Which moving average works best in Bank Nifty options for intraday trading?

Which moving average works best in Bank Nifty options for intraday trading?

None.

Yes, none of the moving average works well in Intraday trading with BANK NIFTY. You can never find the best parameter. It varies with each stock and different time periods,.

When Bank Nifty is trending, no matter what kind of moving average you use, its going to end up in profits most of the time.

But the problem starts when BankNifty starts trading in range bound move, you end up with lot of whipsaws and tons of losing streaks. Eventually you stop that best parameter you found, and start looking for another best parameter or some other indicator that can stop your losses.

I already did an analysis on this best moving average.

Let’s find out which is the best moving average for Intraday trading. Here’s the example of Yes Bank.

For testing purpose, I simply take a condition

• Buy if Close>20 Moving average
• Short if close<20 moving average

The green arrow in the above chart shows Buy Signal and Red arrow shows sell signal.

Now simply run a optimization to find out which would be best moving average between 10 to 100, in few seconds Amibroker charting tool can give me results.

The result shows that 35 is the best Moving average giving the higher intraday profits for Yes Bank for the period Jan 2016 to Dec 2016.

You are happy that you are able to figure out the best MA and decided to trade with 35 moving average parameter.

Let’s find out what was the result for 2017 with the same parameter. You can see from the below table, for the year 2017, 75 was the best moving average giving highest profits, where as 35 was at the bottom.

The best moving average that you tested for the year 2016 was the worst moving average for the year 2017.

This is the worst mistake every beginners make, they always tend to look for that one best thing in Trading. No, it never works. Optimization is an illusion. You cannot simply trade with moving average in intraday, moving average system always tends to provide whipsaws, the best moving average keeps changing, its not a constant one, as the volatility of the stock keeps changing.