Moving Average Trading Strategies – Rules, Backtesting, and Determining the Best Moving Average

How to use moving average trading strategies are widely discussed and used in the media and likewise frequently used by analysts when making calls about the future. What is a moving average and can we find profitable moving average strategies on stocks? Do moving average strategies work?

Backtests reveal that the most popular moving averages work best for short-term mean reversion and long-term trend-following. However, moving averages serve many purposes, for example as trend filters or for other indicators and strategies. We conclude that the two most used and known moving averages are the best: the simple moving average and the exponential moving average.

In this article, we discuss moving averages, and how you can use them in trading, we test some moving average strategies, and we provide links/articles to 20 different types of moving averages. However, we believe moving averages were much more useful in the past before the personal computer came about. As the markets have become faster and more efficient, the usefulness of moving average strategies has slowly eroded somewhat. Despite this, we find value in “classical” moving averages like the death cross or the 200-day moving average.

Let’s get started: