Advanced Investment Strategy for Trading Major Currency Pairs

In this paper there is a description of one of the possible approaches to investing in the currency market, which is based on the statistical analysis of price movements of major currency pairs. It is the currency pairs EUR/USD, GBP/USD and USD/JPY which consist of major currencies of the world powers. For the analysis includes no fundamental information such as the rate of unemployment, sales, GDP, inflation, etc., and is thus a purely technical analysis, which is based on the actual price. The proposed investment strategy works with short-term investments, which have an average duration of several hours. The logic used strategy is based on the psychological reaction of investors to the previous trading session and their future expectations. To increase the effectiveness of strategies financial leverage is used. This type of investment requires precise compliance with the rules for risk management. Due to diversification, the proposed strategy is put into more currency pairs and achieves stable growth of capital. Due to the computationally intensive optimization problems genetic algorithms that can effectively deal with this type of task were used. The proposed investment portfolio is applied in the time period January 2010 to January 2012 and has been stable profitably.

Authors: Jan Budík, Lenka Smolíková
Keywords: portfolio, currency, optimization, pro t, investment strategy, genetic algorithm
Volume: 6
Issue: 1
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