Research on the Performance of the Trend Following Trading Strategy in the Chinese Commodity Market. (24th September 2022)

• Record Type: Journal Article
• Authors: Xie, Anran; Huang, Yichong; Bian, Yian; Zhao, Shucen; Lin, Jiaxin
• Other Names: Menon Varun Academic Editor.
• Is Part Of: Wireless communications and mobile computing. Volume 2022(2022)
• Publication Date: 2022-09-24
• Subjects: Wireless communication systems -- Periodicals; Mobile communication systems -- Periodicals; 621.38205
• DOI: 10.1155/2022/5296678
• Languages: English
• ISSNs: 1530-8669

Abstract

Abstract : Trend following strategy is a popular strategy that investors often use in trading around the world. Stocks are bought during an upswing and sold during a decline, the two main phases of the trend-following trading technique. This research evaluates the performance of the trend-following strategy in the Chinese commodity market by systematically employing quantitative methods to trade and get back test results for performance evaluation. The main trading indicator for this research is DMAC (Dual Moving Average Crossover) with a trend indicator called ADX for adjustment. As a kind of technical analysis, so-called "Dual Moving Average Crossovers" are often cited as providing reliable signs for discerning future stock price movements. By employing these indicators and systematically backtesting on 21 commodity futures for ten years, the research discovers that DMAC does not perform well (negative annualized return and sharpe ratio) from 2011 to 2021. By refining the strategy which is to replace DMAC with MACD (Moving Average Convergence/Divergence) and abandon ADX, the backtest result performs much better. The refinement suggests that the utilization of different trading signals/indicators will lead to a different performance of the trend following strategy in the Chinese commodity market. The research concludes that the trend following strategy is worthy of exploring in the Chinese commodity market in terms of using different trading indicators.