• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2010 Vol.1(3): 289-296 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2010.V1.52

Triggering Long-Short Trades on Indexes

Giuseppe C. Calafiore and Bruno Monastero
Abstract—This paper analyzes the predictivity and return performance of the Barmish-Iwarere feedback trading algo- rithm described in [1]. In the first part of the paper, we study the trade triggering algorithm using either an Ito process model, or real data from indexes and ETFs. It is shown through hypothesis testing that the trigger provides mixed results in predicting the sign of the single trade, for both the Ito process and real indexes. However, we show empirically that the trigger is sufficiently good in identifying a trend, while it fails in detecting side movements. In the second part of the paper, we analyze the effect of controller parameters under various market circumstances. The efficiency of a pre-optimization on historical data appears controversial. Some modifications are experimented, with the objective of improving the returns. In particular, the trigger is modified to detect anomalous falls during a rising trend using the estimated volatility. The resulting system is then tested with other indexes, commodities and interest rates.

Index Terms—Trading system; trigger; feedback controller; long-short trades.

G. C. Calafiore, Professor, Dipartimento di Automatica e Informatica, Politecnico di Torino, Corso Duca degli Abruzzi 24, 10129 Torino, Italy giuseppe.calafiore@polito.it.
B. Monastero, PhD Student, Dipartimento di Automatica e Informatica, Politecnico di Torino, Corso Duca degli Abruzzi 24, 10129 Torino, Italy bruno.monastero@polito.it.

[PDF]

Cite:Giuseppe C. Calafiore and Bruno Monastero, "Triggering Long-Short Trades on Indexes," International Journal of Trade, Economics and Finance vol.1, no.3, pp. 289-296, 2010.

Copyright © 2008-2015. International Journal of Trade, Economics and Finance. All rights reserved.
E-mail: ijtef@ejournal.net