Introduction

Asset class trend following is a strategy that tries to exploit a momentum anomaly between various assets. It uses various moving averages or momentum filters to gain an exposure to an asset class only at the time when there is a higher probability for outperformance with less risk. The basic logic behind the trend following is finding a method to detect the trend of price movement and buy an asset when its price trend goes up, and sell when its trend goes down.

Method

This algorithm applies to trend following ideas to 5 ETFs in different asset classes like stocks, bonds, and commodities. The simple moving average is used to detect the trend. When the closing price is over its ten-month simple moving average, we give equal allocation to those ETFs, otherwise stay in cash. SMA(symbol, period, resolution) is used to generate the moving average value in LEAN implementation. A warm-up period of ten months is set to prime the data and initialize the indicator so the SMA is ready to use when the algorithm starts.


Reference

  1. Quantpedia - Asset Class Trend Following