A Simple Trend Following System

I recently came across a simple trend following system.

The rules for an uptrend goes like this (reverse it for a downtrend):

  1. When 20 SMA > 40 SMA, it is in an uptrend, only go long, not allowed to short.
  2. Enter on short-term weakness, when CCI(5) < -100
  3. Sell everything when price crosses below 40 SMA.

In terms of position sizing, at each buy point (i.e. when CCI(5) < -100), buy in the following sizes: 50%, 30%, 20%, and 5% for each new signal.

This shows that a profitable trading system need not be complicated at all. What is more difficult is being able to develop or find a profitable trading system where you are psychologically able to follow its rules.




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