Basic forex strategies - page 8

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Notwithstanding its widespread use and well documented profitability, technical analysis is still not accepted by the academia. This may be due to the fact that the causes of this profitability are not yet well understood. This paper suggests a rational for the application of technical trading rules. It is assumed that some of the asset price fundamentals are observable only with a considerable lag or not observable at all. Within this realistic informational environment a moving average trading rule is able to detect possible regime shifts in the process of currently unobservable fundamentals. Moving average trading rules can be interpreted as a cheap proxy for Bayesian learning and complementary to the standard forward looking approach of asset price expectations.
 
techmac:
Anybody has the : Exponentially Decaying Weighted Moving Average?

techmac


From information I could collect, that is simply EMA (just another name)

 
seekers:
ATTENTION: Video should be reuploaded
revisiting_the_profitability_of_market_timing_with_moving_averages.pdf

Good study. Thanks

 
Jon Hanson and Douglas Kysar coined the term “market manipulation” in 1999 to describe how companies exploit the cognitive limitations of consumers. Everything costs $9.99 because consumers see the price as closer to $9 than $10. Although widely cited by academics, the concept of market manipulation has had only a modest impact on consumer protection law.

This Article demonstrates that the concept of market manipulation is descriptively and theoretically incomplete, and updates the framework for the realities of a marketplace that is mediated by technology. Today’s firms fastidiously study consumers and, increasingly, personalize every aspect of their experience. They can also reach consumers anytime and anywhere, rather than waiting for the consumer to approach the marketplace. These and related trends mean that firms can not only take advantage of a general understanding of cognitive limitations, but can uncover and even trigger consumer frailty at an individual level.

A new theory of digital market manipulation reveals the limits of consumer protection law and exposes concrete economic and privacy harms that regulators will be hard-pressed to ignore. This Article thus both meaningfully advances the behavioral law and economics literature and harnesses that literature to explore and address an impending sea change in the way firms use data to persuade.
 
This paper studies the feedback loop between liquidity and predatory trading. On one hand, predators exploit the market illiquidity to move prices and trigger a margin call on a rival trader (the prey)'s position. On the other hand, the mere anticipation of the prey's firesales by other market participants lowers the current price of the asset and changes the liquidity the prey has access to: her price impact decreases, while predators' increases. This makes predation cheaper from their viewpoint. The model predicts that predatory trading occurs in markets with low risk-bearing capacity, and shows that short-selling bans may be ineffective against predatory trading.
 
The purpose of this paper is to present simple quantitative methods that improve risk-adjusted returns for investing in US equity sectors and global asset class portfolios. A relative strength model is tested on the French-Fama US equity sector data back to the 1920s that results in increased absolute returns with equity-like risk. The relative strength portfolios outperform the buy and hold benchmark in approximately 70% of all years and returns are persistent across time. The addition of a trend-following parameter to dynamically hedge the portfolio decreases both volatility and drawdown. The relative strength model is then tested across a portfolio of global asset classes with supporting results.
 
This study investigates the foreign exchange risk management program of HDG Inc. (pseudonym), an industry leading manufacturer of durable equipment with sales in more than 50 countries. The analysis relies primarily on a three-month field study in the treasury of HDG. Precise examination of factors affecting why and how the firm manages its foreign exchange exposure are explored through the use of internal firm documents, discussions with managers, and data on 3110 foreign-exchange derivative transactions over a three and a half year period. Results indicate that several commonly cited reasons for corporate hedging are probably not the primary motivation for why HDG undertakes a risk management program. Instead, informational asymmetries, facilitation of internal contracting, and competitive pricing concerns seem to motivate hedging. How HDG hedges depends on accounting treatment, derivative market liquidity, foreign exchange volatility, exposure volatility, technical factors, and recent hedging outcomes.
 
The underlying concept behind the technical trading indicators based on moving averages of prices has remained unaltered for more than half of a century. The development in this field has consisted in proposing new ad-hoc rules and using more elaborate types of moving averages in the existing rules, without any deeper analysis of commonalities and differences between miscellaneous choices for trading rules and moving averages. The first contribution of this paper is to uncover the anatomy of market timing rules with moving averages. Our analysis offers a new and very insightful reinterpretation of the existing rules and demonstrates that the computation of every trading indicator can equivalently be interpreted as the computation of a weighted moving average of price changes. Therefore the performance of any moving average trading rule depends exclusively on the shape of the weighting function for price changes. The second contribution of this paper is a straightforward application of the useful knowledge revealed by our analysis. Specifically, we evaluate the out-of-sample performance of 300 various shapes of the weighting function for price changes using historical data on four financial market indices. The goal of this exercise is to suggest answers to long-standing questions about optimal types of moving averages and whether the best performing trading rule can beat the passive counterpart in out-of-sample tests.
 
This study employs the Simple Moving Average (SMA) and the Displaced Moving Average (DMA) trading rules to test the weak form efficiency of the Indian equity markets. The indicators were applied on the S&P CNX Nifty, BSE Sensex as well as multiple individual stocks for a time period spanning 15 years (1991-2005). Our results provide sufficient evidence that the DMA indicator is a highly successful trading rule that generated profitable signals even after adjusting for transaction and other costs.
 
The supply/demand of a security in the market is an intertemporal, not a static, object and its dynamics are crucial in determining market participants' trading behavior. Previous studies on the optimal trading strategy to execute a given order focuses mostly on the static properties of the supply/demand. In this paper, we show that the dynamics of the supply/demand are of critical importance to the optimal execution strategy, especially when trading times are endogenously chosen. Using the limit-order-book market, we develop a simple framework to model the dynamics of supply/demand and their impact on execution cost. We show that the optimal execution strategy involves both discrete and continuous trades, not only continuous trades as previous work suggested. The cost savings from the optimal strategy over the simple continuous strategy can be substantial. We also show that the predictions about the optimal trading behavior can have interesting implications on the observed behavior of intraday volume, volatility and prices.
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