Trading Strategies Research Papers - Academia.edu (original) (raw)

This is my own invention of exercising Options. I call it, "The Dragon Spread". I uploaded several pictures and I'm still experimenting with this Options strategy. It is to be exercised when the stock price is determined to be bullish.... more

This is my own invention of exercising Options. I call it, "The Dragon Spread". I uploaded several pictures and I'm still experimenting with this Options strategy. It is to be exercised when the stock price is determined to be bullish. There is a little Insurance protection from the Put side. First, Buy Call one ATM (At the Money) or slightly INM (In the Money) and Sell one OTM (Out of the Money) where you think the price will reach. Second, after initiating the first one, we then create a Credit Spread (Vertical) Options on the Put side where we think the price will not reach. For instance, Initiating the trade by Thursday, If the price of XYZ stock is determined to be 110 by the next day, i.e., Friday with the current price being 100. The price reached 110 by Friday, being bullish, we collected premiums on both sides of the trade, i.e., on Call and Put. The Further the stock goes up, the further the premium will go up. Here, the first spread, i.e., bull call spread is initiated for an expiration of 30-40 days, the same goes for the credit (vertical) spread. P.S. I'm not a financial advisor and all risk must be taken by the initiator, trader or investor.

We study the extent to which crashes in emerging market currencies are predictable using simple logit models based on lagged macroeconomic and financial data. To evaluate our model, we calculate trading strategies in which an investor... more

We study the extent to which crashes in emerging market currencies are predictable using simple logit models based on lagged macroeconomic and financial data. To evaluate our model, we calculate trading strategies in which an investor goes long or short in the currency ...

Purpose – The purpose of this paper is to analyze long-term prior return patterns in stock returns for India. Design/methodology/approach – The methodology involves portfolio generation based on company characteristics and long-term prior... more

Purpose – The purpose of this paper is to analyze long-term prior return patterns in stock returns for India. Design/methodology/approach – The methodology involves portfolio generation based on company characteristics and long-term prior return (24-60 months). The characteristic sorted portfolios are then regressed on risk factors using one factor (capital asset pricing model (CAPM)) and multi-factor model (Fama-French (FF) model and four factor model involving three FF factors and an additional sectoral momentum factor). Findings – After controlling for short-term momentum (up to 12 months) as documented by Sehgal and Jain (2011), the authors observe that weak reversals emerge for the sample stocks. The risk model CAPM fails to account for these long-run prior return patterns. FF three-factor model is able to explain long-term prior return patterns in stock returns with the exception of 36-12-12 strategy. The value factor plays an important role while the size factor does not expl...

The Foreign Exchange Market is the biggest and one of the most liquid markets in the world. This market has always been one of the most challenging markets as far as short term prediction is concerned. Due to the chaotic, noisy, and... more

The Foreign Exchange Market is the biggest and one of the most liquid markets in the world. This market has always been one of the most challenging markets as far as short term prediction is concerned. Due to the chaotic, noisy, and non-stationary nature of the data, the majority of the research has been focused on daily, weekly, or even monthly prediction. The literature review revealed that there is a gap for intra-day market prediction. Identifying this gap, this paper introduces a prediction and decision making model based on Artificial Neural Networks (ANN) and Genetic Algorithms. The dataset utilized for this research comprises of 70 weeks of past currency rates of the 3 most traded currency pairs: GBP\USD, EUR\GBP, EUR\USD. The initial statistical tests confirmed with a significance of more than 95% that the daily FOREX currency rates time series are not randomly distributed. Another important result is that the proposed model achieved 72.5% prediction accuracy. Furthermore, ...

