Which algorithm model is better to make profits? ——A comparison of the Trend-Following model and the Multi-Factor model

Authors

  • Xinyan Tao

DOI:

https://doi.org/10.61173/88ca9h55

Keywords:

Trend-Following Model, Multi-Factor Mod-el, Profitability, Risk Analysis, Volatility, Quantitative Trading

Abstract

This study compares two algorithmic trading models—the Trend-Following Model and the Multi-Factor Model, to see which is better at making profits in stock trading. The research combines a mixed methodology: secondary research (literature review) establishes foundational knowledge, while primary research involves (1) collecting historical price data for Tesla (TSLA) and Microsoft (MSFT) from the Trading View platform, and (2) testing the Trend-Following Model (using MACD and ATR indicators) against the Multi-Factor Model (using PE ratio, PB ratio, and RSI) to evaluate profits, risks, and trading frequency. Results show the Multi-Factor Model outperforms for low-volatility stocks (e.g., MSFT), while the Trend-Following Model suits high-volatility stocks (e.g., TSLA). The conclusion highlights that there is no absolute "winner," as performance depends on market intervention, volatility, and stock-specific factors.

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Published

2025-08-26

Issue

Vol. 3 No. 4 (2025): Volume 3, Issue 4

Section

Articles

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