“You always want to be with the predominant trend. My metric for everything that I look at is the 200-day moving average.” – Paul Tudor Jones Being able to determine the market’s primary trend will put the odds in your favor to properly position your portfolio for future events. There are many ways to accurately identify a trend, however using the 200-day moving average* is one of the simplest yet most effective strategies. In fact, most Trend Following firms employ trading strategies that take an entry and, possibly, an exit based on a specified percentage close above or below the 200-day moving average, respectively. Moreover, the 200-day moving average can be an effective trading signal for all markets since Trend Followers are typically registered as Commodity Trading Advisors (CTA’s) that have exposure to equities, fixed income, currencies, as well as commodities. Additionally, the 200-day moving average has been an effective signal throughout many market cycles. One s...
Price-based perspective on market behavior