Improved Moving Average (IMA) Strategies
Market Technician, Journal of the Society of Technical Analysts, Issue 72, May 2012
6 Pages Posted: 2 Jun 2014
Date Written: May 1, 2012
A modified version of, perhaps, the most widely used technical trading strategy – moving averages – is discussed in this article. The suggested approach combines cross-over "buy" signals and a dynamic threshold value which acts as a trailing stop. The trading behaviour and performance achieved using this modified strategy is different to 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 less of a drawdown duration than that obtained by using the standard moving average strategy.
Keywords: Moving average, Trading Rules, Stop loss, Trailing stop
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