Testing Trend-Following Rules with Moving Averages and Bollinger Bands

Summary

This project describes a simple web tool for exploring how rule-based trend-following strategies might perform before implementation. Users select a ticker, view closing prices and indicators such as simple moving averages and Bollinger Bands, then define comparison rules. The tool evaluates buy and sell signals and reports basic performance measures, including profit and loss, drawdown duration, and trade counts. The article characterizes trend following as reacting to observed changes rather than forecasting market direction.

The examples rely on crossover rules and assume one stock is bought or sold at a time. The tool permits only one condition per rule, does not support logarithmic transformations, and omits MACD and RSI. It is therefore a prototype for basic rule inspection rather than a comprehensive backtesting framework; the article provides no specific performance results or evidence that the rules are profitable.

Key ideas

• Trend-following rules can respond to price and indicator changes without predicting market direction.
• The described tool plots prices and indicators, then tests user-defined crossover rules.
• Its reported outputs include profit and loss, drawdown duration, and buy and sell counts.
• The implementation is limited to single-condition crossovers and one-stock positions.

Tags

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