A moving average crossover strategy using Kaufman’s Adaptive Moving Average indicator

The Momentum Strategy using Kaufman’s Adaptive Moving Average is ideal as it filters out “market noise” during high volatility periods and prevents generating false signals. A smoother, longer-term KAMA indicator can be used to represent the bigger trend of the performance of a stock and a shorter-term KAMA indicator can be used to generate the trading signals. The crossover of a faster KAMA line above a slower KAMA line indicates a change from downtrend to uptrend, which triggers a buy signal, which is reversed once the faster KAMA line crosses back over.

The portfolio is weighted using the Inverse Volatility weighting strategy, which relies on using a stock’s n day standard deviation to model price volatility and attempt to quantitatively measure the stock’s risk. The lower the standard deviation, the higher weighting the stock will have.

View my analysis: Available on GitHub