This is an interesting book for me to review as I am not really a technical analysis kind of guy.
There is no denying that, many times in the markets, it is better to be in cash than be fully invested.
The Book “5 Moving Averages that beat Buy and Hold” by Steve Burns & Holly Burns give 5 Moving Averages that one can use to protect oneselves in a falling/sideways market
These averages are to be used on the index and not on individual stocks as “the index can’t go bankrupt,issue false earnings etc”
The five moving averages are as follows:
- 200 Day Average.Buy/Hold when index is more than 200 Day Average on the last day of the Month.Else move to cash
- 250 Day Average.Buy/Hold when index is more than 250 Day Average at the end of the day.Else move to cash
- 50 Day SMA & 200 Day SMA. Buy/Hold when the 50 Day SMA is more than the 200 Day SMA.Else move to cash
- 20 Day SMA & 200 Day SMA. Buy/Hold when the 20 Day SMA is more than the 200 Day SMA.Else move to cash
- 50 Day SMA & 100 Day SMA. Buy/Hold when the 50 Day SMA is more than the 100 Day SMA.Else move to cash
The Book has back tested these formulas and makes a decent case.
There may be additional factors such as whiplashes,trading costs,impact costs etc which may impact the results in an actual trading environment
Do buy this book if interested in an introduction to Moving Averages.
One reply on “Book Review: 5 Moving Average Signals that beat Buy & Hold”
This was a nice read. Can this be applied in NSE as he applies the rule once the ETF does a cross over.