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Is 200 SMA still alive?

June 7, 2018

Many traders usually ask me how do I know my overnight trading patterns will still be profitable in future.

Well, one way is to constantly monitor patterns stats and equity curves to see “how” they change with new data. But as we deal with hundreds of patterns, the main problem is that it can happen that a pattern equity curve goes out of the track for a few months and then, when the trader decides not to rely on it anymore, it suddenly comes back to be profitable.

The real question is: is there a way to detect if a change in the equity curve is temporary or permanent?

The answer is yes. We must move away from a single patterns stats and change perspective. Look at the general picture.
What is the underlying market phenomena telling us?
What is its equity curve doing now?

If it’s against us, then I will opt for the permanent change in the single patterns behaviour. Otherwise it’s only a fake failing.

Here we come with the first cornerstone of Nightly Patterns:  200 SMA (Simple Moving Average) used to filter long overnight trades on SPY back to 1993. We take all overnight trades on SPY when today’s close is above 200 SMA.

How is 200 SMA dealing with the new recent data?

4546 57,70 1,29 0,31 -0,33 4,09 -3,41 -13,56
    T-score 4,87        

It’s doing well from the numbers above. Good profit factor (improved from my last year stats). I remember it was weakening to 1,11.  4546 nights from 1993. I like the compounded drawdown which keeps there under 15%.

And here’s the equity curve:


Impressive start in the 90’s leads to good filtering efficiency in 2001/2 and 2008/9 big bear markets. It looks like we have problems recently but the equity curve resumed strongly upward.

I believe 200 SMA is one of the oldest and most well-known stock market filters and maybe, mainly because of that, it will be the last leaving the table!

It will continue… with the other cornerstones!

Marco Simioni

Nightly Patterns

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One Comment
  1. Alex Argyros permalink

    Thank you, Marco, for this interesting and important post.


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