Jurik Moving Average (JMA) – Strategy, Rules, Settings, Returns, Backtest

In the ever-changing world of financial markets, traders and investors are always seeking better indicators to improve their analysis of the markets and make better trading decisions — one interesting indicator is the Jurik Moving Average (JMA). What do you know about this indicator?

The Jurik Moving Average (JMA), is a proprietary moving average indicator created by Mark Jurik, a market research analyst and software developer. It is designed to be adaptive, offering a smoother and more responsive indicator line than traditional moving averages, such as the SMAs and EMAs. The indicator combines adaptive smoothing and phase correction techniques to filter out market noise so as to provide a clearer picture of price trends.

In this post, we will take a look at most of the questions you may have about the Jurik Moving Average: what it is, how it works, and how you can use it to improve your trading strategies. Read along!

Key takeaways

1. What it is: The JMA is a proprietary moving average created by Mark Jurik, designed to be smoother and more responsive than traditional moving averages like the SMA and EMA.
2. Purpose: It aims to filter out market noise while still closely tracking price trends, offering a clearer picture of market direction.
3. How it works: It uses adaptive smoothing and phase correction techniques, although the exact formula is proprietary.
4. Availability: While the full algorithm is only available to paying customers, some versions can be found on platforms like TradingView.
5. Usage:
   • Plotted directly on the price chart, it closely follows price action.
   • It’s effective for swing traders, thanks to its fast response to sustained price changes.
   • Trend followers can use it to detect short-term trends while ignoring minor fluctuations and false signals common in other MAs.
6. Please also visit the most popular trading indicators.
7. More about moving average trading strategies.

What is the Jurik Moving Average (JMA)?

The Jurik Moving Average (JMA), is a proprietary moving average indicator created by Mark Jurik, a market research analyst and software developer. It is designed to be adaptive, offering a smoother and more responsive indicator line than traditional moving averages, such as the SMAs and EMAs. The indicator uses complex mathematical processes to filter out market noise so as to provide a clearer picture of price trends.

It achieves this by combining adaptive smoothing and phase correction techniques. The exact formula or algorithm used to compute the indicator is proprietary information available to those who purchase the indicator from the developer. Nonetheless, some versions of the indicator are available on various trading platforms, like TradingView.

Plotted as an overlay on the price chart, the JMA indicator follows the price action very closely. It is like the line chart that has been smoothed. The indicator not only smooths price data but also responds fast to sustained changes in price direction. This makes it a versatile tool for swing traders who wish to trade individual price swings.

It is also useful for trend followers as it can help in identifying short-term trends while filtering out minor price fluctuations that could present as false signals in other moving average indicators.

Below is an example of a Jurik Moving Average (orange color) and a simple 200-day moving average (blue color). As you can see, the Jurik MA is much more responsive.

How does JMA differ from traditional moving averages?

The JMA differs from traditional moving averages in that it is adaptive to changing market conditions and, thus, offers a smoother and more responsive indicator line than traditional moving averages.

Unlike the traditional moving averages, such as the SMAs and EMAs, which plot the averages, the JMA combines both adaptive smoothing and phase correction techniques to filter out market noise so as to provide a clearer picture of price trends.

While all moving averages aim to smooth the price data and remove noise from minor fluctuations, the traditional moving averages tend to lag a lot. However, the JMA reduces the lag without compromising on the smoothing features. It does that using a proprietary algorithm that adapts to market volatility.

Jurik Moving average trading strategy- rules, settings, returns, and performance

Let’s backtest a trading strategy that uses the Jurik Moving Average – complete with trading rules and settings.

We make the following trading rules:

• When the close crosses above the 200-day Jurik Moving Average, we go long; and
• We sell when the close crosses below the average.

We buy and sell at the close.

Commissions and slippage of 0.03% per trade are included.

Let’s first backtest the S&P 500 from 1960 until today:

Let’s look at the trading performance and metrics:

• Number of trades: 439
• Average gain per trade: 0.9%
• Win rate: 26%
• Max drawdown: 44%
• Annual return 5.3% (buy and hold: 7.3%)
• Time invested in the market: 64%

The results are worse than those of the traditional 200-day moving average using a simple MA.

Let’s also backtest Bitcoin:

The Jurik moving Average performs better for Bitcoin:

• Number of trades: 71
• Average gain per trade: 12.4%
• Win rate: 36%
• Max drawdown: 65%
• Annual return 75% (buy and hold: 66%)
• Time invested in the market: 53%

What are the key features of the Jurik Moving Average?

