There was quite a bit of talk yesterday about traders shorting the ASX 200 on a break of the 200-day moving average at 5103. I ran analysis on how successful you'd be if you went short (assuming starting capital of $100,000) on a daily close below the 200-day moving average and again assuming you close the trade when the index closed back above the 200-day moving average and the results show it is not a profitable strategy at all. Effectively, since the GFC low (March 10 2009) you'd be down 16.2%, having placed twenty-six trades, with a 93% of these resulting in a loss. The average win would be $937, while the average loss would be $3170 and the position would be open for an average of 937 days. To summarise, use the 200-day as a guide to the longer-term trend, but a trigger for a trade. Forget it.
Chris joined IG as a sales trader in 2006, having worked previously at Morgan Stanley, Credit Suisse and Merrill Lynch, gaining exposure to both equity and fixed income trading. After accruing 15 years' experience in financial markets, Chris...
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