The above trading strategy using the 8 and 21 day moving average crossing had pros and cons.
Pros: Long enough term allowing it to be more predictive of underlying strength and would help iron out choppy short term price action. Would also give you some room to play so you weren't forced out by daily volatility. which is the reason why the strategy seemed to work better on low vol stocks. FBR was not one of them.
Cons: Let's say you were holding. By the time the 8 day MA again crossed the 21 day MA on the downside, the price could have moved significantly. It was long enough to iron out short term fluctuations but the double edged sword here was that if there were fundamental changes, the sell execution signal wouldn't appear for at least a few days.
Therefore, while in theory it looked good, in execution there were problems. It could have worked well in theory, across many trades, but again I could never back test the strategy and short term capital gains tax and trading fees would seem to eat at the little alpha you could generate, at least with my modest trading account. I was never going to risk significant money into this type of trading strategy so the alpha would never overcome the frictions.
In any case, just wanted to add some context to my statement above.
Not investment advice. DYOR, etc etc.
FBR Price at posting:
4.9¢ Sentiment: Buy Disclosure: Held
