An Improved Moving Average Technical Trading Rule II: Can We Obtain Performance Improvements with Short Sales?

Quantf Research Working Paper Series No. WP02/2014

45 Pages Posted: 14 Nov 2011 Last revised: 2 Jun 2014

See all articles by Fotis Papailias

Fotis Papailias

King’s College London - King's Business School; Knot Analytics Ltd

Dimitrios D. Thomakos

University of Athens, Department of Business Administration

Date Written: June 1, 2014

Abstract

In this paper we extend the methodology of our earlier work (Papailias and Thomakos, 2011) on a modified moving average technical trading rule by allowing short sales. We show how short sales change the trading rule which now acts as a dynamic trailing "stop-and-reverse", instead of a dynamic trailing stop as in the context of "long-only" trades. Then we empirically examine the performance of our modification in the context of a "long/short" trading approach and discuss the differentiation and implications in strategy performance. We compare both the modified version of our trading rule with the standard moving average approach and also compare the long/short approach with the long-only approach of the earlier paper.

Keywords: ETF, Exchange Rate, Moving average, Price cross-over, S&P500, Short Sales, Stop and Reverse, 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 II: Can We Obtain Performance Improvements with Short Sales? (June 1, 2014). Quantf Research Working Paper Series No. WP02/2014, Available at SSRN: https://ssrn.com/abstract=1958906 or http://dx.doi.org/10.2139/ssrn.1958906

Fotis Papailias (Contact Author)

King’s College London - King's Business School ( email )

150 Stamford Street
London, SE1 9NH
United Kingdom

Knot Analytics Ltd ( email )

Lytchett House, 13 Freeland Park
Wareham Road
Poole, BH16 6FA
United Kingdom

Dimitrios D. Thomakos

University of Athens, Department of Business Administration ( email )

Athens
Greece

HOME PAGE: http://ba.uoa.gr/

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