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The profitability of interacting trading strategies from an ecological perspective

Author

Listed:
  • Kun Xing

    (Beijing Normal University
    Beijing Normal University)

  • Honggang Li

    (Beijing Normal University
    Beijing Normal University)

Abstract

Objective To study the interactions among trading strategies and their profitability from an ecological perspective. Methods A market ecosystem model is established, and simulations are conducted to examine the interactions and profitability of trading strategies in different market ecologies. Results Strategies compete with themselves, and different time-window trend strategies exhibit competition and predator–prey relationships. Value and trend strategies demonstrate both symbiosis and predator–prey relationships. The profitability of a strategy depends on the balance of supporting and inhibiting effects, with greater supporting effects leading to higher maximum profit and market capacity, while greater inhibiting effects result in losses. The model suggests that fundamental analysis has a larger market capacity than technical analysis.

Suggested Citation

  • Kun Xing & Honggang Li, 2024. "The profitability of interacting trading strategies from an ecological perspective," Annals of Finance, Springer, vol. 20(3), pages 377-394, September.
    • Handle: RePEc:kap:annfin:v:20:y:2024:i:3:d:10.1007_s10436-024-00445-6
    DOI: 10.1007/s10436-024-00445-6
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    More about this item

    Keywords

    Market ecology; Trading strategies; Efficient market; Artificial market;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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