Stock Predictor trading strategy

Composite Moving Trend

Composite Moving Trend is a variation of the moving averages crossover that adds a confirmation of the price direction. It uses three moving averages: short (k days), medium (n days) and long (m days).

Strategy group

Moving average strategies

Based on

Three moving averages

Typical parameters

k = 5, n = 10, m = 30 days

The shortest average shows the most recent direction of the price. When it is rising there is a pre-buy condition; the buy is confirmed when the medium average crosses above the long one. The sell works the same way in the opposite direction.

Trading signals

• Buy when the k-day average is rising and the n-day average crosses above the m-day average.
• Sell when the k-day average is falling and the n-day average crosses below the m-day average.

Strategy rules

IF MA(n) >= MA(m) AND MA(k)[t] > MA(k)[t-1]
   THEN GO LONG
IF MA(n) < MA(m) AND MA(k)[t] < MA(k)[t-1]
   THEN GO SHORT

Where MA(k), MA(n) and MA(m) are moving averages of the closing price, k < n < m; [t] is today and [t-1] yesterday.

See also: how the Moving Averages indicator is calculated.