Way of the turtle

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Way of the Turtle

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Dual Moving Average
This is a very simple system that buys and sells when a 100-day
moving average crosses over a slower 350-day moving average.
Unlike the other systems, this system is always in the market, either
long or short. The only time a trade is exited is when the fast-mov-
ing average crosses over, at which time the trade is exited and a new
trade is initiated in the opposite direction. Figure 10-4 shows the
moving averages for the Dual Moving Average system.
The 100-day moving average more closely follows the price, and
when it crosses it at the end of July, a long trade will be entered. As
you probably can tell, this system is a very long term trend-following
Turtle-Style Trading: Step by Step
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141
SB: Sugar #11 World-CSCE
Dec 20
05
Nov 2005
Oct 2
005
Sep
2005
Aug
2005
Jul 2005
12.0
11.5
12.5
13.0
13.5
14.0
14.5
15.0
15.5
11.0
Figure 10-4
Dual Moving Average System
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system and does not trade all that often compared with most other
systems.
Triple Moving Average
This system uses three moving averages: a 150-day average, a 250-
day average, and a 350-day average. The buys and sells occur
when the 150-day moving average crosses over a slower 250-day
moving average. The system uses the longer 350-day average as a
trend filter. Trades happen only when both moving averages are
on the same side as the longer 350-day average. If both are higher,
long trades are permitted; if both are lower, only short trades are
permitted.
Unlike the Dual Moving Average system, this system is not
always in the market. Trades are exited when the 150-day average
crosses the 250-day average. Figure 10-5 illustrates the moving aver-
ages for the Triple Moving Average system.
The top line is the 150-day average, the middle line is the 250-
day average, and the lower line is the 350-day average. You can see
how all three lines slowly follow the price upward on this chart,
which uses the same time period as the one in Figure 10-4. The
system will exit the trade when the top line crosses back under the
middle line.
Before we move on to the next section, guess what the relative
performance of these systems for the period indicated will be. How
much worse will the time-based exit be than the normal breakout
exit? Which two systems do you guess will have the best MAR ratio?
How much better will the Triple Moving Average system perform
than the Dual Moving Average system?