Forex Mechanical System Review: Triple SMA Crossover Version 3.0

The Triple SMA Crossover Version 3.0 forex mechanical system only managed to generate one valid signal for the forward testing period so I’m gonna squeeze in my review for this system today, too!

But before we get to the numbers, make sure you’ve reviewed the tweaked rules of this version and the backtest results:

Forex Rules: Triple SMA Crossover Version 2.0

Backtest Results (Dec. 1, 2013 – Dec. 1, 2014)

And now here are the grades based on my Framework for Forex Mechanical Systems:

Profitability: 14/20

With the addition of the 100-pip profit target, this system managed to lock in more pips as the trend progressed, allowing it to be profitable even if the trend eventually turned. Although the overall P/L was lower compared to the previous version of the forex system, the win ratio saw a large improvement so I added brownie points for that.

EUR/USD 4-hour Forex Chart

EUR/USD 4-hour Forex Chart

However, the system didn’t fare so well in forward testing, as it generated the sell signal late in the trend and actually shorted at the bottom. Despite that, I still think the ADX was an excellent addition in filtering out signals occurring during ranging environments.

Risk Tolerance: 17/20

As with the previous versions of the system, I think the 200-pip trailing stop does a good job of cutting losses when a reversal is about to take place. What’s great about this tweaked version is that the system generated no losses for the backtesting period!

During the forward test though, the system wound up with a loss when the trailing stop was hit on a price reversal. Instead of getting the full 1% hit, the loss was trimmed to just 0.63% after price briefly dipped to a new low before turning up.

Newbie-Friendliness: 10/10

Even with all the tweaks, this system is still definitely newbie-friendly since the rules are straightforward and easy to implement. It simply makes use of basic technical indicators such as moving averages while entry and exit points are easy to understand.

Total Score: 41/50

Definitely an improvement from the previous versions! See, that’s why I didn’t want to give up on this forex system too easily. I must admit that more tweaks might be needed to generate better results, possibly with signals given earlier in the trend.

Do stay tuned for the summary of the forex systems I’ve studied in the past months so we can compare and figure out which ones are worth looking more closely into!