How To Set Up The Right MA?

The Market Trend line is fundamental in identifying the market trend within a specific timeframe. It plays a pivotal role in dictating the suitable market order direction. As a result, adjusting the length of the moving average can impact the strategy's performance.

By default, the value is set at 200 Exponential Moving Average (EMA), providing a common indicator to distinguish market trends. If an asset's price moves above the EMA, it suggests that recent market performance exceeds the average, indicating a bullish trend. Conversely, a price below the EMA can hint towards a bearish trend.

As a first step in strategy formation, there is typically no need to adjust the EMA. However, users may tweak it slightly with the help of a backtesting tool to optimize strategy performance based on historical data.

It's important to note that excessively customizing the length of the moving average for each market or trading asset increases the risk of overfitting. Overfitting refers to a model that is overly complex or precise based on past data, reducing its effectiveness when applied to future data.

To guard against overfitting, you can test the strategy across various trading assets or instruments of a similar type. This can validate the strategy's soundness and readiness for future market conditions.

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Note: All scripts and indicators offered by TradeDots are intended for educational and informational use. Past performance is no guarantee of future results.