The Profitability of Technical Analysis during the COVID-19 Market Meltdown

Lento, Camillo; Gradojević, Nikola

doi:10.3390/jrfm15050192

Cited by 9 publications

(9 citation statements)

References 63 publications

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“…Additionally, López-Martn, Benito Muela, and Arguedas [37] demonstrated that, while the EMH has been challenged over time, changes in Bitcoin markets show a tendency to evolve from less to more efficiency, indicating that other cryptocurrencies may be less explored than Bitcoin but also appear understudied in relevant studies. Furthermore, some trading rules may create a considerable excess return for most cryptocurrencies other than Bitcoin, meaning that cryptocurrency markets may not be efficient for most cryptocurrencies other than Bitcoin [38]. We then infer that the aforementioned result may be attributable to Bitcoin's appeal to individual investors, institutional investors, and even academics, thereby enhancing the efficiency of the Bitcoin market.…”

Section: Of 18mentioning

confidence: 89%

Enhancing Crypto Success via Heatmap Visualization of Big Data Analytics for Numerous Variable Moving Average Strategies

Chiu,

Ni,

et al. 2023

Applied Sciences

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This study employed variable moving average (VMA) trading rules and heatmap visualization because the flexibility advantage of the VMA technique and the presentation of numerous outcomes using the heatmap visualization technique may not have been thoroughly considered in prior financial research. We not only employ multiple VMA trading rules in trading crypto futures but also present our overall results through heatmap visualization, which will aid investors in selecting an appropriate VMA trading rule, thereby likely generating profits after screening the results generated from various VMA trading rules. Unexpectedly, we demonstrate in this study that our results may impress Ethereum futures traders by disclosing a heatmap matrix that displays multiple geometric average returns (GARs) exceeding 40%, in accordance with various VMA trading rules. Thus, we argue that this study extracted the diverse trading performance of various VMA trading rules, utilized a big data analytics technique for knowledge extraction to observe and evaluate numerous results via heatmap visualization, and then employed this knowledge for investments, thereby contributing to the extant literature. Consequently, this study may cast light on the significance of decision making via big data analytics.

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Section: Of 18mentioning

confidence: 89%

Enhancing Crypto Success via Heatmap Visualization of Big Data Analytics for Numerous Variable Moving Average Strategies

Chiu,

Ni,

et al. 2023

Applied Sciences

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“…We generate the automated trading signals using two of the most frequently applied technical indicators, namely moving average convergence divergence (MACD) [25] and Bollinger bands (BB) [26], and a hybrid strategy that reinforces these two with fractal dimension (D) [27]. Academic studies have widely investigated the performance of MACD and BB as technical trading strategies, either as a single indicator or combined indicators [9,[28][29][30][31]. For example, Xie et al [31] found that MACD performs better than other trend-following indicators, such as dual moving average (MA) crossover and average directional index (ADX).…”

Section: Fractal Analysis and Technical Indicatorsmentioning

confidence: 99%

“…For example, Xie et al [31] found that MACD performs better than other trend-following indicators, such as dual moving average (MA) crossover and average directional index (ADX). Lento and Gradojevic [29] showed that, out of a set of technical indicators tested, BB appears as the only technical indicator that is profitable during the market crash. In detecting market phases, there are variations or more sophisticated techniques that utilize fractals or the Hurst exponent, such as multifractal detrended fluctuation analysis (MF-DFA) by Kantelhardt et al [32].…”

Section: Fractal Analysis and Technical Indicatorsmentioning

confidence: 99%

Is Technical Analysis Profitable on Renewable Energy Stocks? Evidence from Trend-Reinforcing, Mean-Reverting and Hybrid Fractal Trading Systems

Nor

Zawawi

Wickremasinghe

et al. 2023

Axioms

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Demand for power sources is gradually shifting from ozone-depleting-substances towards renewable and sustainable energy resources. The growth prospects of the renewable energy industry coupled with improved cost efficiency means that renewable energy companies offer potential returns for traders in stock markets. Nonetheless, there have been no studies investigating technical trading rules in renewable energy stocks by amalgamating fractal geometry with technical indicators that focus on different market phases. In this paper, we explore the profitability of technical analysis using a portfolio of 20 component stocks from the NASDAQ OMX Renewable Energy Generation Index using fractal dimension together with trend-reinforcing and mean-reverting (contrarian) indicators. Using daily prices for the period 1 July 2012 to 30 June 2022, we apply several tests to measure trading performance and risk-return dynamics of each form of technical trading system—both in isolation and simultaneously. Overall, trend (contrarian) trading system outperforms (underperforms) the naïve buy-and-hold policy on a risk-adjusted basis, while the outcome is further enhanced (reduced) by the fractal-reinforced strategy. Simultaneous use of both trend-reinforcing and mean-reverting indicators strengthened by fractal geometry generates the best risk-return trade-off, significantly outperforming the benchmark. Our findings suggest that renewable energy stock prices do not fully capture historical price patterns, allowing traders to earn significant profits from the weak form market inefficiency.

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“…Regarding this point, the research of Lento and Gradojevic (2022) is relevant. They explored the profitability of technical trading rules (including the traditional moving average cross-over rule) around the COVID-19 pandemic market crash (from January to May 2020) for five asset markets (bitcoin, gold, oil, and so on).…”

Section: Published By Sciedu Pressmentioning

confidence: 99%

Finding Optimal Parameter Values for the MACD Indicator: Evidence From the Japanese Nikkei 225 Futures Market Using a New Methodology

Kang

2022

IJFR

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This paper explores: (1) what parameter values are most often used to optimize the Moving Average Convergence Divergence (MACD) trading system for the Japanese Nikkei 225 futures market; and, (2) the characteristics of good-performing models with the optimized parameter values. To accomplish this purpose, this paper presents a new methodology to find the three optimal parameter values of the MACD trading system; this approach systematically examines specific ranges of optimal parameter values. Evidence from the Japanese futures market demonstrates the validity of this new methodological approach. From this, we find that for the Japanese market the technical trading system is most often optimized by three parameter values within three specific ranges over the last 11 years (2011–2021). These optimal value combinations have a unique characteristic form. These findings give insightful and broader perspectives about the market. This issue, methodology and the results have not been discussed in the existing literature. This paper also considers how the models with optimal parameter values performed during the pandemic period (2020–2021).

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The Profitability of Technical Analysis during the COVID-19 Market Meltdown

Cited by 9 publications

References 63 publications

Enhancing Crypto Success via Heatmap Visualization of Big Data Analytics for Numerous Variable Moving Average Strategies

Enhancing Crypto Success via Heatmap Visualization of Big Data Analytics for Numerous Variable Moving Average Strategies

Is Technical Analysis Profitable on Renewable Energy Stocks? Evidence from Trend-Reinforcing, Mean-Reverting and Hybrid Fractal Trading Systems

Finding Optimal Parameter Values for the MACD Indicator: Evidence From the Japanese Nikkei 225 Futures Market Using a New Methodology

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