20 EMA Trading Strategy — Does It Work? (Rules, Setup, Backtest, Performance)

The exponential moving average is a type of moving average (MA) that places a greater weight and significance on the most recent data points. But a question arises: Can it be used to develop a profitable trading strategy?

In this post, we are going to look at what the 20-day EMA trading strategy is, backtest it, and improve it by adding an additional technical indicator.

We backtest the following trading rules:

1. We buy the asset when the 20-day EMA is under the asset price
2. We sell the asset when the 20-day EMA is over the asset price

We backtested the strategy using the ETF version of the S&P 500, SPY. The data is not adjusted for dividends and splits. Below is the equity curve.

You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/20-ema-trading-strategy/

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