Research on futures trend trading strategy based on short term chart pattern

• Main Authors: Saulius Masteika, Aleksandras Vytautas Rutkauskas
• Format: Article
• Language: English
• Published: Vilnius Gediminas Technical University 2012-10-01
• Series: Journal of Business Economics and Management
• Subjects: futures market; quantitative analysis; trend trading; time series analysis; chart pattern; fractal formation
• Online Access: https://journals.vgtu.lt/index.php/JBEM/article/view/4436

The main task of this paper is to examine a short term trend trading strategy in futures market based on chart pattern recognition, time series and computational analysis. Specifications of historical data for technical analysis and equations for futures profitability calculations together with position size measurement are also discussed in the paper. A contribution of this paper lies in a novel chart pattern related to fractal formation and chaos theory and its application to short term up-trend trading. Trading strategy was tested with historical data of the most active futures contracts. The results have given significantly better and stable returns compared to the change of market benchmark (CRB index). The results of experimental research related to the size of trading portfolio and trade execution slippage are also discussed in the paper. The proposed strategy can be attractive for futures market participants and be applied as a decision support tool in technical analysis.