Volume Cyclicality. Reliable capital investment signals based on trading volume information.

Keywords: Capital investment, technical analysis, trading volume, volume cyclicality, trading strategy, algorithmic trading

Abstract

Capital investment is a sustained activity nowadays. The buy and sell decisions are usually made in technical analysis using the price quote evolution in time. Another useful information provided by any stock exchange is the trading volume for each time interval. The volume information is usually hard to be included in a trading or investment strategy, having an unstable and discontinued evolution in time. Some obsolete ideas indicate a favorable entry period after a maximal traded volume value interval, but today, on the high price volatility markets, when a maximal value is detected, usually is too late for a convenient price entry on that market. This paper presents a mathematical model specially designed for fast and instant market entry decisions based only on the traded volume information. It was found that even the traded volume variation in time is discontinued, a cyclical phenomenon is present in all markets. With the proper mathematical method, the Volume Cyclicality function can be computed in real-time in order to build reliable capital investment signals. The model presented in this paper fills an essential gap in the literature, and it was tested for more than ten years on the most important stock exchanges in the world. Investment results are also included in this paper to prove the efficiency and utility of the presented method. The Volume Cyclicality function is an exclusively mathematical model, and it can be applied in any automated investment software system to improve capital efficiency.

Author Biography

Cristian PĂUNA, Bucharest University of Economic Studies

Economic Informatics Doctoral School

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Published
2020-06-30
How to Cite
PĂUNA, C. (2020). Volume Cyclicality. Reliable capital investment signals based on trading volume information. Timisoara Journal of Economics and Business, 13(1), 31-44. Retrieved from https://www.tjeb.ro/index.php/tjeb/article/view/330
Section
Articles