Derivative Moving Average Strategy

The Derivative Moving Average was published in an article in the "Technical Analysis of Stocks and Commodities" magazine, in June 1996. The article was written by Adam White and was entitled "The Derivative Moving Average". It describes a trading strategy that uses a simple moving average for long signals and a technical indicator called trend analysis index for sell signals.

The moving average in the entry signals was used to catch trending stocks/securities. According to Adam White, the moving average was not used in the sell rules because it suffers from two important flaws. The first flaw occurs when the market or security is not trending, consequently it will cross the moving average several times and very quickly. The second flow is caused by the lag of the moving average that is due to the way it is calculated.
For these reasons, the author used the trend analysis index to produce exit signals.

The current trading system uses the Derivative Moving Average strategy plus a long ranking system. The Ranking system instructs the simulator to buy stocks with the lowest 5-Bar Rate of change.
I have also added a price filter (stocks with a close price lower than 2 are ignored) and a profit stop of 10%.

Technical Analysis

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• Hanging Man
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Fundamental Analysis

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• ISM Non-Manufacturing Index
• Analyst comments
• Inventory to Sales Ratio - I/S Ratio
• Commitments of Traders - Historical Data
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