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Price Range Analysis

Part 1: Price range analysis for stop - loss optimization :

The price range analysis can be considered as the study of the prices of the given products as well as the services in the given market for improving the productivity over there. It will help in knowing on how the price actually affects the growth of certain business as well as will also influence the sales volume. The price analysis can be considered as the process of deciding whether the asking price of the product as well as the service can be considered to be fair as well as reasonable. This is achieved without examining any kind of specific cost as well as the profit calculations which the vendor will use in arriving at the given price. It can be considered as process of comparing different price with the given known indicators. The price range can be considered to be the highest as well as the lowest price which is recorded in the given time on the given market. The stop loss rules are generally studied in the finance. The levels of stop loss are constructed in a systematic manner over there. The stop levels are set arbitrarily.

The main aim over here is to maximize the expected returns from the information available. The stop loss threshold can be analysed by distributing the maximum drawdowns. The results of hourly trading strategies must be presented with the two variations in the given constructions. There is one goal of the trader and that is to maximize the expected returns. This can be achieved by the available information at the current time. It is also not feasible to analyse every piece of information over there. The stop loss can be considered to be the financial elements which can be useful for mitigating the losses just by signalling the trading strategy so that it exists the position over there. Also, when the price of the traded asset is passing the stop loss threshold then the position will also result in loss and then it exists. These can be considered as indirect methods of maximizing the given returns. This helps in loosing less when the given strategy is considered to be wrong. It is also known that the implementation stop cannot be considered to be beneficial and can also reduce the expected returns. This also means that different regimes will be determined if the stops will be useful or not. This must always be considered when we are analysing the results. The if study also helps in stop loss rules in different past events.

The price path is forecasted for setting the stop threshold. Although the trading strategy can be considered to be looking for predicting the movements of the market but setting the stop loss threshold setting can help in predicting the final price point in the essence of doubling down over there. The trading strategy must actually have both the exit as well as the entry signals. The signal-only trade will be useful for calibrating the model. This will help in increasing the computational requirements. One of the major issues of interest over there is to lock the gains. One of the most common tools which can be useful for accomplishing the same will be the trailing stop losses. Over here instead of keeping the stop loss at 97 % of the given asset price at entry time, the threshold will be updated at 97 % of the given highest asset price which is observed since its entry. Not more than 3 % will be lost from the maximum. But, losing all the gains will be made since we actually entered. It is also very much important to note that the infinite tight trailing stops can be considered as the opposite limit of the Signal Only system. This is not having any stop at all. This can also limit the losses at the first sign of the downward movement. This can be considered as the term which is useful for describing the effect of the cutting off the winners. Some of the positions over here are having temporary losses. This is done for rebounding down the given line as well as to exit even when they are actually higher than they were actually at the start of the given drawdown over there. It is also important to characterize over here.

Stop Loss Rules

There are basically different types of trajectories over there. The first one is for the winners. The second one is for the losers. The winners will be having the drawdowns before they actually exit. The losers will have the upswings before they actually crash. All these trajectories actually show a piece of information that they are having maximum drawdown at every point of the time. The looser upswings will be handled with the given trailing stops. It is also important to understand that there must be a way of tackling the problem of the winner drawdowns. The very tight stops cannot be set over there. Also, the threshold over here cannot be too loose either over there.  It is also not known that which trajectory will actually end up in winning at the present time. The separation of the losers as well as the winners with the drawdowns with the given information will also form the basis of the methodology which is used. The framework can here be developed for systematic finding the stop loss threshold. Over here basically two components are actually required. The first component over here is the magnitude of the dwardowns. The second component will be the categorization of the trade trajectory as the winner as well as the losers. In the given drawdown distribution, every round - trip trade will be executed by the given signal only strategy. The maximum drawdown will be measures as the returns. With the discrete nature of the given results, the drawdowns will be bin into the equal size bins which actually correspond to their magnitude over there. The next strategy over here will be to return to the expected values.

