I manually back tested whether attempting to
avoid whipsaws using Matt's method (waiting to take a reversal
trade until price closed above/ below the high/low of the price of
SPY on the day the crossover of the 13/34 EMAs occurred) would make
a good trading system. Unfortunately, the answer is
"NO".Going back to the first signal after 1/1/95,
there would have been 74 trades, of which 21 would have been
winners and 53, losers. The expectancy of this system would have
been .06.
While following Matt's suggestions would have avoided some
whipsaws, there were many more that this system could not have
avoided. However, the biggest reason for these poor results was
that, if you wait for the confirmation of a close
above/below the price of SPY on the day of the 13/34 EMA
crossover and then opened and/or closed a trade at the
open of the next trading day, the entry/exit prices were much
poorer than if you had taken the trade on the day after the
crossover and lived with all the whipsaws.
I tried to attach my spreadsheet, but don't think that it took.
If anyone wants to see it, send me an email at
rchug@gmail.com.
Bob
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13/34 EMA Crossovers and Attempting to Avoid Whipsaws - SPY
Posted by bobhug on 1st of Jun 2011 at 04:51 pm
I manually back tested whether attempting to avoid whipsaws using Matt's method (waiting to take a reversal trade until price closed above/ below the high/low of the price of SPY on the day the crossover of the 13/34 EMAs occurred) would make a good trading system. Unfortunately, the answer is "NO".Going back to the first signal after 1/1/95, there would have been 74 trades, of which 21 would have been winners and 53, losers. The expectancy of this system would have been .06.
While following Matt's suggestions would have avoided some whipsaws, there were many more that this system could not have avoided. However, the biggest reason for these poor results was that, if you wait for the confirmation of a close above/below the price of SPY on the day of the 13/34 EMA crossover and then opened and/or closed a trade at the open of the next trading day, the entry/exit prices were much poorer than if you had taken the trade on the day after the crossover and lived with all the whipsaws.
I tried to attach my spreadsheet, but don't think that it took. If anyone wants to see it, send me an email at rchug@gmail.com.
Bob