Believe me: it's not so easy to find a profitable trading system on Forex and it's not so easy to build a profitable trading system based only on simple moving averages, but with my Lazy Trading System #2 I achieved these goals!
Summary
What is “Lazy Trading”?
My Lazy Trading System #2
Conclusions
What is “Lazy Trading”?
I intend lazy trading like trading on very long time frames like weekly or monthly, so you can look at your trades only once per week/month, spending very little of your precious time.
In this post, I suggest a trading system on EUR/USD using a weekly time frame.
My Lazy Trading System #2
My lazy trading system #2 is simple as usual but profitable.
I consider four simple moving averages of closing prices on a weekly time frame:
- SMA(4)
- SMA(10)
- SMA(20)
- SMA(40)
Why did I choose these periods? Well, the SMA(40) is used by professional analysts on a weekly time frame because it's equivalent to the SMA(200) on a daily time frame, considering 5 trading days a week. SMA(20) is half of SMA(40), and SMA(10) is half of SMA(20). SMA(4) is a little less than half of SMA(10), but 4 weeks represent one month. That's all!
These are the rules of this trading system.
- I buy when the close price is over the SMA(4), SMA(4) is over the SMA(10), SMA(10) is over the SMA(20), and SMA(20) is over the SMA(40).
- I exit from the long position when the close price cross below SMA(10).
- I sell when the close price is below the SMA(4), SMA(4) is below the SMA(10), SMA(10) is below the SMA(20), and SMA(20) is below the SMA(40).
- I exit from the short position when the close price cross above SMA(10).
I decided to use TradingView for the backtest.
This is the simple code of this basic strategy.
// Four SMAs Strategy-Weekly
// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © The Investor Digest
//@version=5
strategy("Four SMAs Strategy-Weekly", overlay = true)
// I have not put any inputs
// Simple moving averages calculation:
SMA4 = ta.sma(close,4)
SMA10 = ta.sma(close,10)
SMA20 = ta.sma(close,20)
SMA40 = ta.sma(close,40)
// Simple moving averages plot on the graph:
plot(SMA4, color=color.red, linewidth=2)
plot(SMA10, color=color.aqua, linewidth=2)
plot(SMA20, color=color.green, linewidth=2)
plot(SMA40, color=color.blue, linewidth=2)
// Entry Long:
if (close> SMA4 and SMA4 > SMA10 and SMA10 > SMA20 and SMA20 > SMA40)
strategy.entry("Long", strategy.long)
// Entry Short:
if (close< SMA4 and SMA4 < SMA10 and SMA10 < SMA20 and SMA20 < SMA40)
strategy.entry("Short", strategy.short)
// Exit Long:
exitLong = ta.crossunder(close, SMA10) // candle closes below SMA21
strategy.close("Long",when=exitLong)
// Exit Short:
exitShort = ta.crossover(close, SMA10) // candle closes above SMA21
strategy.close("Short",when=exitShort)
These are the properties of the backtest (all the images below are screenshots by the Author; source: TradingView):
This is the equity curve:
So, it works!
Conclusions
Takeaways:- This trading system is suitable for beginners and long-term traders, too.
- It's so slow that you can trade it manually, spending a few minutes a week.
Suggestions:
- I suggest you use this trading system as the starting point of wide research. For example, you can add inputs to the code and try different periods for the moving averages; you can try a different type of moving average, like the exponential one (ta.ema); you can try to test this trading system on different financial instruments; etc.
- If you don't know how to code TradingView, this book can help you: Learn to program automated trading systems for TradingView from scratch (please, look inside the Our Shop section of this blog).
A sincere wish of good work to all!
Written by F. GRAMOLA (*).
(*) Member of S.I.A.T., the Italian Society of Technical Analysis (member society of I.F.T.A. – International Federation of Technical Analysts).
Warning
We merely cite our personal opinions for educational purposes only.
All trademarks are the property of their respective owners.
Investing and trading are risky. Don't invest or trade money that you cannot afford to lose.
Initial photo by Ibrahim Boran on Unsplash.
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