Category: TRADING

Technical Trading in the Foreign Exchange Market

Technical trading is a method of analyzing securities by studying past price movements and trends. Based on this analysis, traders then make decisions about what trades to make. Technical traders use indicators to develop algorithmic trading systems. These trading systems are popular in the equity and commodity futures markets. Reference …

Do Stop-Loss Orders Add Value?

A stop-loss order is an order to buy or sell a security when the price reaches a certain level. A stop-loss order is designed to limit an investor’s losses on a position in a security. There are two main types of stop-loss orders: stop market orders and stop-limit orders. A …

Performance of Momentum Funds

Across several time frames and equity markets, momentum trading strategies that involve buying past winners and selling past losers have produced considerable gains. In recent years, asset management firms have offered investment vehicles that provide investors with easy access to momentum strategies. The number of funds and the asset under …

Anti-Herding Behavior of Hedge Funds

The herd effect is when people do not pay attention to what they know. Instead, they follow what other people are doing. It is found that people tend to herd based on other investors’ activity, and not only their own behavior. They also tend to follow more extreme decisions made …

Quantitative Trading in Credit Markets

Quantitative trading, which relies on computer algorithms to make decisions about when and how to trade, has become a more dominant form of trading in equity markets. This type of trading employs mathematical models to identify opportunities and optimize trades. While quantitative trading is prevalent in equity markets, it is …

Price Dynamics of Volatility Indices

We have previously discussed the price dynamics of the SP500 volatility index, VIX. A recent article investigated the trending/mean-reverting properties of several volatility indices. The paper’s objective is to use the autoregressive fractionally integrated moving average (ARFIMA) model to extend research on Hurst exponent to the universe of volatility …

Genetic Algorithm for Pairs Trading

We have discussed previously how a complex trading system can be profitable. In a similar context, Reference applied a genetic algorithm to pairs trading. The authors developed a sophisticated genetic optimization algorithm that utilizes Bollinger Bands and correlation-coefficient for pairs trading. The algorithm encoded six important variables into a …