Golden Cross Optimised For Reversal (by Coinrule)

16 wrz 2020

A moving average crossing is a common and widely adopted trading strategy. A short-term MA crossing above a long-term one provides the buy-signal. The opposite generates a sell-signal for the strategy.

Although very popular, this strategy has some limitations that lead to frequent "false signals" and only a few very profitable trades. If the strategy provides two many trades, that generates

• the risk for more potential losses
  
• more transaction fees paid
  
• capital allocated to the strategy, thus the impossibility of catching other potential opportunities.
  

Applying an additional filter to the strategy, consisting of the crossing happening below a longer-term moving average, allows increasing the chances of catching the first crossing signaling a reversal.

The indicator is set to work with three moving averages.

Buy signal: The MA(9) to cross above the MA(50), which must be below the MA(100)
Sell Signal: The MA(9) to cross below the MA(50)

This indicator works significantly better on lower time frames, where it can reduce the noise of getting too many non-profitable signals from a conventional crossing strategy.

The indicator has been backtested mostly on cryptocurrencies.