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Triple Moving Average Trading System

The Triple Moving Average 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 (Triple Moving Average 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 Triple Moving Average trading system.
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Triple Moving Average System Explained

The Triple Moving Average Trading system uses three moving averages, one short, one medium, and one long. The Triple Moving Average Trading system trades long when the short moving average is higher than the medium moving average and the medium moving average is higher than the long moving average. When the short moving average is back below the medium moving average, the system exits. The reverse is true for short trades.

For this reason, unlike the Dual Moving Average trading system, this system is not always in the market. The system is out of the market when the relationship between the short MA and medium MA does not match the relationship between the medium MA and long MA.

For example, considering Long trades, if the short MA is over the medium MA but the medium MA is under the long MA, the system is out of the market. Likewise if the medium MA is over the long MA but the short MA is not over the medium MA the system is out of the market.

This means that the Triple Moving Average system can initiate trades due to either:

· Short MA is above the medium MA for Long entries or to below for Short entries. This is the most common case.

· Medium MA is above the long MA where the short MA is already over the medium MA for Long entries, or to below the long MA where the short MA is already under the medium MA for Short entries . This will happen when the market has been descending or ascending for a long time and then reverses direction. It takes longer for the medium MA to move to the other side of the long MA since they are both slower moving averages than the short MA.

The Triple Moving Average trading system optionally uses a stop based on Average True Range (ATR). If the ATR stop is not used, the system uses the value of the long moving average as the stop for the purpose of position sizing.

In the event of a stop out, the system will reenter whenever the above conditions are true, even if this is the following day’s open.

The Triple Moving Average trading system includes seven parameters that affect the entries:

Long Moving Average

The number of days in the long moving average.

Medium Moving Average

The number of days in the medium 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 Average

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 the trading system computes a stop at the price of the long moving average for the purposes of position sizing. In this case, the stop is active only for the first day.

Close through Short MA

If set to True, Trading Blox won’t take a trade unless the close is also on the right side of the short moving average. For example, with this parameter set to True, in addition to the short moving average being over the medium moving average and the medium moving average being over the long moving average, the close must be above the short moving average in order to trigger a Long position entry.

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.

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