Re: Basic forex strategies

11
I present evidence that a moving average (MA) trading strategy third order stochastically dominates buying and holding the underlying asset in a mean-variance-skewness sense using monthly returns of value-weighted decile portfolios sorted by market size, book-to-market cash-flow-to-price, earnings-to-price, dividend-price, short-term reversal, medium-term momentum, long-term reversal and industry. The abnormal returns are largely insensitive to the four Carhart (1997) factors and produce economically and statistically significant alphas of between 10% and 15% per year after transaction costs. This performance is robust to different lags of the moving average and in subperiods while investor sentiment, liquidity risks, business cycles, up and down markets, and the default spread cannot fully account for its performance. The MA strategy works just as well with randomly generated returns and bootstrapped returns. I also report evidence regarding the profitability of the MA strategy in seven international stock markets. The performance of the MA strategies also holds for more than 18,000 individual stocks from the CRSP database. The substantial market timing ability of the MA strategy appears to be the main driver of the abnormal returns. The returns to the MA strategy resemble the returns of an imperfect at-the-money protective put strategy relative to the underlying portfolio. The lagged signal to switch has substantial predictive power over subsequent decile portfolio returns. Furthermore, combining several MA strategies into a value/equal-weighted portfolio of MA strategies performs even better and represents a unified framework for security selection and market timing.


Re: Basic forex strategies

12
In these days, trading automation is one of the major topics in the field of financial research. Buy and sell are the key rule to an automated trading system which is possible to generate by various technical indicators in Forex. Benefits and disadvantages of each indicators, has its own. Regarding to our first research result which was based on P-sar indicator and published in the IIAFC conference[1]. In this paper, we will focus on the MACD indicator for four currencies namely EURUSD, GBPUSD, USDCHF and USDJPY individually to identify effectiveness of the indicator regarding to the amount of profit generated, using hourly data of market stretch from January 2001 to December 2010. Virtual Historical Trading Software (VHTS) is developed for the purpose of computing the indicator based on its original formulas and interpretations; for applying the assumptions; for trading based on buy and sell signals generated by the MACD indicator.

Re: Basic forex strategies

13
The determination of trends and prediction of stock prices is one of the main tasks of the MACD (Moving Average Convergence Divergence) and the RVI (Relative Volatility Index) indicators of the technical analysis. The research covers the sample representing stocks which are continually traded on the financial market of the Republic of Serbia. Subject of this research is to determine the possibility of MACD and RVI indicators application in investment decision making processes on the financial market of the Republic of Serbia. The main goal of the research is to identify the most profitable parameters of the MACD and RVI indicators as functions of investment strategy optimization on the financial market. The main hypothesis of the research is that the application of the MACD and RVI indicators of technical analysis significantly contributes to investment strategy optimization on the financial market. The applied methodology during the research includes analyses, synthesis and statistical/mathematical methods with special focus on the method of moving averages. Research results indicate significant possibilities in application of MACD and RVI indicators of technical analysis as functions of making optimum decisions on investment. According to the obtained results it is concluded that the application of the optimized MACD and RVI indicators of technical analysis in decision making process on investing on the financial market significantly contributes maximization of profitability on investments.

Re: Basic forex strategies

14
I present evidence that a moving average (MA) trading strategy third order stochastically dominates buying and holding the underlying asset in a mean-variance-skewness sense using monthly returns of value-weighted decile portfolios sorted by market size, book-to-market cash-flow-to-price, earnings-to-price, dividend-price, short-term reversal, medium-term momentum, long-term reversal and industry. The abnormal returns are largely insensitive to the four Carhart (1997) factors and produce economically and statistically significant alphas of between 10% and 15% per year after transaction costs. This performance is robust to different lags of the moving average and in subperiods while investor sentiment, liquidity risks, business cycles, up and down markets, and the default spread cannot fully account for its performance. The MA strategy works just as well with randomly generated returns and bootstrapped returns. I also report evidence regarding the profitability of the MA strategy in seven international stock markets. The performance of the MA strategies also holds for more than 18,000 individual stocks from the CRSP database. The substantial market timing ability of the MA strategy appears to be the main driver of the abnormal returns. The returns to the MA strategy resemble the returns of an imperfect at-the-money protective put strategy relative to the underlying portfolio. Furthermore, combining several MA strategies into a value/equal-weighted portfolio of MA strategies performs even better and represents a unified framework for security selection and market timing.

