Moving Average Trading Strategies’ Effectiveness Research

This article mainly study the moving average trading strategies’effectiveness in history, some important factors to its effectiveness, themoving average strategies’ predictive ability and the effectiveness that50ETF index fund effective strategies used in constituent stocks.Expecting this research is able to draw some meaningful researchconclusion for the theory and practice. The main research method is touse the computer to calculate the historical transaction data and toanalysis the results.This study found that using the moving average strategy over thepast eight years can obtain significant excess returns, which meansmoving average strategies have certain efficiency; The shorter length oftime in strategy, the lower efficiency it is. When the time is shorter than10days, the efficiency is very low; Transaction cost greatly reduced themoving average strategies’ ability to gains returns. To our supervise,Transaction cost only reduce the absolute efficiency, not the relative efficiency; Good strategy in a general trend market may not good in theother trend, but the worse performance strategy also performs worse inother market trend; The investment strategy based on historical data have acertain reference in the future; Good strategy used in50ETF index fundsalso perform good in constituent stocks.The main revelations to the practice are as below: the moving averagestrategy used as a investment reference has certain efficiency, especially instop loss. The opinion that the moving average is completely invalid iswrong; A certain moving average strategy is unstable in gain profit. So toblind worship and always use a moving average as indicator is notscientific; in different market period, the same moving average strategyhas different effect. If the moving average strategy was used inquantitative strategy, more attention should be placed on how to recognizeand transform the current moving average strategy to most effective. Asthe short moving average strategy’s efficiency is not good, recommendedto use long-term average strategy in practice; As Transaction costs ofmoving average strategy has a little effects on the relative efficiency, itunnecessary to spend too much energy and model to simulation theinfluence of transaction cost in quantitative strategy; when findingquantitative strategies for constituent stock, it useful to study the index, and then according to the characteristics of the individual stocks to revisethe strategy.