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TSFDC: A Trading strategy based on forecasting directional change

TSFDC: A Trading strategy based on forecasting directional change

Bakhach, Amer M., Tsang, Edward P.K. and Chinthalapati, V. L. Raju (2018) TSFDC: A Trading strategy based on forecasting directional change. Intelligent Systems in Accounting, Finance and Management, 25 (3). pp. 105-123. ISSN 1055-615X (Print), 1099-1174 (Online) (doi:

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Directional Change (DC) is a technique to summarize price movements in a financial market. According to the DC concept, data is sampled only when the magnitude of price change is significant according to the investor. In this paper, we develop a contrarian trading strategy named TSFDC. TSFDC is based on a forecasting model which aims to predict the change of the direction of market’s trend under the DC context. We examine the profitability, risk and risk-adjusted return of TSFDC in the FX market using eight currency pairs. We argue that TSFDC outperforms another DC-based trading strategy.

Item Type: Article
Uncontrolled Keywords: Algorithmic trading; 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: 03 May 2020 01:38
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: None

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