Re: Basic forex strategies

15
This study investigates the out-of-sample hedging effectiveness and dynamic hedge ratios of floor-traded and E-mini futures with VAR, ECM, bivariate GARCH, Kaiman filter, and Markov regime switching in the S&P500 and Nasdaq-100 markets. The empirical results show that both the floor-traded and E-mini futures can be good instruments to be used as hedge objectives. The correlation coefficient between spot and futures increases and hedge effectiveness goes up when the hedging period is extended. Moreover, the bivariate GARCH and Markov regime switching show a higher HEI performance in short-term and long-term hedging periods, respectively. Furthermore, floortraded futures with an open outcry system surprisingly do better than E-mini futures contracts. This study proposes meaningful evidence of hedging strategies for investors with different spot index, hedging periods, and trading mechanisms.


Basic forex strategies

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The purpose of this report is to review the evidence on the profitability of technical analysis. The empirical literature is categorized into two groups, "early" and "modern" studies, according to the characteristics of testing procedures. Early studies indicated that technical trading strategies were profitable in foreign exchange markets and futures markets, but not in stock markets before the 1980s. Modern studies indicated that technical trading strategies consistently generated economic profits in a variety of speculative markets at least until the early 1990s. Among a total of 92 modern studies, 58 studies found positive results regarding technical trading strategies, while 24 studies obtained negative results. Ten studies indicated mixed results. Despite the positive evidence on the profitability of technical trading strategies, it appears that most empirical studies are subject to various problems in their testing procedures, e.g., data snooping, ex post selection of trading rules or search technologies, and difficulties in estimation of risk and transaction costs. Future research must address these deficiencies in testing in order to provide conclusive evidence on the profitability of technical trading strategies.

Basic forex strategies

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Many technical indicators have been selected as input variables in order to develop an automated trading system that determines buying and selling trading decision using optimal trading rules within the futures market. However, optimal technical trading rules alone may not be sufficient for real-world application given the endlessly changing futures market. In this study, a rule change trading system (RCTS) that consists of numerous trading rules generated using rough set analysis is developed in order to cover diverse market conditions. To change the trading rules, a rule change mechanism based on previous trading results is proposed. Simultaneously, a genetic algorithm is employed with the objective function of maximizing the payoff ratio to determine the thresholds of market timing for both buying and selling in the futures market. An empirical study of the proposed system was conducted in the Korea Composite Stock Price Index 200 (KOSPI 200) futures market. The proposed trading system yields profitable results as compared to both the buy-and-hold strategy, and a system not utilizing a genetic algorithm for maximizing the payoff ratio. .

Absolute Momentum: A Simple Rule-Based Strategy and Universal Trend-Following Overlay

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There is a considerable body of research on relative strength price momentum but much less on absolute momentum, also known as time series momentum. In this paper, we explore the practical side of absolute momentum. We first explore its sole parameter - the formation, or look back, period. We then examine the reward, risk, and correlation characteristics of absolute momentum applied to stocks, bonds, and real assets. We finally apply absolute momentum to a 60/40 stock/bond portfolio and a simple risk parity portfolio. We show that absolute momentum can effectively identify regime change and add significant value as an easy-to-implement, rule-based approach with many potential uses as both a stand-alone program and trend-following overlay.

Intraday Forex Trading Based on Sentiment Inflection Points

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In this study we propose a short-term Forex trading strategy that uses the principles of technical analysis to create buy or sell signals based on data derived from fundamental news. Short and long term sentiment inflection points are captured by consulting a set of sentiment indexes that measure the trailing sentiment on both scheduled and unscheduled economic and geopolitical news events. The sentiment indexes are proven to predict intraday price moves in the EURUSD for up to several hours after an inflection point.

Evaluating Trading Strategies

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We provide some new tools to evaluate trading strategies. When it is known that many strategies and combinations of strategies have been tried, we need to adjust our evaluation method for these multiple tests. Sharpe Ratios and other statistics will be overstated. Our methods are simple to implement and allow for the real-time evaluation of candidate trading strategies.


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