So you have the right trigger to enter a position? A 10 tick break of a 20MA (moving average) on a 10 minute chart? What is the likelihood it is a winner? My statistics show about 45% of the time you will be correct !!! With profit targets set at 10 ticks and the stop loss at 10 ticks – this test was done on my automated trading back testing programme (via Ninja Trader) with about 10 different instruments over several weeks on over 500 simulated trades. It’s a loser !!!

Oh … so you want to widen the stops, make trail-stops, adjust the tick entry over the MA, a different MA, follow a higher level MA, stop to break-even or even fade the entry and/or exits on multiple contracts? Of course most of these techniques are actually order management and have nothing to do with the original trigger. Yes even after optimising all these parameters it is still about a 40 to 50% at best strategy – a loser !!! You could have thrown a dart and perhaps come out with the same results.

Charts are deceiving when you look at them. It looks so easy and predictable until you actual try it. Fundamentally MAs, as most indicators, are lagging indicators and hence are no predictor of the future. Though useful as guides, nothing takes away from anticipatory thinking. This leads to the theory that many good traders perhaps have a six sense and over time sense when markets are about to turn. What do you think? Do you have a fool proof mechanised trigger?