The aim of this paper is to investigate, for the first time, the performance of trading strategies based on the combination of technical trading rules and fundamental analysis in the sale and purchase market for dry bulk ships. Using a... more

The aim of this paper is to investigate, for the first time, the performance of trading strategies based on the combination of technical trading rules and fundamental analysis in the sale and purchase market for dry bulk ships. Using a sample of price and charter rates over the period January 1976 to September 2004, we establish the existence of a long-run cointegrating relationship between price and earnings and use this relationship as an indicator of investment or divestment timing decisions in the dry bulk shipping sector. In order to discount the possibility of data snooping biases and to evaluate the robustness of our trading models, we also perform tests using the stationary bootstrap approach. Our results indicate that trading strategies based on earnings–price ratios significantly out-perform buy and hold strategies in the second-hand market for ships, especially in the market for larger vessels, due to higher volatility in these markets.

The widespread use and proven profitability of technical trading rules in financial markets has long been a puzzle in academic finance. In this paper we show, using an agent-based model of an evolving stock market, that widespread... more

The widespread use and proven profitability of technical trading rules in financial markets has long been a puzzle in academic finance. In this paper we show, using an agent-based model of an evolving stock market, that widespread technical trading can arise due to a multi-person prisoners' dilemma in which the inclusion of techinical trading rules to a single agent's repertoire of rules is a dominant strategy. The use of this dominant strategy by all traders in the market creates a symmetric Nash equilibrium in which wealth earned is lower and the volatility of prices is higher than in the hypothetical case in which all agents rely only on fundamental rules. Our explanation of this lower wealth and higher volatility is that the use of technical trading rules worsens the accuracy of the predictions of all agents' market forecasts by contributing to the reinforcement of price trends, augmenting volatility, and increasing the amount of noise in the market. Submitted to Con...

MEJOR ESTRATEGIA DE TRADING FOREX La Mejor Estrategia de Trading Forex | Ganadora y rentable ¡Aprender la mejor estrategia de forex rentable GRATIS! ✔ Indicadores y plantilla ✔ Fácil de aprender ✔ Increíblemente efectiva ✔ ¡Totalmente... more

MEJOR ESTRATEGIA DE TRADING FOREX
La Mejor Estrategia de Trading Forex | Ganadora y rentable
¡Aprender la mejor estrategia de forex rentable GRATIS!
✔ Indicadores y plantilla
✔ Fácil de aprender
✔ Increíblemente efectiva
✔ ¡Totalmente Gratis!

This paper is concerned with implementing and evaluating popular mean-reversion trading strategies. The underlying market is modeled like a sinusoidal function, consistently switching between two states: the uptrend (bull market) and down... more

This paper is concerned with implementing and evaluating popular mean-reversion trading strategies. The underlying market is modeled like a sinusoidal function, consistently switching between two states: the uptrend (bull market) and down trend (bear market). The set of trading rules examined includes Moving Averages (Simple and Exponentially Weighted), Moving Average Cross-Over, the Auto-regressive model (AR), Moving Average Convergence/Divergence (MACD), Relative Strength Index (RSI), MA 200/MA 20. The objective is to identify three best performing trading strategies and evaluate their performance through popular performance indicators and statistical hypothesis testing.

It has been widely accepted by many studies that non-linearity exists in the financial markets and that neural networks can be effectively used to uncover this relationship. Unfortunately, many of these studies fail to consider... more

It has been widely accepted by many studies that non-linearity exists in the financial markets and that neural networks can be effectively used to uncover this relationship. Unfortunately, many of these studies fail to consider alternative forecasting techniques, the relevance of input variables, or the performance of the models when using different trading strategies. This paper introduces an information gain technique used in machine learning for data mining to evaluate the predictive relationships of numerous financial and economic variables. Neural network models for level estimation and classification are then examined for their ability to provide an effective forecast of future values. A cross-validation technique is also employed to improve the generalization ability of several models. The results show that the trading strategies guided by the classification models generate higher risk-adjusted profits than the buy-and-hold strategy, as well as those guided by the level-estim...

There are many aspects to successful trading. An often overlooked yet critical aspect is, knowing the trading system ("trading strategy") you’re using actually has a clear positive edge/positive expectancy. This is a MUST for any... more

There are many aspects to successful trading. An often overlooked yet critical aspect is, knowing the trading system ("trading strategy") you’re using actually has a clear positive edge/positive expectancy.
This is a MUST for any consistently profitable trading strategy!
Read on to understand the importance of trading system expectancy, learn how to calculate it, and confirm if you have a profitable trading strategy (clear positive expectancy).

