EMAzing Trends: When One Moving Average Beats a Basket of Signals
EMAzing Trends: When One Moving Average Beats a Basket of Signals The latest research from Sebastien Valeyre delivers a surprise to the CTA world: a single exponential moving average (EMA) can match — or even beat — the performance of elaborate, multi-indicator trend-following systems. This conclusion comes from an empirical validation of a 2014 theoretical model by Grebenkov & Serror, which predicted the optimal Sharpe ratio for an EMA-based trend strategy given market autocorrelation and trend strength. Unlike the industry’s love affair with blending MACDs, crossovers, momentum mixes, and Bollinger Bands, the data suggest that simplicity wins. ...