Amibroker Optimisation gave unexpected results - Mean Reversion?

[TraderJimmy]

I am doing some Amibroker testing, mostly to learn AFL, and I got some results that have confused me. I copied some code from a website to test the optimisation function and I thought it was testing an MA Crossover strategy, ie. buy when the shorter MA crosses up over a longer MA - indicating an uptrend....but the better results were the opposite of what I expected. Is that Mean Reversion?

I'm a noob, so I'm hoping someone can set me straight.

Here's the code (I've removed my comments to keep it clean). I ran it over the last couple of years on ASX200 equities.

//
fastlength = Optimize( "FMA", 100, 5, 100, 1);
slowlength = Optimize( "SMA", 25, 1, 100, 1);

FastMA = MA(C, fastlength);
SlowMA = MA(C, slowlength);

Buy = Cross(FastMA, SlowMA);
Sell = Cross(SlowMA, FastMA);
//

The best results seem to be where when FastMA = 18 and the SlowMA = 3...or numbers similar to that. At first glance, this wsa the opposite of what I expected.

When I backtested it (as opposed to running an optimisation) I looked at some of the individual trades and found that it was buying when the FastMA (eg 18) crossed above the SlowMA (eg 3). This means you're buying as the price has dropped below the longer MA, is that a Mean Reversion strategy?

 

[MovingAverage]

your fastlength and slowlength default parameters should be the other way around. fastlength = 25 and slowlength = 100. In fact just rename "fastlength" to slowlength and "slowlength" to fastlength and you should be right. Try that and re-run your sims it should make sense then. With the parameters you posted your fast MA is actually a slow MA and your slow MA is actually a fast MA. Conventionally a short MA has a shorter period than a slow MA

 

[Trav.]

F1 is your friend ( short cut to help file )

https://www.amibroker.com/guide/afl/cross.html

 

[TraderJimmy]

your fastlength and slowlength default parameters should be the other way around. fastlength = 25 and slowlength = 100. In fact just rename "fastlength" to slowlength and "slowlength" to fastlength and you should be right. Try that and re-run your sims it should make sense then. With the parameters you posted your fast MA is actually a slow MA and your slow MA is actually a fast MA. Conventionally a short MA has a shorter period than a slow MA

This was my thought as well when I copied the code in, a fast ma must be shorter...but I thought (being a noob) that I was wrong. The code is still on the site and there's even a YouTube video...but no one seems to have picked up on that glaring mistake. Glad my initial reaction was right.

Thanks for setting me straight.

 

[TraderJimmy]

F1 is your friend ( short cut to help file )

https://www.amibroker.com/guide/afl/cross.html

View attachment 107579

Thanks Trav, yes, I found the help...and that reinforced my suspicion...but just assumed that the site I'd got the coffee from must have been right. It goes to show, just because something is published somewhere, doesn't mean it's right.

 

[MovingAverage]

This was my thought as well when I copied the code in, a fast ma must be shorter...but I thought (being a noob) that I was wrong. The code is still on the site and there's even a YouTube video...but no one seems to have picked up on that glaring mistake. Glad my initial reaction was right.

Thanks for setting me straight.

Who would have thought you couldn't trust code grabbed off the internet It's a great way to learn...roll up your sleeves an get stuck in to some AFL coding...well done mate you'll learn a lot

 

[Trav.]

but just assumed that the site I'd got the coffee from must have been right.

Well I hope the coffee was better than the code

All good mate, and probably a good lesson to learn early on. I like to use the Exploration to help see what is going on and of course charting helps as well.

I have done a coupe of little mod's to your code and in doing so found the error in your ways, as it appears you have swapped the fast and slow period ranges around

fastlength = Optimize( "FMA", 100, 5, 100, 1);
slowlength = Optimize( "SMA", 25, 1, 100, 1);

Fixed code with some additions to help fault find

slowlength = Optimize( "SMA", 100, 5, 100, 1);
fastlength = Optimize( "FMA", 25, 1, 100, 1);

SlowMA = MA(C, slowlength);
FastMA = MA(C, fastlength);

Buy = Cross(FastMA, SlowMA);
Sell = Cross(SlowMA, FastMA);


Plot( C, "Price", colorDefault, styleBar );
Plot( SlowMA, "SlowMA", colorBlue, styleLine);
Plot( FastMA, "FastMA", colorRed, styleLine);


if( Status( "Action" ) == actionExplore );

Filter = Buy OR Sell;

AddColumn(Close, "Close", 1.2, colorDefault, colorDefault, 50);
AddColumn(ROC( C, 1 ), "%", 1.2, colorDefault, colorDefault, 50);
AddColumn(SlowMA, "SlowMA", 1.2, colorDefault, colorDefault, 50);
AddColumn(FastMA, "FastMA", 1.2, colorDefault, colorDefault, 50);

PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorGreen, 0, L, Offset=-40);
PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorLime, 0,L, Offset=-50);
PlotShapes(IIf(Buy, shapeupArrow, shapeNone),colorWhite, 0,L, Offset=-45);

PlotShapes(IIf(Sell, shapeSquare, shapeNone),colorRed, 0, L, Offset=-60);
PlotShapes(IIf(Sell, shapeSquare, shapeNone),colorOrange, 0,L, Offset=-70);
PlotShapes(IIf(Sell, shapeUpArrow, shapeNone),colorWhite, 0,L, Offset=-65);

 

[Trav.]

Also the exploration window for you

 

[TraderJimmy]

Thanks Trav, yeah if you look up the thread, this was the discovery...and was my suspicion early on. It just seemed backward [emoji15].

It was definitely a good learning, to go through the trades and verify what I suspected.

Thanks for refining the code. I've re-run mine just to see the proper output, which worked well.

I'll try yours over the weekend.

I have to start with simple code before I start getting into loops and more complex entry and exit strategies.