Essay on Efficacy of Algorithm in Trading and Investing

15369 Words Apr 12th, 2016 62 Pages
AN ANALYTICAL STUDY ON EFFICACY OF ALGORITHM FOR BOTH TRADING AND INVESTING
AN ANALYTICAL STUDY ON EFFICACY OF ALGORITHM FOR BOTH TRADING AND INVESTING

ABSTRACT

INDEX

AIM OF STUDY
PURPOSE
* The main agenda of this study is to test the basic oscillators like RSI and OBV is to identify the behavior of these early indicators in various types of market. The agenda of using moving average lag indicators like Bollinger band is to check how well these bands work in giving out trade signals.

* The study aims to find out using Bloomberg terminal that whether combination of studies and Risk management help to enhance the performance of the indicators and do they really help to make a more profitable decision.

* This study
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Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory.
The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable.
HISTORY
The principles of technical analysis are derived from hundreds of years of financial market data. Some aspects of technical analysis began to appear in Joseph de la Vega's accounts of the Dutch markets in the 17th century. In Asia, technical analysis is said to be a method developed by Homma Munehisa during early 18th century which evolved into the use of candlestick techniques, and is today a technical analysis charting tool.
In the 1920s and 1930s Richard W. Schabacker published several books which continued the work of Charles Dow and William Peter Hamilton in their books Stock Market Theory and Practice and Technical Market Analysis. In 1948 Robert D. Edwards and John Magee published Technical Analysis of Stock Trends which is widely considered to be one of the seminal works of the discipline.
It is exclusively concerned with trend analysis and chart patterns and remains in use to the present. As is obvious, early technical analysis was almost exclusively the analysis of charts, because the processing power of computers was not available for statistical…

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