Efficiency of markets has been much debated and theory evolved from the efficient market hypothesis (EMH) in its three forms to the adaptive market hypothesis (AMH). We study the US technology sector, finding that stocks traded... more

Efficiency of markets has been much debated and theory evolved from the efficient market hypothesis (EMH) in its three forms to the adaptive market hypothesis (AMH). We study the US technology sector, finding that stocks traded inefficiently during the financial crisis and rejecting the conventional all-or-nothing EMH in favour of the AMH. We also analyse Bitcoin, rejecting a move-to-efficiency as suggested by EMH literature and showing support for the AMH. Finally, we apply an original Double Runs Test to high-frequency Bitcoin prices to develop the notion of sticky efficiency and show that it exists in the Bitcoin market.

The Momentum effect is a capital market puzzle. International evidence has found anomalies that market efficiency-based explanations have been so far unable to explain. If it is pervasive, the Momentum effect should be present in the... more

The Momentum effect is a capital market puzzle. International evidence has found anomalies that market efficiency-based explanations have been so far unable to explain. If it is pervasive, the Momentum effect should be present in the Chilean market as well. From the perspective of the existing literature, this is an out-of-sample test of the effect and thus constitutes our main motivation. This paper mainly follows the methodology proposed by Jegadeesh and Titman (1993, 2001) and finds a strong presence of the momentum effect. Ignoring transaction costs, trading strategies consisting of buying past winners and selling past losers, earn significant abnormal returns in the period July 1991 - September 2008. We also study possible empirical regularities in this behavior, finding non discernible patterns in performance. Nonetheless, such patterns arise in terms of persistence: aggregate economic shocks affect the profit levels from a Momentum-based strategy but do not affect its statistically significant presence throughout the business cycle.

This is first part of 2 paper series on Power trading, in the first part Power System Trading Strategies (TS) is discussed from viewpoint of Power generation company (GENCO) in auction based (short term) Electrical Power Markets (EPM)... more

This is first part of 2 paper series on Power trading, in the first part Power System Trading Strategies (TS) is discussed from viewpoint of Power generation company (GENCO) in auction based (short term) Electrical Power Markets (EPM) while in second paper market design analysis is done to form competitive EPM. Electricity is a particular type of commodity which does not store in large quantities so whenever it is generated it must be consumed immediately. This has made Electrical power status complicated, for both generation and consumption point of view. Usually, electricity generation sources are limited as compared to load. In deregulation
environment the GENCOs faces a situation of competition. It is generally seen that market prices (LTP) of power decrease and efficiency of generation increases with the increase in competition but now, many countries faces power LTP much higher than expected by economic considerations. The most probable reason for this LTP is market power and oligopoly, GENCOs having large capacity can impact the LTP by means of their TS. Also, Market Participants having small generation capacity able to manipulate market price in times of stringent
supply function. This paper shows the comparative analysis among main strategies GENCOs opt for LTP manipulation to earn more profit.

A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with... more

A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with bivariate copulas and the fitted copula structures are utilised to identify the trading opportunities. Two trading strategies are considered that take advantage of the relative mispricing between a pair of correlated stocks and involve taking a position on the stocks when they diverge from their historical relationship. The position is then reversed when the two stocks revert to their historical relationship. Only stock-pairs with relatively high correlations are considered. The dependence structures of the chosen stock-pairs very often exhibited both upper- and lower-tail dependence, which implies that copulas with the correct characteristics should be more effective than the more traditional approaches typically applied. To identify trading opportuniti...

A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with... more

A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with bivariate copulas and the fitted copula structures are utilised to identify the trading opportunities. Two trading strategies are considered that take advantage of the relative mispricing between a pair of correlated stocks and involve taking a position on the stocks when they diverge from their historical relationship. The position is then reversed when the two stocks revert to their historical relationship. Only stock-pairs with relatively high correlations are considered. The dependence structures of the chosen stock-pairs very often exhibited both upper- and lower-tail dependence, which implies that copulas with the correct characteristics should be more effective than the more traditional approaches typically applied. To identify trading opportuniti...