For data aapl_daily.csv :

 

Figure 1

 

Figure 2 

 

Figure 3

data:  diff(log(a$Close))

Dickey-Fuller = -57.402, Lag order = 0, p-value = 0.01

alternative hypothesis: stationary

 

Figure 4

 

Figure 5

 

Figure 6  

arima(x = log(a$Close), order = c(0, 1, 1), seasonal = list(order = c(0, 1,

    1), period = 12)) 

Coefficients:

          ma1     sma1

      -0.0418  -0.9973

s.e.   0.0180   0.0108 

sigma^2 estimated as 0.0003145:  log likelihood = 7836.66,  aic = -15667.33

Code for task 2 :

a<- read.csv('C:/Users/user/Desktop/aapl_daily.csv')

summary(a)

plot(a$Close) 

abline(reg=lm(a$Close~time(a$Close)))

boxplot(a$Close~cycle(a$Close)) 

library(tseries)

adf.test(diff(log(a$Close)), alternative="stationary", k=0) 

acf(log(a$Close))

acf(diff(log(a$Close))) 

 pacf(diff(log(a$Close))) 

(fit <- arima(log(a$Close), c(0, 1, 1),seasonal = list(order = c(0, 1, 1), period = 12))) 

pred <- predict(fit, n.ahead = 10*12) 

Code for task 3 :

a<- read.csv('C:/Users/user/Desktop/aapl_60min.csv')

summary(a)

plot(a$Close) 

abline(reg=lm(a$Close~time(a$Close)))

boxplot(a$Close~cycle(a$Close)) 

library(tseries)

adf.test(diff(log(a$Close)), alternative="stationary", k=0) 

acf(log(a$Close))

acf(diff(log(a$Close)))

pacf(diff(log(a$Close)))

(fit <- arima(log(a$Close), c(0, 1, 1),seasonal = list(order = c(0, 1, 1), period = 12)))

pred <- predict(fit, n.ahead = 10*12) 

Code for task 4 : 

a<- read.csv('C:/Users/user/Desktop/world_etf_DAILY.csv')

summary(a)

plot(a$Close)

abline(reg=lm(a$Close~time(a$Close)))

boxplot(a$Close~cycle(a$Close))

a<-na.omit(a)

library(tseries)

adf.test(diff(log(a$Close)), alternative="stationary", k=0)

acf(log(a$Close))

acf(diff(log(a$Close)))

pacf(diff(log(a$Close))) 

(fit <- arima(log(a$Close), c(0, 1, 1),seasonal = list(order = c(0, 1, 1), period = 12))) 

pred <- predict(fit, n.ahead = 10*12) 

The time series as well as the measurements of quantity which is taken over the time can be considered to be the fundamental data object which is actually studied across the given scientific discipline. This also includes the measurement of stock price. In order to understand the structure of these signals there have been a lot of techniques which are developed. In the approach the libraries of both the time series data as well as the time series approach will be considered for the time series analysis. over here the methods will be characterised by their behaviour which is across the wide variety of different types of time series as well as the time series can be characterised by the given outputs of the scientific methods which are considered to be diverse and must also be applied to them. The structure which actually emerges from the collection of the data as well as the methods will be able to provide a new as well as a unified platform which will be useful for interdisciplinary time series. It is also sometimes difficult to determine which method. It is also a difficult task on how the methods which are developed in different discipline can be compared with the dynamics which are actually defined in the theoretical time series model.

Trajectories of Winners and Losers

The automated as well as the data driven techniques will be able to address the practical difficulties just by allowing the diverse method as well as the data to compare it from a unified representation over there. Earlier the techniques were applied on a very small scale. Now, the techniques are applied on the large scale. The diverse collection of both the method as well as data can also be organised meaningfully just by doing the following. The first thing to do is to represent the method just by using the behaviour of the data as well as to represent the time series just by measuring the properties of the same. Some of the new techniques will be used: the first one will be the ability to connect with the specific pieces of the time series data  with the real world as well as the model generated time series. The second method will be to link the time series analysis method to a given range of different forms of the literature. The different types of methods in the given library will be useful for contributing the new insights in the time series analysis problems. This is to uncover the meaningful structure in the given time series data sets. The next one will be to select the relevant methods which are used for the general time series classification as well as the regression tasks automatically. The major component over here is to apply the large set of operations to a given large set of time series.

