A short-term price prediction-based trading strategy.
Weijia Fan1,2,3, Ru Zhang1, Hao He1
1School of Management, Harbin University of Commerce, Harbin, P. R. China.
Plos One
|March 7, 2024
Summary
This study introduces a quantitative trading strategy using short-term price forecasting to balance investment returns and risks. The model effectively mitigates risk, guiding objective trading decisions.
Area of Science:
- Quantitative Finance
- Financial Market Analysis
Background:
- Quantitative investment theory is a key area in financial markets.
- Investors seek to understand market dynamics for better decision-making.
Purpose of the Study:
- To propose a short-term prediction-based trading strategy.
- To balance investment returns with risk mitigation, considering investor risk preferences.
Main Methods:
- Utilized the GM(1,1) model for short-term price dynamics prediction.
- Developed a multi-objective planning equation for optimizing asset allocation.
- Conducted a case study with gold and bitcoin price data (2016-2021).
Main Results:
- The proposed strategy effectively balances return and risk.
- Short-term price forecasting was shown to be a potent tool for proactive risk mitigation.
- Empirical analysis affirmed the strategy's efficacy and resilience.
Conclusions:
- The strategy facilitates judicious and objective trading practices.
- The model offers tangible utility for real-world investment decisions.
- Proficient price forecasting enhances risk management in quantitative trading.
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