Market-Timing Indicators (Macd, Bollinger Bands And Rsi) for Securities Trading

Abstract

The objective of this study on "Market-Timing Indicators (MACD, Bollinger Band and RSI) for Securities Trading" is to measure the ability of market timing in the Stock Exchange of Thailand : SET by using Moving Average Convergence/Divergence: (12, 26, 9), (5, 35, 9), (20, 50,10) and(15, 60, 10), Bollinger Bands: (20, 2SD), (10, 2SD), (30, 2SD) and(20, 1.8SD) and Relative Strength Index: (70, 30), (60,  30), (65, 35) and(65, 40). By simulating an automated trading system to measure the effectiveness of each indicator using stock price predictions in 3 years. And tested by assuming 3 types of economic conditions, including market uptrend, downtrend, and sideway in 1 year. Using daily closing price data from 2010 – 2017.

The study found that the most accurate indication of market timing is Bollinger Bands with a 63 percent chance to make profit however it’s also most risky way. The indicator with the lowest risk is MACD. And the testing result from the different economic conditions found that uptrend economy condition is the only choice that to invest with an opportunity to make a profit. With similar capability across all indexes, which offer a chance of around 70 percent. As for other conditions, there are no indicators that can generate profits at all. However it could help to make trading decision occasionally which would cause higher risk than uptrend market condition.