Trend Following Strategy Based on Moving Average

Overview

This strategy uses Mark Minervini’s stock selection template and moving average indicators to determine price trends for automated entry and stop-loss. It mainly judges whether stock prices are in an uptrend and whether they have broken through key moving averages to generate buy signals. At the same time, the strategy sets a stop-loss line to actively stop losses when prices fall back.

Strategy Principle

The strategy mainly judges the following conditions and generates a buy signal when they are met at the same time:

1. The current stock price is above both the 150-day and 200-day moving average lines.
2. The 150-day moving average is above the 200-day moving average.
3. The 200-day moving average has been trending up for at least 1 month.
4. The 50-day moving average is above both the 150-day and 200-day moving averages.
5. The current stock price is above the 50-day moving average.
6. The current stock price is at least 25% above its 52-week low.
7. The current stock price is within at least 25% of its 52-week high.

When the above conditions are met, the strategy judges that the stock price is in an upward trend and generates a buy signal.

In addition, the strategy also sets a stop-loss line. When the stock price falls back by 5% from its peak or rises by 10%, it will stop loss or take profit.

Advantage Analysis

1. Use Mark Minervini’s stock selection ideas to improve profitability.
2. Use multiple moving averages to confirm the trend and avoid missing buying points.
3. Set stop-loss mechanism to avoid huge losses.

Risk Analysis

1. Stock prices may adjust in the short term, triggering a stop loss.
2. Moving averages cannot fully determine trends, and false breakouts may occur.
3. The stop loss and take profit ratios set are not perfect, may take profits or expand losses prematurely.

Optimization

1. Test combinations of moving averages with different parameters.
2. Add other technical indicators to determine entry timing.
3. Optimize stop loss and take profit ratio settings.

Summary

The strategy overall follows the idea of trend trading, generating buy signals when the uptrend of stock prices is confirmed. At the same time, a stop-loss mechanism is set to control risks. By optimizing various detailed parameters, the stability and profitability of the strategy can be further improved. However, no strategy can completely avoid market risks, so investors need to treat it cautiously.