Tim Olson
47471b7700
- Flink update_bars debouncing - update_bars subscription idempotency bugfix - Price decimal correction bugfix of previous commit - Add GLM-5.1 model tag alongside renamed GLM-5 - Use short Anthropic model IDs (sonnet/haiku/opus) instead of full version strings - Allow @tags anywhere in message content, not just at start - Return hasOtherContent flag instead of trimmed rest string - Only trigger greeting stream when tag has no other content - Update workspace knowledge base references to platform/workspace and platform/shapes - Hierarchical knowledge base catalog - 151 Trading Strategies knowledge base articles - Shapes knowledge base article - MutateShapes tool instead of workspace patch
2.8 KiB
2.8 KiB
description, tags
| description | tags | ||||
|---|---|---|---|---|---|
| Uses three moving averages of ascending length to filter false signals, requiring full alignment of all three MAs before establishing or liquidating long or short positions. |
|
Three Moving Averages
Section: 3.13 | Asset Class: Stocks | Type: Trend-Following / Technical Analysis
Overview
Adding a third moving average helps filter false signals that arise in the two-MA strategy. A long position is established only when all three MAs are in descending order by length (shortest on top), confirming a strong uptrend. Liquidation occurs as soon as the shortest MA drops below the middle MA — an earlier warning than waiting for a full cross of the two outer MAs.
Construction / Signal
Three MAs with lengths T_1 < T_2 < T_3 (e.g., T_1 = 3, T_2 = 10, T_3 = 21):
Signal = { Establish long position if MA(T_1) > MA(T_2) > MA(T_3)
{ Liquidate long position if MA(T_1) <= MA(T_2)
{ Establish short position if MA(T_1) < MA(T_2) < MA(T_3)
{ Liquidate short position if MA(T_1) >= MA(T_2) (324)
- Long trigger: All three MAs are in bullish alignment (T_1 > T_2 > T_3 in value).
- Long liquidation: Early warning — the short MA drops back below the middle MA (even if still above the long MA).
- Short trigger: All three MAs are in bearish alignment (T_1 < T_2 < T_3 in value).
- Short liquidation: Early warning — the short MA rises back above the middle MA.
Entry / Exit Rules
- Long entry: MA(T_1) > MA(T_2) > MA(T_3)
- Long exit: MA(T_1) <= MA(T_2)
- Short entry: MA(T_1) < MA(T_2) < MA(T_3)
- Short exit: MA(T_1) >= MA(T_2)
Key Parameters
- Short MA length T_1: Typically 3–10 trading days
- Middle MA length T_2: Typically 10–21 trading days
- Long MA length T_3: Typically 21–50 trading days; must have T_1 < T_2 < T_3
- Example: T_1 = 3, T_2 = 10, T_3 = 21
- MA type: SMA or EMA
Variations
- Different exit rule: Liquidate when T_1 falls below T_3 (slower exit) instead of T_2
- Combined with stop-loss: Add price-based stop-loss as in the two-MA strategy (Section 3.12)
- Four or more MAs: Further extension possible but increases complexity and reduces signal frequency
Notes
- The three-MA strategy generates fewer signals than the two-MA strategy, filtering out some false crossovers.
- The early liquidation rule (based on T_1 vs T_2 only) provides faster exit than waiting for full reversal.
- Like all MA-based strategies, considered "unscientific" by academics but widely used by practitioners.
- Best applied in trending markets; whipsaw losses occur in range-bound (mean-reverting) markets.
- Applicable single-stock or across a universe; parameter selection should be done via backtesting.