Title: Deep dive into the online trading academy education When you are thinking about any investment, your first thought comes in my mind is trading. But most people are complaining about how they could start it? Hardly a few of other... more

Title: Deep dive into the online trading academy education When you are thinking about any investment, your first thought comes in my mind is trading. But most people are complaining about how they could start it? Hardly a few of other students or working man investing their time into trading education. Most people want to invest their time to learn things but as a working man or woman, they can't afford it. So the solution comes in a market with the best in the class online trading academy. Starting from basic knowledge sharing of trading to complete guide of market research is truly available on it. You can learn things from the application like the trading academy. Invest your free time into learning when there is no job pressure. Learn the marketing research tips and investment ideas though you are a non-commerce field. Experts tips and ideas about the growth and downfalls of shares and markets are easily available on your fingertip. Friendly graphical interpretation and display will help you understand easily about the growth ration of the past few months or time. Conclusively, we could suggest that mainly online trading educations are not that hard to stuff for any seeker who wants to be a good investor. Many Online trading academies are providing this learning session tutorial and live market examples to help those all-new bees on the trading field. Get the best knowledge from trading education and be a smart investor to shape your life. Wisely investing money could be the best growth finder for the investors. And the trading academy will help you for the same. http://tradingakademy.com/

Determining the circumstances under which it is possible to make any sort of prediction is a fundamental question in financial research. The presence of complex and robust statistical characteristics, exhibited by most financial time... more

Determining the circumstances under which it is possible to make any sort of prediction is a fundamental question in financial research. The presence of complex and robust statistical characteristics, exhibited by most financial time series, raise doubts on the simple relationship between information and price changes, as implied by the efficient market hypothesis. In this paper, we consider the main competing economic hypotheses and examine different approaches for learning the price behaviour in financial markets. Our analysis reveals the need to approach the problem from a new perspective. In financial markets, traders are not only adapting, but also determine and form the economic mechanism essentially by their actions. In these settings, financial markets are evolutionary structures of competing trading strategies; prices in such markets are driven endogenously by the induced expectations. A combination of economics, computer and cognitive science in cross-disciplinary study of...

Abstract—This paper proposes a multi-agent based simulation (MABS) framework to construct an artificial electric power market where heterogeneous, rationally bounded and learning agents co-evolve dynamically. The proposed framework aims... more

Abstract—This paper proposes a multi-agent based simulation (MABS) framework to construct an artificial electric power market where heterogeneous, rationally bounded and learning agents co-evolve dynamically. The proposed framework aims to facilitate the integration of two ...

Abstract—This paper proposes a multi-agent based simulation (MABS) framework to construct an artificial electric power market where heterogeneous, rationally bounded and learning agents co-evolve dynamically. The proposed framework aims... more

Abstract—This paper proposes a multi-agent based simulation (MABS) framework to construct an artificial electric power market where heterogeneous, rationally bounded and learning agents co-evolve dynamically. The proposed framework aims to facilitate the integration of two ...

Theory suggests that long/short equity hedge funds’ returns come from directional as well as spread bets on the stock market. Empirical analysis finds persistent net exposures to the spread between small versus large cap stocks in... more

Theory suggests that long/short equity hedge funds’ returns come from directional as well as spread bets on the stock market. Empirical analysis finds persistent net exposures to the spread between small versus large cap stocks in addition to the overall market. Together, these factors account for more than 80 percent of return variation. Additional factors are price momentum and market activity. Combining two major branches of hedge fund research, our model is the first that explicitly incorporates the effect of funding (stock loan) on alpha. Using a comprehensive data set compiled from three major database sources, we find that among the three thousand plus hedge funds with similar style classification, less than twenty percent of long/short equity hedge funds delivered significant, persistent, stable positive non-factor related returns. Consistent with the predictions of the Berk and Green (2004) model we find alpha producing funds decays to “beta-only” over time. However, we do ...

