This simple but effective condition improves the probability of the simple trend

following
system capturing the most profitable breakouts and not just any moving average c
rossover
which occurs. It is different to common moving average crossover systems where e
very
trade is taken, since the additional filter has to confirm the moving averages a
nd in this
way prevents trading some false breakouts.
3.2 First evaluation of the trading system
Calculation without slippage and commissions
The strategy is now applied to 30 minute FOREX data from 21/10/2002 to 4/7/2008.
All
the following calculations in this chapter are based on a one contract basis. Ke
eping the
beginning simple we calculate the trading system s results without any slippage and
commissions. These will be added in the next section where we will examine their
impact
on system performance. Furthermore please note that at first we check the system
just
with entries and trade reversals, leaving out exits.
As first input parameters for the trading system s entries we choose 10 bars for the
fast
and 30 bars for the slow moving average. With 30 minute bars this means the fast
moving
average is calculated from the last 5 trading hours whereas the slow moving aver
age
relies on the last 15 hours. Figure 3.2 shows the resulting equity curve in a de
tailed form.
With detailed form
we mean that this curve shows all run-ups and drawdowns of the
trades which happen during their lifetime. Like this the equity line is more inf
ormative
compared to a form where just end-of-day or even end-of-month results are show