I’m designing a trading-system, I’m close to finish there’s only one question left:
Before entering a (swing)trade I look up for some confirmation… Now I also would like to use a SMA crossover for another confirmation. I can’t decide either to use a 5 + 13 SMA or a 8 + 13 SMA (both on D1, maybe H4 timeframe).
So which one would you reccomend? I know the 5 period SMA may be faster and leads to more buy/sell signals but it also could provide fakes or false signals, the 8 period is of course a bit slower and maybe provides more reliable signals but also fewer?
I don’t think its likely that reducing the number of signals from a methodology automatically increases the win rate. However, the fewer signals you take, the lower the over-heads from spread and costs. This is amplified if, as a result of taking fewer trades you are in fewer simultaneous positions and therefore require less margin.
But that’s not to say I am positive about MA cross-overs. They are poor entry signals. They only work because they get you into an established trend. And there are more reliable entry signals for every trend.