World's Simplest Trading System

Awesome post from System Trader Success

http://systemtradersuccess.com/worlds-simplest-trading-system/

Abstract from website:

Here’s the system (I got this coded on MT4 Expert Advisor "SMATS", running forward testing as of now):

At the end of every month,

• if the index is above its 10-month simple moving average: the portfolio is 100% in the market

• if the index is below its 10-month simple moving average: the portfolio is 100% in cash

And that’s it.

So, if we take the FTSE 100 Index as an example, if at the end of a month the FTSE 100 is above its 10-month simple moving average then either,

• the portfolio moves into the market by buying, say FTSE 100 ETFs, (these will be the easiest instrument for most investors, but equally futures, CFDs or spread bets could be used), or

• nothing needs to be done if the portfolio is ready in the market.

Conversely, if at the end of a month the FTSE 100 is below its 10-month simple moving average then the portfolio sells the ETFs and moves 100% to cash; if it is already in cash then nothing is done.

[NB. OK, it’s possible that this isn’t absolutely the simplest trading system imaginable, but apart from buy and hold it is unlikely there are many systems much simpler than this one!]

The following chart illustrates such a portfolio for the FTSE 100 Index since 1995. The diamond markers indicate the decisions made at the end of each month whether to be in the market (green diamond) or in cash (red diamond).