Various moving average convergence divergence trading strategies: A comparison

Abstract

Some studies published recently (Dejan Eric, 2009; R. Rosillo, 2013; Terence Tai-Leung Chong, 2008; Ülkü and Prodan, 2013) uncover that moving average convergence divergence (MACD) trading rules have predictive ability in many countries. The MACD trading strategies applied by these papers to execute the trading signals are various. This study analyzes the performance of a MACD trading strategy (MACD-4 in the current study), which is applied popularly by practitioners, but was not tested by prior academicians. Furthermore, the author compares the performance of each of the strategies on a group of markets to identify the best one. Before considering the costs, the author finds that the MACD-4 trading strategy has predictive ability. The best performance is MACD strategy applied by Terence Tai-Leung Chong (2008). This strategy is also the most effective one if it is applied in a high trading cost environmentm because the numbers of trades created are the lowest. Especially, the strategy applied by R. Rosillo (2013) is unpredictable in the selected samples.