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The Best Moving Average Crosses to Day Trade on $QQQ

One of the very first indicators that new traders learn about is the Moving Average. There are several different types of moving averages: Simple Moving Average (SMA), Exponential Moving Average (EMA), and Hull Moving Average (HMA), to name a few, but they all seek to perform a similar function; To show us the average price over a specified period of time.

One of the most common ways to utilize moving averages in day trading is to buy and sell when they cross. What is less known is which length and style of moving average offer the best returns when day trading. To answer this question, we’ve taken a look at some of the most commonly used moving average lengths and styles and utilized our Strategy Tester to find out which crosses work the best.

In this test, we’ll be looking at several different moving average combinations including:

  • 3 SMA Crossing Up on 8 SMA
  • 5 SMA Crossing Up on 10 SMA
  • 8 SMA Crossing Up on 21 SMA
  • 10 SMA Crossing Up on 20 SMA
  • 15 SMA Crossing Up on 30 SMA
  • 50 SMA Crossing Up on 200 SMA

We’re taking the bullish bias here, so we’ll be buying when they cross up and we’ll sell when they cross down. In addition, we’ll be testing each of the three types of Moving Averages listed above. We’ll be utilizing the 15-minute time frame, we’ll be testing back 7,000 candles, and we’ll be running all tests on the ETF.

Let’s jump in!

The Simple Moving Average (SMA)

The SMA is the most commonly used of the MAs, so we felt it the most appropriate moving average to start with. Let’s dig into the results and see how these various crosses performed.

3 SMA Cross Up on 8 SMA
3 SMA Cross Up on 8 SMA example.

5 SMA Cross Up on 10 SMA5 SMA Cross Up on 10 SMA example.

8 SMA Cross Up on 21 SMA8 SMA Cross Up on 21 SMA example.

10 SMA Cross Up on 20 SMA10 SMA Cross Up on 20 SMA example.

15 SMA Cross Up on 30 SMA15 SMA Cross Up on 30 SMA example.

50 SMA Cross Up on 200 SMA50 SMA Cross Up on 200 SMA example.

Cumulative Results

In the table below, we can see how the results compare. The first thing to note is % gain. The 5 SMA & 10 SMA cross is the clear winner here with a net profit of +19.12% over 383 trades. Now, that might be a lot of trades for the less active trader, so an alternative with nearly the same results would be the 15 SMA & 30 SMA cross. It has offered a return of +17.90% over the same period of time and only took about 1/3 the trades. The clear loser of the bunch is the 50 SMA & 200 SMA cross, which netted a profit of only 1.89%.

Cumulative results of SMA Cross examples.

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The Exponential Moving Average (EMA)

Many traders prefer to use EMAs because they give additional weight to the most recent price action. Let’s see if that additional weight aids in the results of the strategy.

3 SMA Cross Up on 8 EMA3 SMA Cross Up on 8 EMA example.

5 SMA Cross Up on 10 EMA5 SMA Cross Up on 10 EMA example.

8 SMA Cross Up on 21 EMA8 SMA Cross Up on 21 EMA example.

10 SMA Cross Up on 20 EMA10 SMA Cross Up on 20 EMA example.

15 SMA Cross Up on 30 EMA15 SMA Cross Up on 30 EMA example.

50 SMA Cross Up on 200 EMA50 SMA Cross Up on 200 EMA example.

Cumulative Results

In the table below, we get an idea of how the results compare. Much like the SMA strategy, the 5 & 10 cross was the best performer again, achieving a net gain of +18.30%. Again, of note is the sheer number of trades taken, so for the less active trader, an alternative could be the 15 & 30 cross, which manages a profit of +18.32% over the same period of time. Again, much like the SMA strategy, the worst performer is the 50 & 200 cross.

Cumulative results of EMA Cross examples.

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The Hull Moving Average (HMA)

The Hull Moving Average is the least commonly used moving average of the styles that we tested. The difference between the Hull and the Simple and Exponential MAs is their calculation. It is designed to reduce the lag often associated with moving averages by providing a faster signal on a smoother visual plane. Let’s see how this alternate calculation affects our results. The Hull Moving Average requires a minimum period of 5, so we’ve removed the 3 & 8 cross from the dataset.

5 HMA Cross Up on 10 HMA5 HMA Cross Up on 10 HMA example.

8 HMA Cross Up on 21 HMA8 HMA Cross Up on 21 HMA example.

10 HMA Cross Up on 20 HMA10 HMA Cross Up on 20 HMA example.

15 HMA Cross Up on 30 HMA15 HMA Cross Up on 30 HMA example.

50 HMA Cross Up on 200 HMA50 HMA Cross Up on 200 HMA example.

Cumulative Results

As we can see in the table below, the Hull Moving Average presents us with a very interesting data set. The first interesting thing is that the 5 & 10 cross performs quite poorly, especially in comparison to the same cross on the other moving average styles. With a net loss of -18.32%, and an astronomical trade count, this is the worst-performing strategy that we tested. On the opposite side of the coin, however, is the 15 & 30 cross. This cross is the best performing strategy of all of the tests we ran. It nets a profit of +20.17% over 296 trades and has a 49% win rate.

Cumulative results of HMA Cross examples.

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Final Conclusions

When we take all of the data into consideration, it’s clear that the 15 & 30 cross is the best performer across moving average styles. The HMA does yield the highest percentage return, but with a total of 296 trades, this strategy may be best suited for the active trader. For a trader who is interested in fewer signals, we suggest the EMA strategy, as it nets a +18.32% profit, only -1.85% less than the HMA, and does so in only 92 trades.

Cumulative results of the 15 and 30 Cross examples.

We hope you found this helpful, and encourage you to drill down, even more, to see if there are more variables that could be added to this strategy to increase its performance!

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