Fibonacci Moving Averages Trading Strategy: Backtest and Evaluation

Moving averages are one of the most useful technical indicators. This is because they are simple and flexible while offering useful information about the trend, as well as support and resistance zones. There are many types of moving average indicators, but in this post, we will be looking at the Fibonacci moving average. What it is? Can we make profitable Fibonacci moving average strategies in the markets?

Fibonacci moving averages are difficult to calculate, and we only find them valuable when using long-term moving averages.

The Fibonacci moving average (FMA) is a type of moving average that calculates many exponential moving averages using lookback periods from the Fibonacci sequence on both highs and lows to form a dynamic support/resistance zone. It works like a typical moving average but tends to provide more support/resistance reaction zones.

Table of contents:

Fibonacci moving average strategy backtest and best settings

Before we go on to explain what a Fibonacci moving average is and how you can calculate it, we go straight to the essence of what this website is all about: quantified backtests.

Our hypothesis is simple:

Does a Fibonacci moving average strategy work? Can you make money by using Fibonacci moving averages strategies?

We look at the most traded instrument in the world: the S&P 500. We test on SPDR S&P 500 Trust ETF which has the ticker code SPY.

Because a Fibonacci moving average consists of 12 different moving averages, we added all of them and divided by 12.

All in all, we do four different backtests:

Strategy 1: When the close of SPY crosses BELOW the N-day moving average, we buy SPY at the close. We sell at the close when SPY’s closes ABOVE the same average. We use CAGR as the performance metric.
Strategy 2: Opposite, when the close of SPY crosses ABOVE the N-day moving average, we buy SPY at the close. We sell at the close when SPY’s closes BELOW the same average. We use CAGR as the performance metric.
Strategy 3: When the close of SPY crosses BELOW the N-day moving average, we sell after N-days. We use average gain per trade in percent to evaluate performance, not CAGR.
Strategy 4: When the close of SPY crosses ABOVE the N-day moving average, we sell after N-days. We use average gai