a big rally (like we have just seen, 2008 - 2022) and get in long after a big decline ( such as after 2000 & 2008 declines) or very possibly after the potential big decline that we are currently working out. More so than any MA crosses, the overall economy and investing climate is much more important than any technical system you could use for "investing."

Using MAs to build a trading system is a good start, but should be enhanced with other indicators to fine tune them for trend and direction and entry triggers.

I also agree with @mashume that some strategies using MAs will not have extremely generous outcomes.

Scott can you share how you incorporate RSI into your trading strategy? I am leaning towards a lower period RSI. The 14 period to me just seems to slow. What are your thoughts? Thank you