Research And Design Of Trading System Base On Trend Following Theory

Investors never stop exploring how to make trading more scientific. Trading system of objectivity, integrality and repeatability is undoubtedly seen as most scientific trading technique. In western developed financial market, most investment managers do financial transactions and manage financial assets by trading system. In recent years, trading system has become heated in our country.Trading system is built on the nonrandom part which extracted from the high random waves of security prices. Many scholars have researched out the waves of securities prices exists persistence which is also called long-term memory. Security price always moves in the same direction for a long period until it changes the direction and then moves in the new direction for another period. This phenomenon is called the trend pattern by security investors. The existence of trend pattern could help investors to hold the profit opportunities.This essay does positive analysis of the persistence of security price waves in domestic stock market and expatiates the trend following method which is repeatedly testified and highly praised by investors. The process of calculating moving average embodies the certain direction and the durative period, which are the two major factors of trend. Therefore, it applies adaptive moving average which is improved from moving average as a basic model to follow the trend and then composes improved transacting signals. Here I use above-mentioned model to compile rudiment of computer trading system.This essay then uses Shanghai composite index and Shenzhen composite index to test this trading system in whole and sections and also analyzes the transaction orders produced by the trading system one by one. In the testing period as long as 20 years, the trading system gains above average profit in Shanghai and Shenzhen stock markets and possess quite stability. It also uses the updated index to do extrapolation test and the result also proves the validity of the system. Therefore, this trading system could be used to give investors advices on how to hold the primary trend of Shanghai and Shenzhen market and how to do related transactions.