Profitability of the Bollinger Star strategy in Foreign Exchange markets.
There are a limited number of published papers on countertrend strategies, candlesticks, and multi-rule setups in foreign exchange markets. Therefore, this paper back-tests a multi-rule countertrend strategy using 13 years of daily price data from the 6 foreign exchange majors. This strategy, hencef...
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| Main Authors: | , , |
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| 格式: | Final Year Project |
| 語言: | English |
| 出版: |
2009
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| 主題: | |
| 在線閱讀: | http://hdl.handle.net/10356/15233 |
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| 總結: | There are a limited number of published papers on countertrend strategies, candlesticks, and multi-rule setups in foreign exchange markets. Therefore, this paper back-tests a multi-rule countertrend strategy using 13 years of daily price data from the 6 foreign exchange majors. This strategy, henceforth known as Bollinger Star, employs Bollinger bands, the Morning/Evening Star candlestick pattern and Average True Range-based stop losses.
The back-test indicates that the Bollinger Star does not trade often, has a short average holding period and a low interest carrying cost. It also has a relatively low percentage of winning trades and a relatively high profit/loss ratio. At 10 times leverage, the average return per trade is not significantly positive, after accounting for transaction costs and interest differentials.
However, it was found that Bollinger Star’s average return per trade and risk-adjusted ratios increased as price volatility at entry increases. In addition, the highest risk-adjusted returns were recorded in very range-bound markets, and highly trending markets.
Overall, in trending and volatile markets, Bollinger Star produced a statistically significant positive average return per trade and the best risk-adjusted performance. In contrast, it registered the worst risk-adjusted performance in range-bound and quiet markets. |
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