Comparing Moving Averages
Despite the seeming sophistication of weighted and exponential moving
averages, nearly every test we’ve seen or done ourselves has shown the simple
moving average to be superior to the others in terms of trading results.
Our own research indicates that weighting the data to emphasize recent
events makes the indicator overly sensitive, thereby negating the original
purpose of the moving average: to smooth market action. Weighted and
exponential moving averages tend to generate more trades in tight, trading
range markets than simple moving averages
This tends to confirm a theory we have long held: Any entry method that is
the result of an abstruse calculation is probably more trouble than it’s
worth.
—Charles Le Beau & David W. Lucas, from
Computer Analysis of the
Futures Market (1992, Business One Irwin, Homewood, IL).
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