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Trend following algorithms for technical trading in stock market
Simon Fong; Jackie Tai; Yain Whar Si
2011-05-01
Source PublicationJournal of Emerging Technologies in Web Intelligence
ISSN17980461
Volume3Issue:2Pages:136-145
Abstract

Trend following (TF) is a rule-based trading mechanism that taps on the movements of long-term market trend instead of relying on any forecast or external information to decide when to buy and when to sell a stock. Its simple operation is in contrast to complicated prediction methods which typically would try to predict a future trend by analyzing the historical data and may be other factors. TF makes no prediction and it is well known for its simplicity. Although TF is a popular strategy in finance and was implemented in some commercial trading system decades ago, there have not been many studies of TF in computer science. Hence the objective of this paper is to develop a computer simulator in which TF is implemented as a variety of algorithms. Through the algorithms, readers will see how different parameters are chosen, and how these TF strategies perform in a simulation with real-life data. The simulation results show that TF algorithm can gain an average profit of 75.63% of return-of-investment monthly. However, we observed that TF degrades in performance in proportion to the amount of fluctuation of the market trend. This finding is important to the design of technical trading systems. It implies that the fluctuation of market trend should be monitored; when it exceeds a certain threshold the TF trading should be paused to prevent loss. © 2011 ACADEMY PUBLISHER.

KeywordJava Simulator Technical Trading Trend Following
DOIhttp://doi.org/10.4304/jetwi.3.2.136-145
URLView the original
Language英语
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Document TypeJournal article
CollectionDEPARTMENT OF COMPUTER AND INFORMATION SCIENCE
Corresponding AuthorSimon Fong
AffiliationFaculty of Science and Technology University of Macau Macau SAR
First Author AffilicationFaculty of Science and Technology
Corresponding Author AffilicationFaculty of Science and Technology
Recommended Citation
GB/T 7714
Simon Fong,Jackie Tai,Yain Whar Si. Trend following algorithms for technical trading in stock market[J]. Journal of Emerging Technologies in Web Intelligence,2011,3(2):136-145.
APA Simon Fong,Jackie Tai,&Yain Whar Si.(2011).Trend following algorithms for technical trading in stock market.Journal of Emerging Technologies in Web Intelligence,3(2),136-145.
MLA Simon Fong,et al."Trend following algorithms for technical trading in stock market".Journal of Emerging Technologies in Web Intelligence 3.2(2011):136-145.
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