Optimization and Testing of Money Flow Index
Abstract and Figures
The paper deals with whether the Money Flow Index (MFI) can still be used successfully for trading, and whether the parameters recommended in the literature are the best that an investor can use. Simulations in randomized time interval for the largest companies in the S&P 500 Index show that trading strategy based on MFI may be more profitable than a simple buy-and-hold strategy; however, parameters of MFI need to be optimized because those recommended in the literature do not produce the best results.
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A highly transmittable and pathogenic viral infection, COVID-19, has dramatically changed the world with a tragically large number of human lives being lost. The epidemic has created psychological resilience and unbearable psychological pressure among patients and health professionals. The objective of this study is to analyze investor psychology and stock market behavior during COVID-19. The psychological behavior of investors, whether positive or negative, toward the stock market can change the picture of the economy. This research explores Shanghai, Nikkei 225, and Dow Jones stock markets from January 20, 2020, to April 27, 2020, by employing principal component analysis. The results showed that investor psychology was negatively related to three selected stock markets under psychological resilience and pandemic pressure. The negative emotions and pessimism urge investors to cease financial investment in the stock market, and consequently, the stock market returns decreased. In a deadly pandemic, the masses were more concerned about their lives and livelihood and less about wealth and leisure. This research contributes to the literature gap of investors’ psychological behavior during a pandemic outbreak. The study suggests that policy-makers should design a plan to fight against COVID-19. The government should manage the health sector’s budget to overcome future crises.
This paper deals with the Relative Strength Index (RSI), a popular oscillator. It answers the question whether-almost 40 years after its publication-the RSI can be still useful in trading. To answer this question, we compare four strategies: RSI with recommended parameters, RSI that uses parameters optimized each trading day, simple buy-and-hold strategy, and strategy based on Kelly gambling. Companies that were included with the largest weights in the S&P 500 Index in years 2006-2009 are used for simulations. Totally, 10,000 simulations of investment are performed for each strategy. Start of each simulation is randomly chosen between 15 February 2007 and 12 February 2010. The end is randomly chosen between 18 February 2014 and 14 February 2017. Companies and dates are used so they include as little information that we possess nowadays as possible. Later, simulations with shorter time interval are performed to verify findings.
Investors and traders seek methods to identify reversal and continuation to better time their trades. This applies for virtually everyone, whether employing a swing trading strategy, engaging in options trading, or timing entry and exit to spot bull and bear reversals. Key signals are found in the dozens of candlesticks, combined with technical signals such as gaps and moves outside of the trading range; size of wicks (shadows) and size of real bodies. The science of candlestick analysis has a proven track record not only from its inception in 17th century Japan, but today as well. This book explains and demonstrates candlestick signals, including both the appearance of each but in context on an actual stock chart. It further takes the reader through the rationale of reversal and continuation signals and demonstrates the crucial importance of confirmation (in the form of other candlesticks, traditional technical signals, volume, momentum and moving averages).
Volume-weighted RSI: money flow
- G Quong
- A Soudack
QUONG, G., SOUDACK, A., Volume-weighted RSI: money flow. Technical Analysis of
STOCKS & COMMODITIES 7(3), 1989: pp. 76-77.
Visual History Of The S&P 500
- Etf Database
ETF DATABASE. Visual History Of The S&P 500 [online]. Chicago: ETF Database, 2019
[accessed 2019-08-15]. Retrieved from: http://etfdb.com/history-of-the-s-and-p-500/.