Study On The Optimization Of Technical Indicator Strategy And Its Application In Quantitative Investment

Currently there are hundreds of technical indicators on the market, which can be divided into four categories: trend indicators, overbought oversold indicators, market indicators and trend-based indicators. The trend-based indicators are not used widely enough for some kind of stocks. MACD, KDJ, PSY are very popular with the investors. However, in the specific investment process, we find that the time window parameters contribute to the different timing and performance of investment .What is worse, the combination method of these indicators has shown to be more arbitrary and subjective.This article aims to present a complete investment strategy of technical indicators. And the paper includes the following parts. Firstly, we introduced the theory of optimal investment strategy of technical indicators. Second, we estimated state variable parameters and the time window parameters. Thirdly, we compared the related trading strategies out of sample. Finally, we summarized the previous trading strategies.We choose the time from the September in 2003 to the September in 2007 as the sample, which is used for evaluating parameters. Then, we present the optimized strategy. Then, we choose the time from the September in 2007 to the September in 2010 as the out of the sample to test our optimized strategy. The conclusion shows that the performance of our strategy is much better the other technical indicator strategies.Though it is difficult to explain why technical analysis can create more value. However, the technical analysis is very popular with the investors in the investment practice. In practice, lots of investors choose the parameters by their empiric. we presented an optimized technical indicator strategy, which is especially for the indicators of MACD, KDJ and PSY, from the quantitative point of view by using sample statistic. The research will help improve the scientific nature of investment decisions, reduce the blindness of the investment process. It is certain that it will be useful for the quantitative investment.