Trend Following with a Smoothed Difference of Two EMAs

Summary

This strategy uses the difference between a fast and a slow exponential moving average to track price direction. It doubles the EMA calculated over half the chosen period, subtracts the EMA over the full period, then smooths that difference with another EMA. A crossing of the smoothed value above or below zero supplies the long or short signal. The published default period is 21.

The document presents the method as a simple trend follower suited to medium-term trading. It says signals can work better in trending markets and may be unreliable in range-bound conditions, where repeated false entries and transaction costs can accumulate. The source describes a BTC/USDT futures backtest setup covering one month on hourly bars, but provides no performance results. Suggested improvements include adding a longer-term trend filter, testing parameter combinations, using reversal indicators for timing, and applying stop losses and position controls. These are proposals rather than validated improvements, and the indicator itself can lag turning points.

Key ideas

• The strategy compares a doubled half-period EMA with a full-period EMA and smooths their difference.
• A smoothed difference crossing zero produces a directional trading signal.
• Range-bound markets can generate false signals and increase trading costs.
• The document provides a backtest configuration but no reported performance evidence.

Tags

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