DREAM: Moving Average Crossover Strategy + Dynamic Programming Model = Wealth Dreams Come True

DOI

10.2991/978-94-6463-042-8_50How to use a DOI?

Keywords

Moving Average Crossover Strategy; Multi-stage dynamic programming model; Trading strategy; Maximum income; Sensitive analysis.

Abstract

If investors want to profit in the market, they need to have a reasonable trading strategy. In this paper, we use the moving average crossover strategy to process data, predict the short-term market price situation based on the historical price before the trading day, and also use EMA, RSI and MACD for analysis, in order to ensure that at every stage our portfolio brings maximum profits. We further introduce the upper bound of transaction amount as a constraint, and transform the model from nonlinear to linear dynamic programming model. At the same time, we prove by contradictory method that the optimal solution obtained by the improved model remains unchanged, which shows that the trading strategy obtained by our model is optimal. Due to the nature of dynamic programming, it is provable thatour trading strategy is optimal. Taking into account the risks in financial markets, we added a risk control system to the model to help us stop losses in time and reduce profit draw downs. Finally, we changed the number of transactions according to the different commission fees, and then conducted a sensitivity analysis on the commission. The results showed that the smaller the commission, the greater the profit, and the more the number of transactions.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Yidan Ma
AU  - Dianjie Gu
AU  - Qiuyan Yi
PY  - 2022
DA  - 2022/12/29
TI  - DREAM: Moving Average Crossover Strategy + Dynamic Programming Model = Wealth Dreams Come True
BT  - Proceedings of the 2022 International Conference on mathematical statistics and economic analysis (MSEA 2022)
PB  - Atlantis Press
SP  - 340
EP  - 348
SN  - 2352-538X
UR  - https://doi.org/10.2991/978-94-6463-042-8_50
DO  - 10.2991/978-94-6463-042-8_50
ID  - Ma2022
ER  -