The paper aims to analyse the status and challenges related to the land corridors of the visionary 'One Belt, One Road' concept promoted by China. Its importance is connected with the global reach creating enormous opportunities for... more

The paper aims to analyse the status and challenges related to the land corridors of the visionary 'One Belt, One Road' concept promoted by China. Its importance is connected with the global reach creating enormous opportunities for involved nations, and the thesis is that it will continue although there are significant obstacles to specific land corridors. The paper utilises qualitative research based on official documents and data related to the project applying analysis, critical synthesis, desk research, and comparative studies methods. Quantitative data are used only for case studies. The paper will allow comprehending the respective corridors and the whole project concerning security and corresponding nations' interests.

This paper investigates the profitability of technical trading rules in the Athens Stock Exchange (ASE), utilizing the FTSE Large Capitalization index over the seven-year period 2005-2012, which was before and during the Greek crisis. The... more

This paper investigates the profitability of technical trading rules in the Athens Stock Exchange (ASE), utilizing the FTSE Large Capitalization index over the seven-year period 2005-2012, which was before and during the Greek crisis. The technical rules that will be explored are the simple moving average, the envelope (parallel bands) and the slope (regression). We compare technical trading strategies in the spirit of Brock, Lakonishok, and LeBaron (1992), employing traditional t-test and Bootstrap methodology under the Random Walk with drift, AR(1) and GARCH(1,1) models. We enrich our analysis via Fourier analysis technique (FFT) and more statistical tests. The results provide strong evidence on the profitability of the examined technical trading rules, even during recession period (2009-2012), and contradict the Efficient Market Hypothesis.

Investment objective of yielding higher return at lower risk is one of the challenges faced by participants (mainly investors) in share market. With an aim of overcoming this common challenge, past scholars have tested various trading... more

Investment objective of yielding higher return at lower risk is one of the challenges faced by participants (mainly investors) in share market. With an aim of overcoming this common challenge, past scholars have tested various trading strategies and even proposed new strategies but the outcomes are still puzzling. These high evolutions pertaining to trading strategies that occurred in investment world are covering several aspects such as fundamental features (ratios of the companies) and the economic variables yet the results were discourage due to mix results reported. Ample of causes could attribute to these situations where one of the most identifiable reasons was unpredictability in global economic condition. Thus, this paper attempts to focus on the high yielding strategy of Dogs of the Dow Theory as one of the trading strategy in constructing portfolio in which this strategy are distinctive from the common high yielding approaches. This paper consists of several parts, namely the evolution of the trading strategies and the empirical evidences supporting Dogs of the Dow Theory as a trading strategy.

A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with... more

A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with bivariate copulas and the fitted copula structures are utilised to identify the trading opportunities. Two trading strategies are considered that take advantage of the relative mispricing between a pair of correlated stocks and involve taking a position on the stocks when they diverge from their historical relationship. The position is then reversed when the two stocks revert to their historical relationship. Only stock-pairs with relatively high correlations are considered. The dependence structures of the chosen stock-pairs very often exhibited both upper- and lower-tail dependence, which implies that copulas with the correct characteristics should be more effective than the more traditional approaches typically applied. To identify trading opportuniti...

Investors who want to execute large orders always have to trade-off between price effect and opportunity cost. The purpose of this research is to investigate an optimal way to execute such orders. In this research we consider the... more

Investors who want to execute large orders always have to trade-off between price effect and opportunity cost. The purpose of this research is to investigate an optimal way to execute such orders. In this research we consider the possibility of order types and the optimal trading strategy based on the volume weighted average price (VWAP), using historical data of a share in Tehran Stock Exchange. In the simulated trading market, we also consider the price effect for large orders. The results show that for a large order on buy-side, execution strategy adopting multiple order types can perform better than those using single order type. The optimal strategy has managed to reduce the volume weighted average price (transaction costs) by 0.137 percent compared to the market.