Z-Score Trading Strategy

Using R-programming, for the purpose of illustration, I am customising a mean reversion trading strategy which involves the use of  z-score:

  • z-score >2.25: overbought (“sell signals”)
  • z-score<-2.25: oversold (“buy signals”)

High-level visualization of the proposed trading strategy (using OKA Corporation as an example):

Slide1

There may be a number of trading signals that have been generated based on the above set of rules. However, the number of trading actions (i.e actual buy or sell transaction) may be far less if it is assumed that one does not buy what one already owns, as well as one does not sell what one does not have. Moving forward, there is a need to (i) back-test this strategy; (ii) benchmark against other trading strategies; and (iii) optimization of this trading strategy.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES

Technical Screening (4 Jul 2017)

Based on the recently developed multi-indicators trading systems , the key indicators & buy signals are summarised as follows:

  • Price crossover above lower Keltner Channel (20,2.25) 
  • RSI(14) crosses above 30.0 
  • RSI(14) was below 30 for the last 5 days 

Based on the above stated technical rules, the following is the results of the stocks screening (as of 4 Jul 2017):

Screening 05072017.png

Continue reading “Technical Screening (4 Jul 2017)”

Technical Screening

In my earlier posting (read this), I had selected 5 test stocks to test a multi-indicators trading system. The outcome of the test is cautiously optimistic, as further fine-tuning is required. Based on this simple trading system, the key indicators & buy signals are summarised as follows:

  • Price crossover above lower Keltner Channel (20,2.25) 
  • RSI(14) crosses above 30.0 
  • *new addition* RSI(14) was below 30 for the last 5 days 

I intend to automate this technical strategy into Shareinvestor Station for the purpose of stocks screening based on the above stated rules.

Continue reading “Technical Screening”

Testing My Very First Multi-Indicators Trading System

Finally, I have customised a multi-indicators trading system (using R-script) to test out on FBMKLCI-listed stocks. My test parameters are as follows:

a. Test subjects (selected constituents of Malaysia’s FBMKLCI): Public Bank, Malayan Banking, Sime Darby, Axiata Group and Petronas Chemicals

Top 10 Stocks.png

Continue reading “Testing My Very First Multi-Indicators Trading System”