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Backlash algorithm: A trading strategy based on directional change

Backlash algorithm: A trading strategy based on directional change

Bakhach, Amer, Tsang, Edward, Ng, Wing Lon and Chinthalapati, V L Raju (2017) Backlash algorithm: A trading strategy based on directional change. In: 2016 IEEE Symposium Series on Computational Intelligence (SSCI). IEEE. ISBN 978-1-5090-4241-8 (doi:https://doi.org/10.1109/SSCI.2016.7850004)

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Abstract

Directional Change (DC) is a new way to summarize price movements in a financial market. Unlike time series, it samples data at irregular time intervals. According to the DC concept, the data is sampled only when the magnitude of price changes is significant according to the investor. In this paper, we propose a contrarian trading strategy which is based on the DC concept. We test our trading strategy using two currency pairs; namely EUR/CHF and EUR/USD. The results show that our proposed trading strategy is consistently profitable; it produce a profit of up to 145% within seven months; whereas the buy-and-hold approach incurred a loss of –14% during the same trading period.

Item Type: Conference Proceedings
Title of Proceedings: 2016 IEEE Symposium Series on Computational Intelligence (SSCI)
Additional Information: Conference held from 6-9 Dec. 2016, Athens, Greece.
Uncontrolled Keywords: contrarian trading strategy; directional change; FX trading
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 30 May 2018 15:33
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/19908

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