What it shows: a long/cash crossover holds while the fast moving average is above the slow one and steps aside when it falls below. You can see exactly when it helps (trends) and when it hurts (chop), and how its drawdown compares to buy-and-hold.
The price path is simulated and calibrated to realistic market statistics, with a slider for how strongly it trends. Illustrative — not a backtest of a specific market, and not investment advice.
Set the rule and the market
The rule: hold when the fast average is above the slow one (a golden cross), move to cash when it drops below (a death cross). Then set whether the market trends or chops.
50 / 200 is the classic “golden cross”. Faster pairs react sooner but whipsaw more.
left = sideways & choppy (whipsaw country) · right = strong, persistent trends
Trending market — the crossover rides it
Over 10 years this 50/200 crossover flipped 11 times. The strategy returned +198% versus +298% for buy-and-hold — behind, as crossovers usually are on raw return. Its worst drawdown was -22% vs -37% for buy-and-hold — a smoother ride, which is the real point. When a real trend forms, staying long while the fast average leads keeps you on the right side of it.
Strategy vs buy-and-hold
Crossover return
+198%
Buy & hold return
+298%
Crossover worst drop
-22%
Buy & hold worst drop
-37%
Crosses
11
trades over 10y
Price, the two averages, and every cross
Green dots = golden crosses (buy), red dots = death crosses (sell). Count them — that is your trade count, and in a choppy market most are false alarms.
What it did to the money
A long/cash crossover usually trails buy-and-hold on total return (it sits in cash through some of the rally) — its case is a gentler drawdown, not a bigger number. Whether that trade-off is worth it is the real question.
Reading this
Moving-average crossovers are a trend-following rule: they shine when markets trend and bleed when markets chop. They rarely beat buy-and-hold on raw return; their honest appeal is smoothing the ride. Read the full method in Moving Averages: the foundation of market timing, and weigh it against the cost of being out of the market.
Frequently asked
- What is a golden cross and a death cross?
- A golden cross is when a shorter moving average rises above a longer one (often the 50-day above the 200-day) — read as a bullish signal. A death cross is the opposite: the short average falls below the long one. This tool trades that rule: hold while the fast average is above the slow one, move to cash when it drops below.
- Does a moving-average crossover beat buy-and-hold?
- Usually not on raw return. Because a long/cash crossover sits in cash during part of every rally, it tends to trail buy-and-hold in rising markets. Its honest appeal is a smoother ride — typically a shallower worst-case drawdown — not a bigger final number. Whether that trade-off is worth it depends on the investor.
- Why does the crossover whipsaw so much sometimes?
- In a sideways, choppy market the two averages cross back and forth repeatedly. Each whipsaw tends to sell after a small drop and buy back after a small rise — losing a little each time. Trend-following rules like this are built for trends; in range-bound markets they churn.
- Is this real market data?
- No. The price path is simulated and calibrated to realistic market statistics, with a slider for how strongly it trends. It is an illustration of how the rule behaves in different regimes, not a backtest of a specific market, and not investment advice.