Silent Market Indicator. Methodology to avoid the risk in no significant price movements

Keywords: capital markets, investment risk, price action, algorithmic trading, Silent Market Indicator

Abstract

Investing in the capital markets is a common task today. An impressive number of traders and investors, companies, private or public funds are buying and selling every day on the free markets. The current high price volatility in the financial markets gives everyone a tremendous number of speculative opportunities in order to make profit. Sometimes the price makes no significant movement however. The majority of the trades initiated in those periods will conclude to losses or will need a very long time in order to became profitable. In order to avoid these cases a mathematical algorithm was developed: the Silent Market Indicator. This paper will present the general principles and the mathematics behind the indicator and how it can be applied in the financial trading in order to improve the capital investment efficiency. It was found that the model generates a very reliable filter in order to avoid to entry into the silent markets intervals, when the price action conducts to small amplitude price movements and when the profit expectation is lower. In order to reveal the efficiency of the Silent Market Indicator usage, some comparative trading results will be presented in the last part of this article together with the functional parameters optimized for several known capital markets. As conclusion it will be proved that the presented methodology is a very good method to stay away the market risk. In addition, being exclusively a mathematical model, it can be applied in any algorithmic trading system, combined with any other trading strategy in order to improve the capital efficiency.

Author Biography

Cristian Păuna, +407.4003.0000

Economic Informatics Doctoral School - Academy of Economic Studies

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Published
2019-05-29
How to Cite
Păuna, C. (2019). Silent Market Indicator. Methodology to avoid the risk in no significant price movements. Timisoara Journal of Economics and Business, 11(2), 135-148. Retrieved from http://tjeb.ro/index.php/tjeb/article/view/308
Section
Articles