Application Of Stationary Technical Indicator In Stock Market

With the rapid development of Chinese society, the securities market also develop rapidly, the securities market already became the important domain now which enterprise financing, the populace invested. But in the face of the vagaries of the securities market environment, how to get more profit in the securities market, the securities market requires understand and study seriously. Generally speaking, investors used method is fundamental analysis and technical analysis. Technical analysis is based on the stock price and trading volume and other historical information data, which can be predict the fluctuation of stock price in the future, in order to better guide the people how to bargain, which originated from the Dow’s theory. The analysis method of the stock price has been developed since the capital market appeared. After 100 years of application and development, technical analysis and fundamental analysis have become two important investments direction in the financial market. Technical indicators are indispensable analysis tool of technical analysis. As a kind of investment means, technical analysis gets an extensive applications in the actual investment instruction. However, for a long time due to technical analysis the lack of perfect theoretic foundation, technical analysis is always regarded as a kind of subjective judgments. So the discussion about it is always hot, the issue of which is the effectiveness of the technical analysis is true or not. Early theoretical research has actually denied the application of technical indicators, but with the financial theory of propulsion and the development of computer science, Some scholars have done some on a class of technical indicators of theoretical and empirical work, and got technical indicators is useful.In this paper, we define three kinds of technical indicators based on MACD, BOLL and SAR indicator, which is suitable for stock trading strategy modeling. We also prove the stationary of these new indicators under the hypothesis of the stock prices behave as the geometric Brown motion. Finally, we construct a stock trading strategy based on this indicator and test its effectiveness and profitability by using real market stock date. All those put forward a kind thought in stock trading.In the empirical test, this paper takes China’s A shares market in Shanghai and Shenzhen 300 index, small and medium-sized board index and the gem index as a sample, The Shanghai 300 index and the index of small and medium-sized panels time interval from January 1, 2010 to January 31, 2015, the gem index of time interval from June 1, 2010 to January 31, 2015.Various trading rules of three kinds of stability index are tested. Most of the current literature assumes the stock returns are independence and normal, and this assumption is turned out to be untrue in the real market. In order to avoid this assumption, There are no such assumptions in the positive analysis of this paper, Which compares the conditional returns selected out by the technical indicators to the unconditional returns by computer random simulation inspired by the thought of Bootstrap methodology, and finally concludes that as long as one chooses the appropriate combinations of parameters of technical indicators, one can gain excessive returns, and the effectively of technical indicators is contrary to that of the securities market.