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Silent Market Indicator. Methodology to Avoid the Risk in No Significant Price Movements

Authors:
  • Algorithm Invest

Abstract and Figures

Investing in capital markets is a common task today. An impressive number of traders and investors, companies, private or public funds are buying and selling every day on the free markets. The current high price volatility in the financial markets gives everyone a tremendous number of speculative opportunities to make a profit. Sometimes the price makes no significant movement, however. The majority of the trades initiated in those periods will conclude to losses or will need a very long time to become profitable. To avoid these cases, a mathematical algorithm was developed in this paper: The Silent Market Indicator. This article will present the general principles and the mathematics behind the indicator and how it can be applied in financial trading to improve capital investment efficiency. It was found that the model generates a very reliable filter to avoid entry into the silent markets intervals, when the price action conducts to small amplitude price movements and when the profit expectation is lower. In order to reveal the efficiency of the Silent Market Indicator usage, some comparable trading results will be presented in the last part of this article together with the functional parameters optimized for several known capital markets. As a conclusion, it will be proved that the presented methodology is an excellent method to stay away from the market risk. In addition, being exclusively a mathematical model, it can be applied in any algorithmic trading system, combined with any other trading strategy in order to improve capital efficiency
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Silent Market Indicator. Methodology to Avoid the Risk in No Significant Price Movements.
1
Errata
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... A particular approach for risk management techniques that can be used in automated decision-making systems for capital investments can be found in (Vince, 1992). Mathematical models especially designed and optimized for algorithmic trading with proved and sustained results in real capital investments can be found in (Păuna & Lungu, 2018), (Păuna, 2018a), (Păuna, 2018b), (Păuna, 2018c), (Păuna, 2019a), (Păuna, 2019b), (Păuna, 2019c), (Păuna, 2019d), (Păuna, 2019e), (Păuna, 2019f), and (Păuna, 2020). ...
Conference Paper
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Capital investment is a sustained activity nowadays. After the worldwide release of the electronic trading systems, automated decision-making investment software is the new trend in financial speculation. A significant part of capital trading is fully computerized today. The buying and selling orders are made and sent automatically, almost in real-time. The price evolution is analyzed by servers using advanced mathematical algorithms. This paper will present one of these models named Price Probability Predictor. It is a method to build a probability field based on the price history and the real-time price action. The revealed function will generate the current probability of a price growth in the next time intervals. Automated entry and exit signals and market limit conditions will be built using the new indicator, in order to automate the whole investment process. Capital investment results will also be included in the current paper to qualify the presented trading methodology and to compare it with other similar models. In conclusion, it was found that the Price Probability Predictor is a reliable mathematical algorithm that can assist any trading decisions, in both ways, manual or automatic capital investments.
Thesis
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After several attempts to publish my Ph.D. thesis with different prestigious publishers, I have decided to make this work public and free of charge for anyone. Enjoy! Cristian Păuna
Chapter
Capital investment is a sustained activity nowadays. After the worldwide release of the electronic trading systems, automated decision-making investment software is the new trend in financial speculation. A significant part of capital trading is fully computerized today. The buying and selling orders are made and sent automatically, almost in real-time. The price evolution is analyzed by servers using advanced mathematical algorithms. This chapter will present one of these models named Price Probability Predictor. It is a method to build a probability field based on the price history and the real-time price action. The revealed function will generate the current probability of a price growth in the next time intervals. Automated entry and exit signals and market limit conditions will be built using the new indicator, in order to automate the whole investment process. Capital investment results will also be included in the current paper to qualify the presented trading methodology and to compare it with other similar models. In conclusion, it was found that the Price Probability Predictor is a reliable mathematical algorithm that can assist any trading decisions, in both ways, manual or automatic capital investments.
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