FAT: A Fractal-Assisted Technical Trade Method in Stock Markets

Abstract

Aiming at improving the accuracy of technical forecast in investment, we proposed a technical trade method assisted by the fractal evolution features of share price, called FAT. This paper first presented a Fractal Quantitative Index (FQI) to control the trade triggered by technical indicators such as Moving Average Convergence/Divergence (MACD), Price Rate of Change (ROC) and Relative Strength Index (RSI). The FQI of a stock is extracted from its price volatility in a certain period of time, and then FAT can make a decision on whether to trade, guided by the state of FQIs of different timescale. With the help of FQI, FAT provided a mechanism to detect and filter out some trading signals that may be noise, in order to control the cost of frequently trading. The experimental results showed that FAT can improve the success probability of trade based on some technical indicators widely used in financial time series. In our conclusion, FAT is a promising technology trading risk control tool worth a deep study.