Trend Following Strategies
Moving Average Crossovers
This classic trend-following strategy uses the intersection of two or more moving averages to generate buy and sell signals. When a shorter-term moving average crosses above a longer-term moving average, it signals a potential uptrend (buy signal). Conversely, when the shorter-term average crosses below the longer-term average, it indicates a potential downtrend (sell signal).
MACD (Moving Average Convergence Divergence)
The MACD is a momentum indicator that shows the relationship between two moving averages of a security's price. It consists of the MACD line, the signal line (a moving average of the MACD line), and a histogram representing the difference between the MACD and signal lines. Buy signals are typically generated when the MACD line crosses above the signal line, and sell signals when it crosses below.
Donchian Channel Breakouts
Developed by Richard Donchian, this strategy uses price breakouts from a channel defined by the highest high and lowest low over a specific lookback period. A buy signal is generated when the price breaks above the upper band of the channel, and a sell signal when it breaks below the lower band. It aims to capture sustained moves.