Do Moving Averages Still Work?

Summary

In this video, champion trader Kevin Davey introduces a simple moving average crossover algorithm for trading without stop losses, which he claims performs well in various market conditions. He explains the strategy, emphasizing its robustness tested over two years across different markets and bar sizes. Davey encourages viewers to read his best-selling books on Amazon for more insights and to test the algorithm themselves for verification, promising more strategies in future videos.

Takeaways

• 🏆 The speaker is a champion trainer named Kevin Davey, who has a successful trading background and has written five best-selling books on trading.
• 📈 He introduces an algorithm (algo) designed for the current market, adaptable to various instruments and bar sizes.
• 🤔 The algo is based on a simple moving average crossover system with a unique twist and no stop losses, which might be concerning for some traders.
• 📚 The strategy is detailed in Kevin's book 'Confessions of a Champion Trader', which he encourages viewers to check out for more information.
• 📊 The algo involves calculating fast and slow moving averages and making trades based on crossovers and momentum indicators.
• 💰 The only exit strategy mentioned is a fixed profit target per contract, which is particularly relevant for futures trading.
• 🔧 The provided Tradestation code outlines the inputs and rules for the algo, including the conditions for buying and short selling.
• 🔬 The strategy has been tested over a two-year period from May 2020 to May 2022 across 133 different market and bar size combinations.
• 📉 The results show the algo's performance in various markets, highlighting the importance of having a diversified portfolio with different trading frequencies.
• 🛠 The process of strategy development includes optimization, robustness checks, and walk-forward testing to ensure the strategy's effectiveness.
• 👍 Kevin encourages viewers to test the algo themselves and not just rely on his word, emphasizing the importance of personal verification.

Q & A

Who is the speaker in the video?

The speaker in the video is Kevin Davey, a champion trader.

What type of algorithm does Kevin Davey introduce in the video?

Kevin Davey introduces a simple moving average crossover type system with a twist that only has a profit target and no stop losses.

What are the credentials that Kevin Davey mentions to establish his authority on trading?

Kevin Davey mentions his trading success in a verified trading contest and having written five best-selling books on trading.

Where can viewers find more information about Kevin Davey's books?

Viewers can find more information about Kevin Davey's books on Amazon.

What is the unique feature of the algorithm that Kevin Davey discusses?

The unique feature of the algorithm is that it does not include stop losses, relying instead on a well-constructed strategy and a set profit target.

What is the profit target based on in the algorithm?

The profit target in the algorithm is based on a set dollar amount per contract, which is particularly relevant for futures trading.

What book does Kevin Davey reference for more information on the algorithm's entry number 13?

Kevin Davey references his book 'Confessions of a Champion Trader' for more information on the algorithm's entry number 13.

What does Kevin Davey suggest is a key aspect of strategy testing?

Kevin Davey suggests that a key aspect of strategy testing is checking the robustness of a strategy by optimizing with a small number of iterations.

How long did Kevin Davey test the algorithm before presenting it?

Kevin Davey tested the algorithm for a period of two years, from the end of May 2020 to the end of May 2022.

What is the significance of the algorithm working across different bar sizes and markets?

The significance of the algorithm working across different bar sizes and markets indicates its versatility and potential for use in various trading scenarios.

What is the final testing method that Kevin Davey mentions for validating trading strategies?

The final testing method that Kevin Davey mentions is walk-forward testing, which is a method of out-of-sample testing.

What is the importance of having different types of systems in a diversified trading portfolio?

Having different types of systems in a diversified trading portfolio is important to catch various market opportunities and to balance the portfolio with some markets that are not always active, ensuring a steady profit over time.

What does Kevin Davey suggest traders do after learning about a new strategy?

Kevin Davey suggests that traders should test the strategy for themselves to verify its effectiveness and not rely solely on what he says.