An improved moving average technical trading rule

Fotis Papailias and Dimitrios Thomakos

Physica A: Statistical Mechanics and its Applications, 2015, vol. 428, issue C, 458-469

Abstract: This paper proposes a modified version of the widely used price and moving average cross-over trading strategies. The suggested approach (presented in its ‘long only’ version) is a combination of cross-over ‘buy’ signals and a dynamic threshold value which acts as a dynamic trailing stop. The trading behaviour and performance from this modified strategy are different from the standard approach with results showing that, on average, the proposed modification increases the cumulative return and the Sharpe ratio of the investor while exhibiting smaller maximum drawdown and smaller drawdown duration than the standard strategy.

Keywords: Moving average; Trailing stop; Technical analysis; Trading strategies (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:428:y:2015:i:c:p:458-469

DOI: 10.1016/j.physa.2015.01.088

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