Two moving averages
A systematic stocks approach—Two moving averages—defined by explicit rules, testable on history, and fragile when costs or regimes change.
Overview
The simplest variant of this strategy replaces the stock price P in Eq. That is, we have 2 moving averages with lengths T′ and T , where T′ <T (e.g., T′ = 10 and T = 30), and the signal is given by: { Establish long/liquidate short position if MA(T′)> MA(T ) Establish short/liquidate long position if MA(T′)< MA(T ) (322) This signal can be augmented with additional “stop-loss” rules to protect realized profits.
Two moving averages sits in the Stocks chapter of the systematic catalog. On QUSXFI we treat it as a testable hypothesis: specify entries, exits, sizing, and costs—then ask whether edge survives out-of-sample scrutiny.
Discretionary traders often arrive at similar ideas intuitively; the quantitative version forces you to write the rule before you see the next bar. That discipline is what makes results reproducible—or exposes them as luck.
Based on the research catalog 151 Trading Strategies (Kakushadze & Serur, 2018), section 3.12. Educational summary—not a replication of the full formal definition.
How the Strategy Works
Two moving averages in Stocks is defined by explicit positions and transition rules—translate each clause into code or a checklist. The catalog frames it this way: this strategy replaces the stock price P in Eq. Your implementation must preserve that economic intent while making every parameter explicit.
The published definition of Two moving averages (catalog §3.12) specifies when exposure changes; discretionary overrides invalidate systematic claims.
Implementation and Research Process
Decompose Two moving averages into signal, portfolio construction, and execution modules—each must be path-independent given the same historical tape.
Stress Two moving averages costs at 2× baseline; many Stocks edges live or die on slippage alone.
Anchor Two moving averages research to the catalog definition, then stress every assumption the textbook silently skips. this strategy replaces the stock price P in Eq.
Risk: What Breaks This Strategy
Single-name or factor exposure in Two moving averages concentrates idiosyncratic shock risk even when the signal is 'systematic.'
Universe selection and survivorship in historical databases flatter backtests versus live investable sets.
Borrow and short availability change the short leg economics without changing the code.
Common Mistakes to Avoid
- Erasing losing Two moving averages months instead of documenting regime breaks—that is how research firms stop learning.
- Deploying Two moving averages live before paper trading through at least one adverse Stocks month.
- Using academic §3.12 definitions for Two moving averages while ignoring borrow, margin, or contract specs.
- Changing Two moving averages parameters after each losing week—implicit discretion destroys reproducibility.
How to Study This Strategy
- Compare Two moving averages to one sidebar alternative net of costs—document why you chose this structure.
- Restate Two moving averages (§3.12) as numbered rules another researcher could implement cold.
- Run a paper book on Two moving averages for a full signal cycle; export trades and tag regimes manually.
- Read the catalog excerpt for Two moving averages and highlight one clause your spec must not hand-wave.
- Add conservative costs to Two moving averages; rerun with 2× spreads and compare drawdown paths.
Key Takeaways
- Two moving averages in Stocks is a testable rule set—a systematic stocks approach—two moving averages—defined by explicit rules, testable on history, and fragile when costs or regimes change.
- Translate every clause of Two moving averages into code or a checklist; judgment steps are not yet quantitative.
- Capacity for Two moving averages appears only when you simulate participation against average volume.
- Erasing losing Two moving averages months instead of documenting regime breaks—that is how research firms stop learning.
- Related strategies in the sidebar may share hidden exposures with Two moving averages—compare before stacking.
Learning Tip
Build a 'Two moving averages' research memo: hypothesis, universe, parameters, costs, kill switches—edit it before every tweak.
Explore related strategies in the sidebar or return to the full catalog.