Informatics methods to include limit conditions into automated capital investment software systems

Abstract

Using automated capital investment software systems is a common task today. At the beginning of the third millennium, modern investors are using artificial intelligence resources and methods to find the best investment opportunities on capital markets and to process the trading orders. One of the most important aspects of this activity, besides the buying and selling decisions, is to stay away from the market risk in specific conditions. For this purpose, in the current doctoral research, the notion of limit conditions in capital markets was introduced by the authors. On the high price volatility markets, when the economic or geopolitical background is changing fast, real-time decisions for earlier investment closing, or filtering decision not to open new positions in specific market states, will contribute together to the risk reduction and will provide a higher capital efficiency a the long time run. In the real-time investment software systems, the limit conditions method’s implementation presumes particular aspects in order not to introduce additional time delays for the trading orders. This paper will present the way how to include additional limit conditions procedures into automated algorithmic trading software systems. It was found that any investment strategy can be improved by using the limit conditions methods presented in this paper. Based on particular data-mining methods applied to real-time price series of any market, these methods can be automated and included in any capital investment informatics systems in order to improve the results and to reduce the allocated capital risk.

Full text

Informatics methods to include limit conditions into
automated capital investment software systems
Cristian Păuna
Economic Informatics Doctoral School
Academy of Economic Studies, Bucharest, Romania
The 19th International Conference on Informatics in Economy (IE2020)
Education, Research & Business Technologies.
21 May 2020, Bucharest, Romania.
This paper was financed by Algorithm Invest (algoinvest.biz)

This paper presents:
The notion of LIMIT CONDITIONS in financial markets
WHY we need limit conditions in capital investments
The THREE distinctive types of limit conditions
Mathematical MODELS to build limit conditions
Informatics methods to AUTOMATE limit conditions

Limit conditions in capital investments
can be applied:
To avoid
high risk
Don't buy near
maximum price
levels
Don't trade on
non significant
price movements
Don't invest in
low price grow
probability
To decrease
the risk
To increase
the profitability
To optimize
capital efficiency

Limit conditions types in financial markets
1. Don't buy near
maximum price levels
2. Don't trade on
non significant price movements
3. Don't invest in
low price probability
Price Prediction Line
Using Price Cyclicality Function (PCY)
Using Inverse Fisher RSI Function (IFR)
Using Price Prediction Line (PPL)
Using Silent Market Indicator (SMI)
Using Price Probability Predictor (PPP)

Silent Market Indicator

Price
Probability
Predictor

Instead of conclusions:
DaxTrader results between
01.01.2017 and 31.12.2019 on
Frankfurt Stock Exchange
Deutscher Aktien Index DAX30
without limit conditions: RRR = 1:3.28
with limit conditions: RRR = 1.5.01
meaning a capital efficiency increase of
52,47%

Informatics methods to include limit conditions into
automated capital investment software systems
Cristian Păuna
Email: cristian.pauna@ie.ase.ro
Phone: +407.4003.0000
Economic Informatics Doctoral School
Academy of Economic Studies, Bucharest, Romania
This paper was financed by Algorithm Invest
(algoinvest.biz)