Strategy critique: EMA50/200 crossover on M5 with H1 trend filter – any flaws?

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Hi everyone, I'm in the process of designing an EA for AUD/USD, NZD/USD, GBP/USD, and EUR/USD.

My strategy enters trades on the 5-minute timeframe (M5), based on EMA50 crossing over EMA200, with confirmation from the 1-hour trend direction (H1 EMA50). I'm setting slippage to 1 pip.

Before I go deeper into coding, I'd love to ask:

- Do you see any potential weaknesses or limitations in this entry condition?
- Are there market conditions where this logic might fail or give poor results?

Any feedback or suggestions would be greatly appreciated!

Thank you in advance.

 
rhyme-prime:

Hi everyone, I'm in the process of designing an EA for AUD/USD, NZD/USD, GBP/USD, and EUR/USD.

My strategy enters trades on the 5-minute timeframe (M5), based on EMA50 crossing over EMA200, with confirmation from the 1-hour trend direction (H1 EMA50). I'm setting slippage to 1 pip.

Before I go deeper into coding, I'd love to ask:

- Do you see any potential weaknesses or limitations in this entry condition?
- Are there market conditions where this logic might fail or give poor results?

Any feedback or suggestions would be greatly appreciated!

Thank you in advance.

Good, robust, durable and profitable strategy can be simple - but not primitive.

My advice: code it anyway! If the results aren’t great, take a step back, learn from it and rethink the logic.

That’s how progress happens.

 
The truth? There's a flaw in almost every strategy. The strategies aren't the weak link either...the markets are designed to make you lose and force retail traders out. Risk management and a "sane" strategy is what you need. There's nothing wrong with a trend following strategy like this, but you have to consider economic news impacts and data impacts on the market (times...economic calendar). If trading really was easy, you could trade every setup and trade at every time, but it's not the case in reality
 

There's a difference between "flawed" and "imperfect" - no strategy works always and in all conditions.

You're also missing key point - MT4/MT5 is more about the dream than the money. For 99% of us - a wonderful life-time journey of building and refining strategies.

 
rhyme-prime:
- Do you see any potential weaknesses or limitations in this entry condition?
- Are there market conditions where this logic might fail or give poor results?

Absolutely. The biggest flaw with any MA cross system is people look at the cross and think "wow! profits!" because you see money being made AT THE CROSS. But that's not your entry/exit points.

Make sure you're looking at the close bar price at the time of cross, and not the cross itself. Example below is EUR/USD 5M with 50/200 cross as you're doing.

What at a glance looks profitable, is actually a massive loss. That's where most people fail with MA crossover strategies.

 

It's possible to code the entry such that it only enters the position when the bid price comes back to one of the moving averages. For example - you create a global boolean flag called "GreenCrossedBelowRed" to indicate the crossover (setting it to true at the crossover), and then while the flag is true, you enter the sell position when the bid price comes back to the 200 period MA. After the position is executed, reset the flag back to false. Tried and tested this before, and while you will see some good trades in the backtest...there are other dilemmas..it won't do anything good in ranging and thin markets. Moving averages are also lagging and change direction when the market rewrites its story after news impact..

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