Why do moving averages SUCK so much?

[wrbtrader]

So I ran some simple moving averages on Excel. Just simple moving averages. Like on SPY. But I tested everything from like 2 day moving averages (lulz) through 300 day moving averages.

All the numbers sucked versus just buy and hold. Way worse upside, and the max drawdown was barely reduced. It didn't matter the period.

HOWEVER, then I found a flaw in my equations. I had a < when it should have been a >. So... AHA! I had been testing like the REVERSE of moving averages, by when spot dropped below it, sell when it went above it. THAT'S why the numbers sucked! I was going to fix it and the numbers would truly be great!

Only, I fixed it, and the numbers still sucked. Which perplexes me much. If markets trend, how can moving averages (and their reverse) suck so bad?

Here is the best I can come up with: Stock prices, on average, move up over time. Thus, despite whatever the trend is, the stock is likely to go up the next day. For every day you are out of the market that is, on average, upside you are losing out on.

Is that the answer? Or why are they so bad?

Thanks!!!

There's a consistent problem with talking about a form of technical analysis (it works or it does not work) when discussed by someone that say they've "tested it" and they expect answers from anonymous public when there's no chart examples to visually explain their test results.

Just as importantly, there's no posted statistics to verify their results.

My point, it just turns into another philosophical discussion until the next person comes along and does the exact same type of discussion without charts and without the statistical results.

wrbtrader

 

[virtusa]

Everything that is "average" sucks. It should be above "average" to have any value.

 

[murray t turtle]

Everything that is "average" sucks. It should be above "average" to have any value.

%%
Exactly;
+ a problem with moving averages is operator trouble. Assume they are tracking correctly which is not true all of the time................................................,.

 

[easymon1]

Why do moving averages SUCK so much?

Lack of performance stats on the part of the user for the implementation of interest?

eg. Engulfing at Resistance entry trigger per Bigalow T-Line Trade
MSTR
https://elitetrader.com/et/threads/...at-right-here-baby.343012/page-8#post-5388902

Trading the T-line - cut to the chase ...
Stephen Bigalow
https://elitetrader.com/et/threads/...t-right-here-baby.335635/page-15#post-5162295

"Trading an Engulfing Candle at Support & Resistance provides greater conviction."
https://www.elitetrader.com/et/thre...t-right-here-baby.335635/page-10#post-5014575

 

[murray t turtle]

Moving averages are absolutely necessary for any trader. At least a quick glance of its position relative to spot couldn’t hurt.

I’ll say this though, if you’re trying to predict movement of price via MA cross overs you’re lacking in understanding of MA’s, and going with what the industry pushes on the populace. Think outside the monkey brain and you’ll find more clever ways to view/use price averages

%%
Good points;
except a PSAR[paraboilic stop and reverse] could substitute for moving averages.
BUT it tends to lag more/ so may not be suitable for all investors.
On the monkey pattern,TX teacher said he finally got rid his monkey, never would groW out of monkey diapers\LOL..........................................................................