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Strength Investing - A Computable Methodology for Capturing Strong Trends in Price-Time Space in Stocks, Futures, and Forex

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Decision Economics: Complexity of Decisions and Decisions for Complexity (DECON 2019)

Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 1009))

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Abstract

This paper proposes Strength Investing (SI) as a new computable methodology for investing and trading in global macro financial markets. SI is actually the foremost mainstream investing methodology in developed economies and in China too. Insisting in that practice is the main criterion for testing truth of financial theory, SI goes beyond modern portfolio theory emphasizing diversification, but concentrates on a minimal diversification of capital on strong market forces. SI takes over value investing in that it offers a complete top-down procedure for optimal selection of markets (assets) with relative strength, with market timing included. It overcomes the weakness of trend following by dynamically shifting capital to strong markets with stronger trends, so frequent stop-loss triggering can be largely avoided. SI mainly aims at international stock index markets and most liquid stocks, while its principles and techniques can be adapted to commodity futures and foreign exchanges (forex).

(Supported by the National Social Science Foundation of China with Grant 17BGL231).

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Correspondence to Heping Pan .

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Pan, H. (2020). Strength Investing - A Computable Methodology for Capturing Strong Trends in Price-Time Space in Stocks, Futures, and Forex. In: Bucciarelli, E., Chen, SH., Corchado, J. (eds) Decision Economics: Complexity of Decisions and Decisions for Complexity. DECON 2019. Advances in Intelligent Systems and Computing, vol 1009. Springer, Cham. https://doi.org/10.1007/978-3-030-38227-8_7

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