The empirical structure can be investigated of the given annotated libraries of the time series as well as the methods by using the type of analysis. Just by judging the operations as well as the time series can be done by forming the empirical fingerprint of the behaviour which will be able to facilitate the useful means to compare them. The first step over here is to analyse the structure in the library of the time series operation of analysis when it will be applied to the representative interdisciplinary set. The next step will be to use clustering for uncovering the structure. The clustering can be performed at the different resolutions for producing the different overviews of the time series analysis. The next step will be to ask for the suitable questions on how many different types of operations are actually required for providing a very good summary of the given rich diversity of the behaviour which will exhibit by the set which is full. The clustering at finer levels will be able to reduce the set of operations which will efficiently approximate the given behaviour in the given full library just by eliminating the methodological redundancy.

The quality of this kind of reduced set of the operation can be quantified just by using the residual variance measure. It is given by 1 – R2. Here R can be considered as the linear correlation coefficient which is measured between the set of the distance present between the given time series in the given reduced space as well as in the given full space. The constraints on the given dynamic generally observe the empirical time series which will allow for exploiting the redundancy in the scientific methods which are actually acting on them. Also, the reduction set of the operation will be helpful in organising the time series library. In order to analyse the complete structure in the library of the operations, it is very much useful for exploring the local structure which surrounds a given target operation over there. This process will help in contextualizing the behaviour of any kind of operation with respect to the alternatives from the literature of time series analysis. These also include the methods which are developed in the fields which are not familiar as well as in the given distant past. Also, it is realy important to know that by using the time series analysis method in the empirical fingerprint can also provide a useful means of structuring as well as comparing the methodological literature. There are a lot of time series analysis methods which are available. Also, they don’t have any framework for judging if the progress is really being made by the continuous development of the new types of methods. When we compare the empirical behaviour, it is demonstrated on how it can be useful for connecting to new methods for alternatives for developing the different fields in a manner which will encourage the interdisciplinary collaboration on the given development of the given novel method of the time series analysis which will not able to simply reproduce the behaviour of the given existing model. 

Systematic Finding of Stop Loss Threshold

For file aapl_60min :

 

Figure 7

> summary(a)

         Date          Time           Open             High       

 03-03-2022:    8   10:00:3023   Min.   :  8.37   Min.   :  8.41  

 01-02-2013:    7   11:00:3022   1st Qu.: 18.94   1st Qu.: 19.00  

 01-02-2014:    7   12:00:3022   Median : 28.99   Median : 29.08  

 01-02-2015:    7   13:00:3022   Mean   : 45.98   Mean   : 46.15  

 01-02-2018:    7   14:00:3022   3rd Qu.: 50.99   3rd Qu.: 51.16  

 01-02-2019:    7   15:00:3010   Max.   :182.74   Max.   :182.94  

 (Other)   :21089   16:00:3011                                    

      Low             Close              Up                 Down          

 Min.   :  7.14   Min.   :  8.37   Min.   :     2232   Min.   :        0  

 1st Qu.: 18.89   1st Qu.: 18.94   1st Qu.:  5366792   1st Qu.:  5546742  

 Median : 28.90   Median : 28.99   Median :  9622044   Median :  9852264  

 Mean   : 45.80   Mean   : 45.98   Mean   : 16368709   Mean   : 16496228  

 3rd Qu.: 50.84   3rd Qu.: 51.00   3rd Qu.: 20606089   3rd Qu.: 20827450  

 Max.   :181.66   Max.   :182.37   Max.   :238912828   Max.   :243106640

 

