FORECASTING THE DIRECTION OF CHANGES IN THE EXCNANGE RATE OF A FINANCIAL INSTRUMENT USING SIMPLE MOVING AVERAGES
DOI:
https://doi.org/10.31732/2663-2209-2022-69-38-51Keywords:
trading system, technical analysis indicator, moving average, currency pair, arbitrageAbstract
Own previous research points to the fact that a range of technical analysis indicators have a certain predictive power, and therefore trading rules and strategies, based on these indicators, have a certain practical value. This article examines some actual issues of the developing and functioning of a trading system, using technical analysis indicators – moving averages. The approaches offered by modern researchers to the use of these indicators in forecasting changes in the financial asset exchange rate are analyzed. In this context, the purpose of the study is to analyze the impact of moving average settings and their combinations on the performance of the trading system, which is based on their use for forecasting the direction of changes in the financial instrument exchange rate. Based on this, the tasks that are solved, using moving averages, were formed. An option for organizing work on developing a trader's trading system is offered. Various options for the formation and interpretation of the trading signal, generated by the system, are considered. The article also pays attention to the criteria for comparing strategies at the testing stage. The results of using different settings options and combinations of indicators are presented and compared, the optimal ones are determined according to the given selection criteria. Trading simulations were made on the example of the EUR/USD currency pair, using data for the period from 1999 to 2023, based on which the optimal combination of technical indicators was selected for real settings of the trading system. The understanding that a trading system, based on moving averages, requires additional optimization is noted separately. The areas of possible optimization are indicated, as well as the tools that can be used for that purpose, while the emphasis is placed on the tools that are available to the retail trader. It is concluded that the proposed approach to developing of a trading system can be used to perform real arbitrage operations.
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