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Fuzzy-Based Factor Evaluation System for Momentum Overweight Trading Strategy

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Intelligent Information and Database Systems (ACIIDS 2023)

Part of the book series: Lecture Notes in Computer Science ((LNAI,volume 13995))

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Abstract

Futures are not only used for offset hedging but also widely used in speculative trading. Due to the high leverage characteristic, managing risks with trading strategies is ver important. Currently, there is no systematic approach to evaluate the suitability of trading strategies in futures. In this article, we propose a novel trading strategy factor evaluation system based on fuzzy set theory as a solution to address this issue. The system is composed of random trading algorithm, profitability indicator, and fuzzy quantification module. First, the objective of utilizing a random trading algorithm is to eliminate the impact of market information and extract the characteristics of underlying futures. Then the profitability indicator used to evaluate the performance of probability distribution of profitability of strategies. Fuzzy quantitation module maps profitability indicator to fuzzy degrees between 0 to 1, which make the performance more comparable. The fuzzy degree of the system provide investor the suitability and profitability of strategies to make the trading decision. Experimental results demonstrate the consistency of correlation coefficients in both training set and testing set, indicating the effectiveness and robustness of the evaluation system. The upcoming research concentrates on improving the adaptability of system to other futures and dealing with the impact of uncertainty in membership function.

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Authors and Affiliations

  1. Department of Information and Finance Management, National Taipei University of Technology, Taipei, Taiwan

    Chi-Fang Chao & Mu-En Wu

  2. Department of Risk Management and Insurance, National Chengchi University, Taipei, Taiwan

    Ming-Hua Hsieh

Authors
  1. Chi-Fang Chao
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  2. Mu-En Wu
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  3. Ming-Hua Hsieh
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Corresponding author

Correspondence to Chi-Fang Chao .

Editor information

Editors and Affiliations

  1. Wrocław University of Science and Technology, Wrocław, Poland

    Ngoc Thanh Nguyen

  2. King Mongkut’s Institute of Technology Ladkrabang, Bangkok, Thailand

    Siridech Boonsang

  3. Iwate Prefectural University Iwate, Iwate, Japan

    Hamido Fujita

  4. Wroclaw University of Science and Technology, Wrocław, Poland

    Bogumiła Hnatkowska

  5. National University of Kaohsiung, Kaohsiung, Taiwan

    Tzung-Pei Hong

  6. King Mongkut’s Institute of Technology Ladkrabang, Bangkok, Thailand

    Kitsuchart Pasupa

  7. Malaysia Japan International Institute of Technology, Kuala Lumpur, Malaysia

    Ali Selamat

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© 2023 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.

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Chao, CF., Wu, ME., Hsieh, MH. (2023). Fuzzy-Based Factor Evaluation System for Momentum Overweight Trading Strategy. In: Nguyen, N.T., et al. Intelligent Information and Database Systems. ACIIDS 2023. Lecture Notes in Computer Science(), vol 13995. Springer, Singapore. https://doi.org/10.1007/978-981-99-5834-4_14

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  • DOI: https://doi.org/10.1007/978-981-99-5834-4_14

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  • Publisher Name: Springer, Singapore

  • Print ISBN: 978-981-99-5833-7

  • Online ISBN: 978-981-99-5834-4

  • eBook Packages: Computer ScienceComputer Science (R0)

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