Figure 8

 

Figure 9 

Augmented Dickey-Fuller Test

data:  diff(log(a$Close))

Dickey-Fuller = -149.85, Lag order = 0, p-value = 0.01

alternative hypothesis: stationary

 

Figure 10 

 

Figure 11 

 

Figure 12 

Call:

arima(x = log(a$Close), order = c(0, 1, 1), seasonal = list(order = c(0, 1,

    1), period = 12))

Coefficients:

          ma1     sma1

      -0.0299  -0.9985

s.e.   0.0068   0.0011

sigma^2 estimated as 4.139e-05:  log likelihood = 76571.38,  aic = -153136.8 

Build one profitable rule - based trading strategy :

The trading system can be considered as more than just a rule for when to enter and when to exit the trade. It can be considered as the comprehensive strategy which will consider the following factors. The rule - based trading system will be created by the following approach. The first step over here will be to examine the mindset. Over there it is really important to keep the following: to know who you are actually, to match the personality to the trading, to be prepared, it is really important to be objective, it is important to be disciplined, it is important to be patient as well as to have a realistic expectation. All these must be followed in the first step over there. The next step over here will be to identify the mission as well as to set the goals. This step will help in knowing where we want to go and what actually we want to achieve. The next step over here will be to ensure that there is enough money available. It is very much important to have cash in order to do trading.

Also, trading can be hampered when there is a lack of cash flow. The next step over here will be to select the market which is able to trade harmoniously. Here, a currency pair must be chosen which must also be tested at different time frames. The next step will be to test the methodology for having the positive results. The last step will be to measure the risk to reward ratio as well as to set your own limits.  It is really important to focus on the psychology. It is also important to focus on the fundamentals. It is also important to focus on the trading methodology. Also, it is very much important to focus on the risk management. Specific tools must be there for selecting the currency pair which are appropriate.

Maximizing Expected Returns

Build one profitable trading strategy

It is also known that no two types of trading plans can be considered to be same. This is also true that no two traders are actually alike. We must consider the following while developing the strategy. The first component which must be included over here is the skill assessment. It is important to check your skill set to be up to date. The second component which must be considered over here is the mental preparation over there. It is really important to be mentally sound for trading. The third strategy which must be considered over there is setting the level of the risk. The risk levels must be set for the trading strategy. The fourth component which must be used over there is to set the desired goals. It is important to do a lot of research before moving forward in the world of trading. The fifth component which must be considered over here is to do the homework regarding the stocks in advance. The next component over there will be to do the necessary trade preparation over there.

Preparing before investing will definitely help in generating more profits all together over there. The next component to be considered over there will be to set the exit rule over there. This is really important to adapt the exit when their loss can be considered. The next component to be used over there will be to set the desired entry rules. The next component to be used over there will be to keep all the desired excellent records. The next component over there will be to continuously analyse the performance. Among all the mentioned components analysis can be considered as the most important component of the same. This is because it is really important to know the answers to the questions which are related to the why as well as how?

Trading system performance

The following terms need to be understood for checking the trading system performance. The first one is CAGR which is the compound annual growth rate. The next term is maximum drawdown which is the largest decline in the value of a portfolio from a peak to a trough over a period of time. The next is Sharpe ratio which will be one of the most popular risk - adjusted return ratio. The next is MAR which is the ratio of annualized compounded returns related to the investment strategies maximum drawdown over there. The correlation will measure the degree to which two securities will move in the relation to one another over there. The next will be the win rate. This will also let us know about the percentage of the system overall trade which will actually result in the profit.

