Exponential Average Crossover System

Exponential Average Crossover System
September 11, 2005 by Ed Seykota

Note: For a more rigorous definition of terms, see System_Math

The Rules:

Compute the Lags

Every day, after the close, compute:

• Slow_Lag (Slow Exponential Average)
• Fast_Lag
• ATR (Average True Range)

Give these indicators some time to warm up (25 days) to allow them to stabilize before generating timing signals.

Signal Timing

If the fast lag crosses above the slow lag, enter an order to buy on the following open.
If the fast lag crosses below the slow lag, enter an order to sell on the following open.

Position Sizing

Set the Risk_Per_Lot = ATR * ATR_Risk_Multiplier.
Position_Size = Equity / Risk_Per_Lot
Round Position size to the nearest 250 lots
Trade from the long side only; go long or out, never short.

Instrumentation

Trade the continuous contract for S&P futures.