Program Trading Strategy Research

Program trading used primarily by institutional investors typically for large-volume trades. Traders try to model the trading ideas and trading rules to construct quantitative trading strategies. Orders from the trader’s computer are entered directly into the market’s computer system and executed automatically. Compared with traditional and subjective trading, program trading has great advantages in so many aspects, such as human cost, execution capability, investment reward etc. With the rapid development of contemporary computer technology, financial mathematics and financial engineering theory, program trading, as a reform and innovation of securities trading, has gained wider applications. Program trading has already been quite mature in the United State, Europe and other developed countries and regions. However, in China, it has a late start and was mainly applied in the futures market. The transaction volumes in program trading occupied very low ratio in total transaction volumes, so did the percentage of the number of program trading investors.Trading strategy is a kind of executable computer code which includes complete entrance and exit rules, position adjustment and risk management, and it can perfectly represent investors’trading ideas. In the process of program trading, the trading strategy is in the decision-making level and plays a primary role. It is because of strategies’strong execution, effective risk-aversion and the ability to overcome the impact of irrational human emotions that research and development of program trading strategy should be an important part of financial market in the future.This thesis analyzes various aspects of the program trading strategy from theory to practical level. Firstly, it analyzes technical indicators from its definition, calculation formulas and application, including trend indicators and volatile indicators. Secondly, it illustrates how program trading strategy is designed, including the composition, classification and statistical indicators of the trading strategy. Finally, it gives us analysis and application of international classic trading strategy, mainly includes "Aberration" strategy and "R—Breaker" strategy. Through analyzing the principles of trading strategy, test reports, performance and practical applications, it gives a comprehensive introduction and then make some improvement and optimization.