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 | £5,000 - £25,000 for a meaningful position |
| Margin Type | Cash for shares (held in dealing account or ISA); leverage only via CFD or spread bet (FCA cap 5:1 on single equities) |
| Best Used When | Sage in clear trending phase; Avoid during range-bound markets |
| Lse Applicability | Sage ideal for EMA crossover due to institutional participation creating sustained trends; Clean price action with minimal gaps; UK software/technology bellwether with sector correlation |
| Fca Compliance | Standard technical analysis approach with no regulatory restriction; AlgoKing operates as an educational simulator and is not FCA-authorised to give advice or execute orders |
| Lot Sizes | ICE single stock future ~100 shares per contract; thin retail liquidity, mostly institutional • Typically 1,000 shares per contract (ICE Europe) (~£9,500 contract value at 950p) • No lot restriction; any whole number of shares, typically 100-2,000 |
| Trading Hours | 8:00 AM - 4:30 PM London time (opening auction 07:50-08:00, closing auction 16:30-16:35); EMA signals on daily close |
| Expiry Considerations | ICE equity options: monthly (third Friday) plus selected weekly/quarterly series; Roll 5-7 days before expiry for positional options |
| Tax Implications | Shares: CGT on disposal at 18% (basic) / 24% (higher) above £3,000 annual exempt amount, with NO holding-period distinction; 0.5% SDRT (stamp duty) on purchases; gains tax-free inside a Stocks & Shares ISA (£20,000 allowance). Options/futures/CFDs: CGT. Spread betting: tax-free (no CGT or stamp duty) |
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 daily close to confirm crossover. Enter at next day's open. Intraday crossovers often reverse by close, so patience prevents false signals.
Skip signals if 3+ crossovers occurred in last 20 days. Check EMA separation (need 1%+ gap). Use 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 high win rate.
Yes, but 9/21 is well-tested for Sage. Avoid over-optimizing. If changing, test nearby values (8/20, 10/22) - results should be similar for robustness.
Use weekly for direction (only trade aligned with weekly trend), daily for signals (9/21 crossover), hourly for entry timing (pullback opportunities).
After Golden Cross, wait for price to pull back to 9 or 21 EMA. Enter on bounce (bullish candle). Better price and tighter stop than chasing crossover.
Crossover day volume > 1.2x average confirms signal. A strong closing-auction print and high on-book share indicate institutional buying (the UK has no delivery-percentage metric). Low volume crossovers are weak - reduce size or skip.
Add 50 EMA as trend filter. Only take golden crosses when price is above 50 EMA and 50 EMA is sloping up. Adds trend context, reduces counter-trend trades.
Reduce position 50% before half-year (May) or full-year (November) results, or buy a protective put. After results, 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 70/30 in-sample/out-of-sample split. Require <20% degradation. Test nearby parameters for stability. Standard 9/21 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 on ICE-listed options, or bull call spreads for defined risk. For leveraged directional views, UK retail commonly uses spread bets (tax-free) or CFDs (CGT, FCA 5:1 cap). UK long-dated single-stock options are scarce, so hold the cash share in an ISA for very long horizons. 45+ DTE minimum for positional options.
Track: Win rate (45-55%), Win/Loss ratio (2-3x), Profit Factor (>1.5), Sharpe (>1.0), Max DD (<15%). Compare to Sage buy-and-hold. Monthly review, quarterly optimization.
Cap Sage at 15% of portfolio. Total tech/software EMA exposure max 20%. Don't double up correlated UK tech names. Track total directional exposure. Diversify across sectors.
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