A Moving Average Range Index for Trend Following

Summary

The Trend Analysis Index (TAI) is presented as a normalized measure of movement in a simple moving average. The method calculates a moving average, finds its highest and lowest values over a shorter lookback, then scales that range by price. A rising TAI is interpreted as stronger trend activity; the strategy takes a long position above an upper threshold and a short position below a lower threshold, retaining the previous state between those levels. An option can reverse the direction of the signals.

The stated defaults are a 28-period average, a 5-period TAI lookback, and thresholds of 0.11 and 0.02. The document provides a rationale and implementation parameters but no backtest results or performance evidence. It warns that ranging markets can generate false signals, moving-average and normalization settings can miss turns or weak trends, and reversing positions can amplify losses. Suggested safeguards include combining indicators, adding stops, adjusting parameters to the market and timeframe, and using trend-probability models as additional input.

Key ideas

• TAI scales the recent range of a moving average by the current price.
• The strategy enters long above the upper threshold and short below the lower threshold.
• Between thresholds, the previous position state is retained.
• Range-bound markets and poorly chosen parameters can produce false signals or miss trends.
• The document supplies no performance results for the strategy.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.