The EC (Euro Currency Futures) Crossover model presented the use of the MESA8 Crossover indicators.   These three indicators are best viewed when combined into a single subgraph to show the Momentum relative to the cycle amplitude.  If the momentum exceeds value of the Crossover Amplitude line in either direction, this signifies a trend movement and the direction of the trend.

In a trending market, more profitable trades can be achieved by combining the MESA8 Crossover indicators with the Detrend indicator.  This indicator is scaled to be normalized to its plus one sigma and minus one sigma variations.  If the Detrend indicator is greater than 1, there is a high probability the market is overbought.  If the Detrend indicator is less than -1, there is a high probability the market is oversold.  The Tune parameter adjusts the dominant cycle period relative to its measured value.

We’ve created a Trading Strategy that combines the MESA8 Crossover and Detrend indicators and applied it to the popular QQQQ NASDAQ 100 ETF.  This strategy buys when the MESA8 Detrend indicator is below Minus Sigma and the slope of the Crossover Momentum indicator is positive.  Entry on the short side occurs when the Detrend indicator is greater than 1 and the Crossover Momentum slope is negative.

We took advantage of the NeuroShell Trader Professional’s built-in genetic algorithm optimizer to find the best parameters for the MESA8 indicators during the period June 2, 2003 to May 31, 2005 (the white line on the Trading Strategy).  The optimized model produced a return on trades of 51.4% compared to buy and hold of 28.7%.  The completed model was applied to out-of-sample data from June 1, 2005 to April 10, 2006.  This time the model produced a return of 18.9% compared to 10.1% buy and hold.