Using moving averages as a cotton pricing tool
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Moving averages are one of the oldest and most popular technical indicators for identifying price trends and momentum. The purpose of this analysis was to evaluate various decision criteria for the entry and exit of short hedges to protect against downside price risk. Eight combinations of short and long term price momentum indicators were evaluated in conjunction with a series of four symmetrical penetration levels to generate specific hedging strategies for evaluation. These strategies were back tested on data from the December cotton futures contract from 1990 through 1999 beginning on February 1(st) of the production year through contract expiration. Results accounted for trading costs and identified two viable hedging strategies that added an annual average of over 2.0 cents per pound to the selling price of cotton during the study period.
2000 Proceedings Beltwide Cotton Conferences
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Johnson, J. L., & Bennett, B. K
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