Trading Algorithm Model Based on Technical Indicators

Abstract

Today the rapid proliferation of the internet provides an environment where efficient e-commerce solutions can be developed. The electronic market is gaining more attention in the global economy, it gives buyers and sellers more liberty to trade cost-effectively and allows access to an adequate amount of data for analysis. New trading agents have been developed for the best utilization of such data. These agents design strategies using financial analysis techniques such as technical indicators. Two very well-known technical indicators used to develop strategies are Convergence-Divergence (MACD) and Stochastic Oscillator (SO). This paper aims to devise a trading algorithm that combines MACD and SO in a single strategy and check the reliability of the combined signals it generates. JTAP simulation system has been used to test the proposed strategy. In this paper, we evaluated the performance of our proposed strategy when implemented on shares of Karachi Stock Exchange, Pakistan which proves improvement of strategy.