The Performance of Momentum Trading Strategies in the U.S. Natural Gas Futures

Ikhlaas Gurrib (), Dalia Hamdan () and Olga Starkova ()
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Ikhlaas Gurrib: School of Management, Canadian University Dubai
Dalia Hamdan: School of Management, Canadian University Dubai
Olga Starkova: School of Management, Canadian University Dubai

A chapter in Economics and Finance Readings, 2025, pp 135-156 from Springer

Abstract: Abstract This study investigates if the Rate of Change (ROC), a common measure of the direction and magnitude of a trend, is reliable to predict U.S. Henry Hub Natural Gas futures prices. The methodology focuses on the ROC and/or Moving Average (MA) price crossover models within a trading system. Monthly futures prices of natural gas are collected for the period May 2004–July 2024. Performance is measured using both Sharpe and Sortino ratios to consider both total and downside risks. The model is evaluated against a naïve buy-and-hold strategy. Findings suggest that the ROC using a period of 10 months provides a superior return per unit of risk relative to the naïve buy-and-hold strategy. There was no downside risk due to the presence of solely positive returns under the ROC-10 model. Supplementing the ROC-based model with a price crossover MA strategy did not improve the performance of the model.

Keywords: Energy; Natural gas; Futures markets; Rate of change; Technical analysis; Performance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-96-6998-1_8

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DOI: 10.1007/978-981-96-6998-1_8

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