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Derivative Moving Average Strategy

by Caleb, 2872 days ago
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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%.


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Type: Trading System

Object ID: 896


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Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.