The key features of the Jurik Moving Average are as follows:

• Smoothing effect: As with any other moving average, the JMA smooths the price data so that the direction of the trend can be easily visualized. The indicator plots a smooth line that follows the major price swings.
• Adaptability: The JMA is highly adaptive to the changes in the market volatility. That is, it becomes slower when the market moves slowly and faster when the market is moving fast. This way, it stays close to the price action.
• Phase correction: The JMA quickly corrects its phase at sharp market turns to be in sync with the price action. This is one of the key features that makes the indicator unique.
• Less lag: The primary goal of the Jurik Moving Average is to reduce the lag experienced with traditional moving averages. The JMA uses a proprietary adaptive algorithm to eliminate lag while maintaining a smoothed average line.

How to set up the Jurik Moving Average on your chart?

To set up the Jurik Moving Average on your chart, you first check whether the indicator is preinstalled on your platform so you can simply double-click it to attach it to the chart. It is unlikely to be one of the preinstalled indicators, so you may have to purchase from the developer for your trading platform.

When it is installed, go to the indicator section of the platform to find it. Double-click on it to attach it to the chart. A box may pop up where you input your preferred settings.

What parameters are used in JMA calculation?

The parameters used in JMA calculation are proprietary information. However, from the custom versions on TradingView and MetaTrader 5, the parameters include:

• Length: This refers to the period length of the moving average used in the calculation.
• Phase Ratio: This determines how well the indicator syncs with the price action. It helps the indicator to be adaptable to changes in market conditions.
• JMA alpha and beta: Alpha refers to a dynamic factor that is based on the relative price volatility, while beta refers to the periodic ratio of the length factor. alpha = beta^Power
• Power: This determines the filtering factor. It is used to calculate the alpha from the beta.

Why use the Jurik Moving Average in trading?

You use the Jurik Moving Average in trading because it offers a smoother and more responsive indicator line than traditional moving averages. This allows you to visualize the price trends more easily without the distractions from random market noise. The indicator uses complex mathematical processes to filter out market noise, smoothen the price data, and provide a clearer picture of price trends.

More interestingly, the indicator responds fast to sustained changes in price direction, making it a versatile tool for trading individual price swings. If you prefer trend-following strategies, you can also use the indicator to identify trends in time for early entry, and it also gives an early exit signal if the trend wants to reverse.

How does JMA reduce lag compared to other moving averages?

The JMA reduces lag compared to other moving averages by using a combination of adaptive smoothing and phase correction techniques. The exact formula or algorithm used to compute the indicator is proprietary information available to those who purchase the indicator from the developer. However, based on the custom versions of the indicator on TradingView and MT5, the JMA makes use of an EMA of a certain length, phase ratio, and alpha and beta variables that are related by the Power factor.

Can beginners easily use the Jurik Moving Average?

Yes, beginners can easily use the Jurik Moving Average if they simply use it to identify the trend and trade accordingly, without trying to understand how it is calculated or what makes it move the way it does. It is a moving average indicator, and they can use it as such.

The indicator’s formula and algorithm are not only complex but also proprietary information. All they need to do is create trading strategies with the indicator and practice until they master how to use the indicator.

What trading strategies incorporate the Jurik Moving Average?

Trading strategies that can incorporate the Jurik Moving Average include:

• Trend-continuation swing trades: These are trades that aim to capture the individual impulse waves in the direction of the main trend. Given the minimal lag effect of the JMA, the slope of the indicator can be used to spot when a news impulse swing is emerging after a pullback to a support/resistance level.
• Breakout trades: The JMA can be used to confirm a price breakout in any direction. If the price breaks out in the upward direction, the JMA indicator should be sloping upward, with the price above it. For a downward breakout, the JMA should be sloping downward, with the price below it.

How to interpret JMA signals for buy and sell?

To interpret JMA signals for buy and sell, you have to consider the direction of the indicator’s slope and where the price is relative to the indicator. If the indicator is sloping upward and the price closes above it, you have a buy signal. The signal is stronger if the main trend on a higher timeframe is also to the upside.

On the other hand, a sell signal is generated if the JMA is sloping downward and the price closes below it. If the main trend on the higher timeframe is also to the downside, the signal is more significant.

What are the advantages of using JMA over EMA?

The advantages of using JMA over EMA include the following:

• The JMA is highly responsive to the price action, which makes it less lagging than the EMA.
• The JMA smooths the price data better than the EMA
• The JMA can adapt to changes in market volatility, while the EMA cannot.
• It is easier to generate buy and sell signals with the JMA than with the EMA

Are there any disadvantages to the Jurik Moving Average?

Yes, there are some disadvantages to the Jurik Moving Average. These are some of them:

• The JMA can be very sensitive to price changes, leading to many false signals when the market is consolidating.
• The JMA cannot serve as a dynamic support or resistance level because its line often wraps the price action.
• It does not work well in all market conditions.
• It may need to be combined with another trend indicator or a higher timeframe analysis to spot the direction of the main trend.

How does the JMA handle market volatility?

The JMA handles market volatility by adapting to sustained volatility changes in the market. Its ability to adapt to changes in market volatility is one of the unique features of the indicator. It speeds up when the market is moving faster and slows down when the market is moving slowly.

