Friday, September 12, 2008

Mark McRae; A Unique Moving Average Cross

Over at Trader's Blog there is a guest article by Mark McRae on a moving average crossover method he uses. The basis of the method is using a moving average of open price in conjunction with a moving average of closing price and trading the crossovers. A MACD or ADX is applied as a filter to reduce whipsaw trades. With Zignals Stock Charts you can create moving average overlays using Open, Close, High and Low prices, and moving averages can be simple, exponential, weighted, time series and variable. A MACD or ADX indicator can be added as suggested for a filter. Below are some examples

Mark McRae uses a 5-period exponential moving average of the close and a 6-period exponential moving average of the open:

A sample chart of Mark's output would look like this:

I looked at a wighted moving average crossover with a 3-period moving average based on the High and a 5-period moving average based on the Open; there are fewer whipsaw signals but I'm not sure the quality of the triggers has improved?

Dr. Declan Fallon, Senior Market Technician, the free stock alerts, market alerts, and stock charts website