Strategies · Library · Currencies
§8.1Trend
Moving averages with HP filter
Currency series are noisy, so first strip out high-frequency wiggles with a smoothing filter, then compare a short and a long average of the smooth trend. Short above long is a buy signal.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Currencies
- Held for
- Months
- Data
- ARCANE has the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Short average versus long average of the smoothed rate.
- Entry and exit
- Buy when short is above long, sell when below.
- Sizing
- One position per pair.
How it fails
- Late signals
- Whipsaws in ranges
- Filter parameter has no fixed rule
Data it needs
- monthly FX spot rates
FX pairs such as EURUSD=X have daily closes; a smoothing filter is not in the builder.
How ARCANE uses it
A Call on a currency pair could cite the crossover state as supporting evidence.
Builds as a long-only proxy. A plain moving-average crossover on the pair, without the smoothing step, and long-only with cash as the other side.
Filed under the trend card
Hold each market in the direction of its own return over the past year, and size every position to the same expected volatility.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 100% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §8.1, p. 86 of the SSRN version. Described in our words. Trend is ARCANE’s filing, not the book’s.