Whatever the market volatility, the indicator adapts to hug tightly to the price action. While this may be very helpful in a trending market, it comes with a lot of false signals when the market is in a consolidation.

What indicators work well with the Jurik Moving Average?

The indicators that work well with the Jurik Moving Average are those that can complement its signals. Given that the JMA is a trend indicator, it may be best to combine it with volume indicators, which can help show when the market is accumulating and the level of bullish or bearish pressure in the market.

For instance, if you are trading a breakout strategy, the volume indicator can tell you if the breakout is accompanied by huge trading volume, which will further confirm the signal.

How to customize the Jurik Moving Average for your needs?

To customize the Jurik Moving Average for your needs, you have to create a trading strategy based on the indicator and backtest it on the markets you want to trade. During the backtesting, you experiment with different settings and parameters to find the ones that suit your needs.

Afterward, you set up the indicator with the best-performing parameters from your backtesting result. Later on, when trading the real market, you will have to periodically evaluate the performance of the strategy to know when you need to tweak your parameters.

What timeframes are best for using JMA?

The best timeframes for using the JMA will depend on your trading style and the results of your backtesting. If your style is day trading, you will trade on intraday timeframes, such as the hourly, 30-minute, 15-minute, and even 5-minute timeframes.

Your backtesting results will tell you the particular timeframes that offer the best day trading performance. In a similar way, if you prefer swing trading, your focus should be on the daily, 8-hourly, and 4-hourly timeframes, but it is your backtesting results that will show you which of those timeframes is best for you.

How to backtest strategies using the Jurik Moving Average?

To backtest strategies using the Jurik Moving Average, follow these steps:

1. Identify and study the markets you want to backtest your Jurik Moving Average strategies.
2. Clearly state the parameters of the strategies.
3. Gather the historical data you need for the backtesting and divide the data into in-sample and out-of-sample data.
4. Convert the strategies into a trading algorithm.
5. Run your backtesting on the in-sample data and optimize with the out-of-sample data, adjusting your parameters as needed.
6. Evaluate the results of your backtesting.

What are common mistakes when using JMA?

The common mistakes when using JMA include:

• Trading without a proper risk management plan
• Trading without first creating a reliable strategy with clear entry and exit points
• Not combining the indicator with other indicators or analysis tools to improve its signals
• Not backtesting your trading strategy before applying it in the market
• Using the indicator as a standalone trading strategy

How accurate is the Jurik Moving Average in predicting trends?

The Jurik Moving Average can be accurate in predicting trends, but as with other indicators, it cannot be accurate all the time. It is very useful for tracking a unidirectional price movement but may not perform well in a consolidating market or markets that are moving randomly without a direction.

The indicator’s responsiveness to price changes offers both an advantage and a disadvantage, depending on the market condition.

Can the Jurik Moving Average be used in all markets?

Yes, the Jurik Moving Average can be used in all markets since it is based on the price data only and all financial markets have their price data on their price charts.

This is unlike volume-based indicators, which cannot be used in markets, such as the spot forex market, where there is no central exchange to document the total trading volume. The JMA can be computed for any financial market using the price data.

What is the history behind the Jurik Moving Average?

The history behind the Jurik Moving Average can be traced to 1994 when Mark Jurik, a market research analyst and software developer, introduced the JMA to the trading public.

The indicator was designed to be adaptive and filter out noise, and thus, it offers a smoother and more responsive indicator line than traditional moving averages, such as the SMAs and EMAs. The author made it proprietary and markets it via his website.

How does JMA smooth price data effectively?

The JMA smooths price data effectively by combining adaptive smoothing and phase correction techniques.

While the exact formula or algorithm used to compute the indicator is proprietary information available to those who purchase the indicator from the developer, custom versions of the indicator on MT5 and TradingView show that the indicator uses an EMA of a certain period length and multiple filtering processes using phase ration and alpha and beta factors, where alpha = beta^Power.

What resources help learn the Jurik Moving Average?

The resources that can help you learn the Jurik Moving Average include this trading blog you’re reading now, as well as other quality trading blogs, like therobusttrader.com and quantifiedstrategies.com. You can also learn from the author’s website.

How to combine JMA with other technical analysis tools?

To combine the JMA with other technical analysis tools, you have to consider the strategy you want to trade. If you want to trade a trend-following strategy, you may have to combine it with a trendline.

The trendline not only shows the direction of the main trend but also serves as a dynamic support or resistance level where to expect reversals. If you want to use it to trade breakout, you will need a volume indicator to show the volume of the breakout price bar.

Where to download the Jurik Moving Average indicator?

Where to download the Jurik Moving Average indicator will depend on the trading platform you want to use it on. Generally, you can get it from Jurik’s website, or different trading platforms for a fee.

However, if you want to get the MT5 version, you may find one on the MQL5 marketplace. For TradingView, you can find some versions on the platform.