Heuristic based trading system on forex data using technical indicator rules

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Date

2015

Author

Öztürk, Murat

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The foreign exchange market, which is widely known as Forex or FX, is the largest financial market with a daily transactional volume of $5 trillion. Due to the huge structure of the market, price analysis on FX market draws attention of many scientists and practitioners. There are 2 main analysis approaches: Fundamental and technical analysis. Fundamental analysis focuses on the macroeconomic factors such as interest rate to explain the market movements. Technical analysis deals with past market price data to forecast the future prices. Technical analysis involves two main approaches: Chart analysis and technical indicator based price analysis. Chart analysis deals with detection of patterns in price charts. Technical indicators transform the price time series data into another time series data to explore patterns. Technical indicators are widely used in FX and other financial markets which are the building blocks of many trading systems. A trading system is based on technical indicators or pattern-based approaches which produces buy/sell signals to trade in the market. In this thesis, a heuristic based trading system on Forex data is developed using popular technical indicators. The system grounds on selecting and combining the trading rules based on indicators using heuristic methods. The selection of the trading rules is realized by using Genetic Algorithm and a local search method. A weighted majority voting method is proposed to combine the technical indicator based trading rules to form a single trading rule. The experiments are conducted on 2 major currency pairs in 3 different time frames where promising results are achieved.

Subject Keywords

Foreign exchange., International finance, Genetic algorithms., Time-series analysis., Heuristic algorithms.

URI

http://etd.lib.metu.edu.tr/upload/12618392/index.pdf
https://hdl.handle.net/11511/24375

Collections

Graduate School of Natural and Applied Sciences, Thesis

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Citation Formats

M. Öztürk, “Heuristic based trading system on forex data using technical indicator rules,” M.S. - Master of Science, Middle East Technical University, 2015.