The Moving Average Playbook: A 10-Year Test Reveals the Best Trend Strategy for India
- Share.Market
- 4 min read
- 08 Dec 2025
Are you aiming for massive, long-term gains or quick, consistent cash flow? Your answer determines the best trading strategy for your portfolio.
Penned by Nishchal Jain, Quant Researcher, Share.Market
The Biggest Problem for Every Investor
The market is a noisy place. You’re constantly bombarded with news, tips, and gut feelings, leading to one critical challenge: How do you filter out the noise and objectively decide when to Buy or Sell?
The classic solution is the Moving Average (MA) crossover. It’s a fundamental tool that creates a clear signal based on price action.
What is a Moving Average (MA)?
Imagine you track the average price of a stock over a specific period—say, the last 50 days. That’s a Moving Average. As the days go by, this average constantly updates, creating a smooth line on a chart.
- Its Benefit: It helps you see the true direction of the trend by smoothing out the daily ups and downs.
- The EMA Advantage: We use the Exponential Moving Average (EMA) because it gives more weight to the most recent prices, making it a bit faster and more responsive than a simple MA.
How Does the Moving Average Crossover Work?
The strategy relies on two EMAs: a “Fast” one (shorter period, e.g., 20 days) and a “Slow” one (longer period, e.g., 50 days).
Note that, EMA works best for the most recent data.
- The “Buy” Signal (Bullish): When the Fast EMA crosses above the Slow EMA, it signals that recent prices are rising faster than the long-term trend. Time to Go Long (Buy).
- The “Sell” Signal (Bearish): When the Fast EMA crosses below the Slow EMA, it signals that prices are falling rapidly. Time to Exit (Sell).
The problem remains: Which “Fast” and “Slow” periods (e.g., 5/20, 20/50, or 50/200) work best in the Indian market?
The 10-Year Indian Market Test (2015-2025)
We analyzed a decade of data across key Indian indices like the Nifty 50, Nifty Midcap 150, and Smallcap 250, testing three popular EMA strategies to find the definitive answers.
The choice comes down to a fundamental trade-off: Big Wins vs. Quick Cash Flow.
1. Goal: Maximum Profit Per Trade (The Patient Winner 🐢)
If your goal is to capture the absolute biggest move possible from a single trade, and you are willing to wait months or even a year for a payoff, the long-term strategy is the clear winner.
| Strategy | Goal | Key Insight |
| EMA 50/200 Crossover | Maximum Profit per Trade | The Golden Cross strategy ignores short-term noise and only signals when a major, long-lasting trend begins. |
Concrete Result: On the Nifty 50, this strategy delivered an Average Return of 14.62% per trade, significantly higher than the 5.15% from the moderate strategy (EMA 20/50).
Key Takeaway for Patient Investors:
- Stick to the EMA 50/200. You’ll trade less often (only about 30 times a year), but your winning trades are massive.
- The Reward: The median winning trade on the Nifty 50 was a spectacular 49.69%.
- The Cost: You must be prepared to accept bigger losses (a median loss of -9.61%) when the big trend unexpectedly fails.
2. Goal: Best Daily Return (The Efficient Trader 🏎️)
If you’re an active trader who needs to keep their money moving (capital efficiency), then a moderate strategy that balances profit and speed is best. You want a decent gain without having your money locked up forever.
| Strategy | Goal | Key Insight |
| EMA 20/50 Crossover | Highest Profit per Day | This is the “sweet spot” that is fast enough to find new opportunities but slow enough to avoid most fake, minor signals. |
Concrete Result: This strategy generated the highest profit relative to the time the money was invested, with a combined daily return of 0.0128% on the Nifty 50, slightly better than the 50/200’s 0.0107%.
Key Takeaway for Active Traders:
- Use the EMA 20/50. It gets you a strong win (median win of 22.19% on Nifty 50) and still allows you to free up capital much faster than the 50/200.
- Holding Period: The median holding time for a trade with 20/50 is 114 days, compared to 379 days for the 50/200.
Relatable Example: This is like running a fast-food business. You need quick, regular customer turnover (trades) to maximize your daily revenue and keep your cash flow healthy.
The Big Picture: Why All Strategies Won
No matter your personal style, the analysis confirmed one crucial finding for the Indian market:
Go Long, Not Short: Across all indices and all strategies, Long trades (buying for a rise) massively outperformed Short trades (selling for a fall).
| Index | Strategy | Long Trade Avg. Return | Short Trade Avg. Return |
| Nifty 50 | EMA 50/200 | 14.62% | -5.13% |
| Nifty Midcap 150 | EMA 50/200 | 22.06% | -5.73% |
This simply confirms the strong, overall bullish trend of the Indian market over the last decade. Any strategy that followed the rising tide was profitable.
Your Personal Strategy Decision
The choice isn’t about which strategy is right or wrong—it’s about matching the strategy to your time horizon and risk tolerance:
- Long-Term Investor (Years): Choose the EMA 50/200. Focus on large profit per trade, ignore the daily noise, and be prepared for large but infrequent losses.
Active Trader (Weeks/Months): Choose the EMA 20/50. Focus on capital efficiency and a strong return with moderate holding periods.
