Trend following · Beginner · Weekly check — rebalances infrequently
SMA Crossover
How it works, and when it doesn't.
Trend persistence is real. Assets that have been rising for 50 days tend to keep rising for another 20.
Trend conditions not met. SMA20 < SMA50, price > SMA200, RF=64%. Flat.
Why it works
Moving average crossovers work because markets trend. When short-term price momentum exceeds the longer-term average, institutional money is rotating in. The 200-day filter eliminates trades against the macro trend — the single most important improvement to any crossover system.
The signal logic
- Long when SMA(20) > SMA(50) — short-term momentum above medium-term
- Additional filter: price must be above SMA(200) — confirms macro uptrend
- Execute at next open to avoid lookahead bias
When it fails
Choppy, sideways markets. When the 20-day crosses the 50-day 4+ times in a month, you're being whipsawed and paying commissions for nothing.
- Best market
- Bull regime, trending assets (SPY, QQQ)
- Worst market
- High VIX, sideways chop (2015, 2018 range-bound periods)
Backtest
| Sharpe ratio | 0.21 |
| Annual return | 1.9% |
| Worst drawdown | -25.0% |
| Trades in the backtest | 36 |
Backtest on daily bars, positions taken the bar after the signal (no look-ahead).
SMA Crossover, live.
Re-scored after every close.
The platform runs this and 32 other strategies against the live tape each day — with the evidence behind every number.