Home // International Journal On Advances in Systems and Measurements, volume 15, numbers 1 and 2, 2022 // View article

Stock Trade Simulation Using an Average Based Trend Indicator with Heuristic Enhancements

Authors:
Yoshihisa Udagawa

Keywords: Covid-19 pandemic; Technical analysis; Global market comparison; Candlestick chart pattern, APAD.

Abstract:
The spread of Covid-19 is making a serious impact on the world economy. As policies to maintain economic activities have been implemented in a timely manner, many stock markets have regained their stock prices to pre-Covid-19 pandemic levels. This paper describes results of statistical analyses of stock price fluctuations in the vicinity of the declaration of a state of emergency following the Covid-19 pandemic. Daily historical data concerning Dow Jones Industrial Average (DJIA), Nasdaq Composite Index (NASDAQ), France Stock Index (CAC), German Stock Index (DAX), Shanghai Composite Index (SSEC) and Nikkei Stock Average (Nikkei) are used for stock trade simulations. The results show that these stock prices plunged for approximately 20 days before the trading day that marked the lowest price, and increased for the following 25 days. Through the analyses of the results, a technical indicator defined by the difference between a stock price and the moving average is devised to predict stock price trend reversals. A stock trade simulator is developed using the devised indicator to examine the degree of stock price prediction. The simulator is enhanced by heuristics using candlestick patterns to avoid large losses. Experimental results using ten years of stock price data from nine world major stock markets show that the simulator achieved the success rate of up to 74% with trade fees for purchasing a stock. Meanwhile, the success rate remains within 25% for selling a stock, because a margin loan for borrowing a stock squeeze profits. Although the developed simulator has some limitations, it provides a tool for measuring profitability among stock markets and analyzing a stock trade opportunity that leads to a significant profit and/or loss.

Pages: 20 to 37

Copyright: Copyright (c) to authors, 2022. Used with permission.

Publication date: June 30, 2022

Published in: journal

ISSN: 1942-261x