Market ecologies: The effect of information on the interaction and profitability of technical trading strategies

Antony Jackson, Daniel Ladley

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)
13 Downloads (Pure)

Abstract

Technical trading strategies make profits by identifying and exploiting patterns in market prices—patterns generated by the interaction of market participants. Using a model market populated by individuals using a range of trading rules we show that the presence of technical traders may be beneficial, in some cases reducing volatility and increasing price efficiency. In particular, contrarian traders who base their decisions on high frequency data have the largest positive effect. It is also found that if technical traders condition their actions using ‘real time’ information, they partially emulate arbitrageurs and make positive profits.
Original languageEnglish
Pages (from-to)270–280
Number of pages11
JournalInternational Review of Financial Analysis
Volume47
Early online date17 Feb 2016
DOIs
Publication statusPublished - Oct 2016

Keywords

  • Technical trading rules
  • artificial market
  • market ecology

Cite this