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Embedding Four Medium-Term Technical Indicators to an Intelligent Stock Trading Fuzzy System for Predicting: A Portfolio Management Approach

Author

Listed:
  • Konstandinos Chourmouziadis

    (Democritus University of Thrace)

  • Dimitra K. Chourmouziadou

    (Democritus University of Thrace)

  • Prodromos D. Chatzoglou

    (Democritus University of Thrace)

Abstract

This paper utilizes a small number of coherent trend-following technical indicators with similar characteristics, but constructed with a different philosophy, in order to predict the movement of a stock market (the Athens Stock Exchange—ASE). Each one of them produces independent buy/sell signals which are used by a previously strict classic trading strategy that has been transformed appropriately to promote the subjectivity and fuzziness. These signals act as inputs to an appropriately designed fuzzy system, which makes a medium-term prediction regarding the optimum level (percent) of the investor’s portfolio which should be invested. The performance of the model for the 1997–2012 period is excessively superior from the buy and hold (B&H) strategy and the interest gained from saving bank accounts, even after the subtraction of the trading costs. The results are very convincing, even when the testing period is divided into a number of bull and bear market sub periods.

Suggested Citation

  • Konstandinos Chourmouziadis & Dimitra K. Chourmouziadou & Prodromos D. Chatzoglou, 2021. "Embedding Four Medium-Term Technical Indicators to an Intelligent Stock Trading Fuzzy System for Predicting: A Portfolio Management Approach," Computational Economics, Springer;Society for Computational Economics, vol. 57(4), pages 1183-1216, April.
    • Handle: RePEc:kap:compec:v:57:y:2021:i:4:d:10.1007_s10614-020-10016-2
    DOI: 10.1007/s10614-020-10016-2
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