Captures medium to long-term trends using EMA crossovers
| Strategy Type | Trend Following Moving Average System |
| Market Outlook | Captures medium to long-term trends using EMA crossovers |
| Risk Profile | Low to Moderate - Clear signals with defined entry/exit rules |
| Reward Profile | 1:2 to 1:5 on trending moves; Captures 60-80% of major trends |
| Time Horizon | Swing trading (1-4 weeks) to Positional (1-6 months) |
| Capital Requirement | C$25,000 - C$150,000 for a meaningful position |
| Margin Type | Cash account for stock delivery; margin/futures account for share futures and options |
| Best Used When | RY in a clear trending phase; Avoid during range-bound markets |
| Tsx Applicability | RY is ideal for EMA crossover due to heavy institutional ownership creating sustained trends; Clean, low-beta price action (~0.59) with minimal gaps; Banking bellwether and the largest S&P/TSX 60 constituent with strong sector correlation |
| Csa Ciro Compliance | Fully compliant standard technical analysis strategy. Securities regulation is provincial under the Canadian Securities Administrators (CSA, lead regulator OSC); dealers and market integrity overseen by CIRO (the IIROC/MFDA successor SRO); RY as a bank is also prudentially regulated by OSFI |
| Lot Sizes | Share futures (Montreal Exchange) = 100 shares per contract; physically settled via CDS (~C$28,000 notional near C$280) • Equity options (Montreal Exchange) = 100 shares per contract; premium = quote x 100 • No lot restriction on TSX; typically 25-300 shares (board lot 100) |
| Trading Hours | 9:30 AM - 4:00 PM ET (TSX); EMA signals taken on daily close. MX derivatives trade alongside the cash session |
| Expiry Considerations | Equity options: monthly expiry on the third Friday (weeklies also listed); Share futures and SXF index futures: quarterly cycle (Mar/Jun/Sep/Dec). Roll positional derivatives 5-7 days before expiry |
| Tax Implications | Investor (capital account): 50% inclusion rate - half the gain is taxed at your marginal rate. Active/frequent trader (income account): 100% taxable as business income (CRA IT-479R factors). Options generally follow the account of the underlying shares; s.39(4) election (Form T123) can lock capital treatment on Canadian securities but is unavailable to traders; 30-day superficial-loss rule applies |
9 and 21 are Fibonacci numbers widely followed by traders, creating self-fulfilling support/resistance. They represent roughly 2 weeks and 1 month of trading, capturing short and medium-term trends.
Wait for the daily close to confirm the crossover. Enter at the next day's open. Intraday crossovers often reverse by close, so patience prevents false signals.
Skip signals if 3+ crossovers occurred in the last 20 days. Check EMA separation (need 1%+ gap). Use an ADX filter (>20). Accept some whipsaws as part of the strategy.
EMA crossover typically wins 45-55% of trades. Profitability comes from winners being 2-3x larger than losers, not from a high win rate.
Yes, but 9/21 is well-tested for RY. Avoid over-optimizing. If changing, test nearby values (8/20, 10/22) - results should be similar for robustness.
Use the weekly for direction (only trade aligned with the weekly trend), the daily for signals (9/21 crossover), and the hourly for entry timing (pullback opportunities).
After a Golden Cross, wait for price to pull back to the 9 or 21 EMA. Enter on the bounce (bullish candle). Better price and tighter stop than chasing the crossover.
Crossover day volume > 1.2x average confirms the signal. A high up-volume share (>65%) indicates buyer-driven accumulation. Low-volume crossovers are weak - reduce size or skip.
Add the 50 EMA as a trend filter. Only take golden crosses when price is above the 50 EMA and the 50 EMA is sloping up. Adds trend context, reduces counter-trend trades.
Canadian banks report quarterly (RY typically reports in late August for Q3). Reduce the position 50% before results or buy a protective put. Also watch Bank of Canada rate decisions, which move bank stocks. After the event, assess the gap and decide to add back or exit. Don't hold full size through uncertainty.
Test fast 5-13, slow 15-34 with a 70/30 in-sample/out-of-sample split. Require <20% degradation. Test nearby parameters for stability. Standard 9/21 is often near-optimal.
Standard 9/21 is most robust. KAMA works well in choppy periods. Hull MA for more responsive trading. Avoid TEMA (too many whipsaws). Test before switching.
ITM calls (delta 0.75+) for trend following. Bull call spreads for defined risk. LEAPS for weekly signals. Calendar spreads for established trends. 45+ DTE minimum. All RY options are 100 shares per contract on the Montreal Exchange.
Track: Win rate (45-55%), Win/Loss ratio (2-3x), Profit Factor (>1.5), Sharpe (>1.0), Max DD (<15%). Compare to RY buy-hold. Monthly review, quarterly optimization.
Cap RY at 15% of the portfolio. Total financials EMA exposure max 20%. Don't double up correlated stocks (RY-TD). Track total directional exposure. Diversify across sectors.
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