An Improved Moving Average Technical Trading Rule

Quantf Research Working Paper Series No. WP01/2014

32 Pages Posted: 13 Sep 2011 Last revised: 2 Jun 2014

Fotis Papailias

Quantf Research; University of London, King's College London, Department of Management

Dimitrios D. Thomakos

University of Peloponnese - School of Management and Economics

Date Written: June 1, 2014

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 behavior and performance from this modified strategy is 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: Dow Jones, ETF, Exchange Rate, Moving average, Price cross-over, S&P500, Threshold, Trailing stop, Technical analysis, Technical Trading, Trading strategies

JEL Classification: C00, C10, C50, G00, G11, G14, G15, G17

Suggested Citation

Papailias, Fotis and Thomakos, Dimitrios D., An Improved Moving Average Technical Trading Rule (June 1, 2014). Quantf Research Working Paper Series No. WP01/2014. Available at SSRN: https://ssrn.com/abstract=1926376 or http://dx.doi.org/10.2139/ssrn.1926376

Fotis Papailias (Contact Author)

Quantf Research ( email )

London
United Kingdom

HOME PAGE: http://www.quantf.com

University of London, King's College London, Department of Management ( email )

150 Stamford Street
London, SE1 9NN
United Kingdom

Dimitrios D. Thomakos

University of Peloponnese - School of Management and Economics ( email )

Department of Economics
22100 Tripolis
Greece
+30 2710 230139 (Fax)

HOME PAGE: http://econ.uop.gr/~thomakos

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