The average win to loss ratio will let us know on how much large the winning trade will be as compared to the size of the average losers. It is very much important to understand that even if we are finding the perfect trading system which is having all the best metrics but still there can be some of the unexpected behaviour with the given system moving forward. This happens because all the measurements will be considered as backward looking which are actually based on the historical data. Also, as we know that the future will not look similar to the strategies of the market also tend to change. It is also very much important to understand that none of the measurements which are taken by them will be sufficient for accessing the efficiency as well as the profitability of the investment strategy. One of the very good examples over here will be for the Sharpe ratio vs the MAR ratio. These both are considered to be the risk adjusted return measurement. Over here one will be able to define the risk by the large deviations of the returns. The other will be defined by the largest loss. The gap between the drawdown performance as well as the consistent system performance can be understood over there.  

For file world_etf_DAILY :

> summary(a)

         Date          Time            Open             High       

           :18755        :18755   Min.   : 49.56   Min.   : 49.56  

 01-02-2013:    1   16:00: 2377   1st Qu.: 70.93   1st Qu.: 71.24  

 01-02-2014:    1                 Median : 80.37   Median : 80.64  

 01-02-2015:    1                 Mean   : 84.72   Mean   : 85.08  

 01-02-2018:    1                 3rd Qu.: 92.15   3rd Qu.: 92.44  

 01-02-2019:    1                 Max.   :136.70   Max.   :136.75  

 (Other)   : 2372                 NA's   :18755    NA's   :18755   

      Low             Close             Vol                OI       

 Min.   : 49.32   Min.   : 49.33   Min.   :      2   Min.   :0      

 1st Qu.: 70.48   1st Qu.: 70.84   1st Qu.:   7842   1st Qu.:0      

 Median : 80.21   Median : 80.33   Median :  24293   Median :0      

 Mean   : 84.26   Mean   : 84.68   Mean   :  66853   Mean   :0      

 3rd Qu.: 91.66   3rd Qu.: 92.04   3rd Qu.:  69714   3rd Qu.:0      

 Max.   :136.30   Max.   :136.45   Max.   :1234462   Max.   :0      

 NA's   :18755    NA's   :18755    NA's   :18755     NA's   :18755  

 

Figure 13 

 

Figure 14 

 

Figure 15 

> adf.test(diff(log(a$Close)), alternative="stationary", k=0) 

        Augmented Dickey-Fuller Test 

data:  diff(log(a$Close))

Dickey-Fuller = -58.366, Lag order = 0, p-value = 0.01

alternative hypothesis: stationary 

 

Figure 16 

 

Figure 17 

 

Figure 18 

Call:

arima(x = log(a$Close), order = c(0, 1, 1), seasonal = list(order = c(0, 1,

    1), period = 12))

Coefficients:

          ma1     sma1

      -0.1500  -0.9889

s.e.   0.0186   0.0067 

sigma^2 estimated as 0.0001268:  log likeli

Cite This Work

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My Assignment Help. (2022). Price Range Analysis And Stop Loss Rules In Trading Strategies. Retrieved from https://myassignmenthelp.com/free-samples/ecs3003-advanced-econometrics/time-series-coursework-file-A1E2DBD.html.

"Price Range Analysis And Stop Loss Rules In Trading Strategies." My Assignment Help, 2022, https://myassignmenthelp.com/free-samples/ecs3003-advanced-econometrics/time-series-coursework-file-A1E2DBD.html.

My Assignment Help (2022) Price Range Analysis And Stop Loss Rules In Trading Strategies [Online]. Available from: https://myassignmenthelp.com/free-samples/ecs3003-advanced-econometrics/time-series-coursework-file-A1E2DBD.html
[Accessed 05 March 2024].

My Assignment Help. 'Price Range Analysis And Stop Loss Rules In Trading Strategies' (My Assignment Help, 2022) <https://myassignmenthelp.com/free-samples/ecs3003-advanced-econometrics/time-series-coursework-file-A1E2DBD.html> accessed 05 March 2024.

My Assignment Help. Price Range Analysis And Stop Loss Rules In Trading Strategies [Internet]. My Assignment Help. 2022 [cited 05 March 2024]. Available from: https://myassignmenthelp.com/free-samples/ecs3003-advanced-econometrics/time-series-coursework-file-A1E2DBD.html.

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