Market ecologies: The effect of information on the interaction and profitability of technical trading strategies

Antony Jackson and Daniel Ladley ()

International Review of Financial Analysis, 2016, vol. 47, issue C, 270-280

Abstract: Technical trading strategies make profits by identifying and exploiting patterns in market prices—patterns generated by the interaction of market participants. Using a model market populated by individuals using a range of trading rules we show that the presence of technical traders may be beneficial, in some cases reducing volatility and increasing price efficiency. In particular, contrarian traders who base their decisions on high frequency data have the largest positive effect. It is also found that if technical traders condition their actions using ‘real time’ information, they partially emulate arbitrageurs and make positive profits.

Keywords: Technical trading rules; Artificial market; Market ecology (search for similar items in EconPapers)
JEL-codes: C63 G12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:47:y:2016:i:c:p:270-280

DOI: 10.1016/j.irfa.2016.02.007

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