Dual Moving Average Crossover Trading System

The Dual Moving Average Crossover trading system (rules and explanations further below) is a classic trend following system. As such, we included it in our State of Trend Following report, which aims to establish a benchmark to track the generic performance of trend following as a trading strategy.

The Wisdom State of Trend Following reports the performance of a composite index made up of classic trend following systems (Dual Moving Average Crossover and others) simulated over multiple timeframes and a portfolio of futures, selected from the range of 300+ futures markets over 30+ exchanges that Wisdom Trading can provide clients access to. The portfolio is global, diversified and balanced over the main sectors.

We publish updates to the report every month, including that of the Dual Moving Average Crossover trading system.
Subscribing is the best way to keep track and follow the performance of trend following on a regular basis.

Dual Moving Average Crossover System Explained

The Dual Moving Average Crossover trading system uses two moving averages, one short and one long. The system trades when the short moving average crosses the long moving average.

The system optionally uses a stop based on Average True Range (ATR). If the ATR stop is used, the system will exit the market when that stop is hit.

If the ATR stop is not used, the system does not have an explicit stop and will always be in the market, making it a reversal system. It will exit a position only when the moving averages cross. At that point, it will exit and enter a new position in the opposite direction. In this case, the positions are sized based only on ATR using a custom money manager.

If an ATR stop is not used, then the entry risk is essentially infinite. This will cause the R-Multiples relatively meaningless since all gains will be less than the infinite risk of entering without any stop.

The Dual Moving Average Trading System includes five parameters that affect the entries:

Long Moving Average

The number of days in the long moving average.

Short Moving Average

The number of days in the short moving average.

Use ATR Stops

If set to TRUE then the system will enter a stop based on a certain number of ATR from the entry point.

ATR Days

The number of days used for the ATR calculation. This parameter is visible and active only if Use ATR Stops is TRUE.

Stop

The stop width expressed in terms of ATR. This parameter is visible and active only if Use ATR Stops is TRUE.

If the Use ATR Stops is FALSE there are no stops, but the system uses a theoretical 1 ATR stop for the purposes of position sizing.

Your Custom Version of this System

We can provide you with a customized version of this system to suit your trading objectives. Portfolio selection/ diversification, timeframe, starting capital… We can adjust and test any parameter to your requirements.

Contact us to discuss and/or request a full custom simulation report.

Get Your Custom Simulation Report

Alternative Systems

In addition to the public trading systems, we offer to our clients several proprietary trading systems, with strategies ranging from long-term trend following to short-term mean-reversion. We also provide full execution services for a fully automated strategy trading solution.

Please click on the picture below to see our trading systems performance.

Trading Systems - Wisdom Trading

CFTC-required risk disclosure for hypothetical results

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.

One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.