2011•International Journal of Business and ManagementOpen access

Usefulness of Moving Average Based Trading Rules in India

S K Mitra

Abstract

The paper analyzes benefits of moving average based trading rules in India for the period December 2000 toNovember 2010 covering a period of ten years. We used two stock indices namely Nifty and Junior nifty, jointlythey cover top 100 stocks traded in Indian market. It is found that many trading rules offer profit opportunitywithout trading costs, but the profit vanishes when trading costs are accounted. We therefore estimatedbreakeven trading cost for each trading rules and found that it is very difficult to trade below breakeven tradingcost and accordingly, small investors need to keep an eye on trading cost before selecting trading rule.

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Key concepts: Alternative trading system, Trading strategy, Algorithmic trading, Profit (economics), Pairs trade, Stock trading, Open outcry, Business