Is it profitable to trade with crossover system?

<p id="isPasted">The profitability of a crossover system, like any trading strategy, depends on various factors, including market conditions, the specific parameters used in the system, risk management, and the trader's skill and discipline in executing the strategy. A crossover system involves using moving averages or other technical indicators to generate trade signals based on the crossover of different time periods or lines.</p><p>Crossover systems can be profitable in certain market conditions, particularly in trending markets where price movements exhibit clear and sustained trends. The crossover of moving averages can help identify potential entry and exit points when the shorter-term moving average crosses above or below the longer-term moving average. This can capture trends and generate profitable trades.</p><p>However, it's important to note that crossover systems may not perform well in all market conditions, particularly during periods of choppy or ranging markets where price movements lack clear trends. In such conditions, crossovers may generate false signals and result in losses or frequent whipsaws.</p><p>To assess the profitability of a crossover system, it's recommended to backtest the strategy using historical data to evaluate its performance over different market conditions. This can provide insights into the system's win rate, risk-reward ratio, and overall profitability. Additionally, forward testing and demo trading can help assess the strategy's performance in real-time market conditions before committing to real capital.</p><p>Successful implementation of a crossover system also requires effective risk management techniques, such as setting appropriate stop-loss levels, position sizing, and trade management. Traders should consider the limitations and potential drawbacks of crossover systems and combine them with other technical analysis tools or strategies to increase their probability of success.</p>

<p id="isPasted">You can test this yourself using whatever moving average formulas and lookback lengths you wish, and adjust the lengths to get the best trading result. This process is backtesting and optimization and is regularly done in fitting a model to data. Remember that a successful backtest is a necessary condition to have a profitable trading system, but it is not a sufficient condition. To give yourself confidence that the system will be profitable in the future, perform model validation using data that is both more recent than the historical data used to fit the model, and that has not been used in fitting.</p><p>Note that a comparison to two moving averages is a comparison of old information. A 20-day simple moving average is a measure of the average of the past 20 days, typically described as the midpoint in time of those 20 days. There is a lag of 10 days between the midpoint and the end point of the period.</p><p>All of that being said, moving average crossovers are very elementary models, easily programmed and tested. If they do identify a tradable inefficiency, that inefficiency will quickly be recognized and arbitraged away.</p><p>So, in my opinion, no -- moving average crossover is not a useful technical indicator and does not give reliable buy and sell signals.</p>