Profitability of Trading Rules in Futures Markets

Abstract

In this paper we conduct tests for two different trading rules, namely, the Dual Moving Average (DMA) model and the Channel Breakout (CHB) rule. These rules are tested across five futures contracts -the S&P 500, British Pound, US T-Bonds, COMEX Gold and Corn using daily data over the period 1990 to 1998. Overwhelmingly, we find that the trading rules are unable to produce (gross or net) profits at any statistical level. While positive gross and net profits were available in four of the five markets, the profits were neither economically or statistically significant.

Testing the performance of technical trading rules in the Chinese markets based on superior predictive test

“…Lucke carried out a test on the effectiveness of head-and-shoulder trading rules on foreign exchange markets and found that returns to head-and-shoulder trading rules were not significantly positive [4]. Anderson and Faff found that in futures markets, the profit of technical trading rules was not significantly obtainable [5]. To investigate the efficiency of technical trading rules, Kung focused on profits produced by buying signals and selling signals, using the Taiwan Stock Exchange Weighted Index and found that for these rules, returns from buy signals are higher than those from sell signals.…”

Trust in online futures market: a study of Malaysia

“…Experience is considered important to increase trust and reduce the risk of not being able to meticulously assess agent performance. Traders should have an understanding of market rules and develop their own investing strategy (Anderson and Faff, 2005) which diminish the broker–traders risk asymmetry, as risky decisions may differ between brokers and traders (Tan and Lee, 2015). Trader A elaborates: Getting experience working with a platform and analyzing the market are the main factors that all traders must think through before starting a transaction.…”

Testing the performance of technical trading rules in the Chinese market

“…The support and resistance strategy is to buy (sell) when the closing price upward (downward) exceeds the maximum (minimum) closing price over the previous n days (5,10,15,20,25,50,100,150,200,250, giving a total of 10 values). An alternative way is to use the most recent closing price that is greater or less than the e previous closing price as maximum or minimum (2,3,4,5,10,20,25,50,100,200, giving a total of 10 values).…”

“…The support and resistance strategy is to buy (sell) when the closing price upward (downward) exceeds the maximum (minimum) closing price over the previous n days (5,10,15,20,25,50,100,150,200,250, giving a total of 10 values). An alternative way is to use the most recent closing price that is greater or less than the e previous closing price as maximum or minimum (2,3,4,5,10,20,25,50,100,200, giving a total of 10 values). Like the moving average, a fixed percentage filter band b (0.001, 0.005, 0.01, 0.015, 0.02, 0.03, 0.04, 0.05, giving a total of 8 values), a time delay filter d days (2, 3, 4 or 5 days, giving a total of 4 values) and a fixed holding time c days (5, 10, 25 or 50 days, giving a total of 4 values) can be included.…”

“…A stock movement channel can be defined when the difference of high and low over the previous n days (5,10,15,20,25,50,100,150,200,250, giving a total of 10 values) is within x percent (0.005, 0.01, 0.02, 0.02, 0.05, 0.075, 0.1, 0.15, giving a total of 8 values) of the low. A buy (sell) signal is then generated when the closing price moves up (down) the upper (lower) channel.…”