This study is intended as a supplement to the NAS Trading article, “This long term trend model has dominated buy and hold” posted at NAS Trading and on Seeking Alpha.
In this article, we evaluated a moving average system using monthly S&P500 index data going back 60+ years. One weakness of the study is that we used an index rather than an investable security. Lets look at the results of the same system, but using SPDR S&P 500 ETF (SPY) data from 1994 to present (which is all we can use given this securities more limited history). Here are the results using a 10MA:
As you can see (and similar to the 10 month lookback system) this approach as historically dominated buy and hold. One important concept in trading system development is to focus on concepts rather than specific rule-sets. Ideally, you want to be able to test a basic idea using a wide variety of different specific trading rules and parameters and find that they all work in a similar fashion.
Lets look at the results using an 8 – 16 month moving average, stepping two months at a time:
All of the parameters we have tested do reasonably well, once again much like our original “lookback” approach.
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