In this section we introduce two trading strategies. The first strategy is naive trading, where future trend is not taken into consideration. The second is same as the first except that the future trend prediction is used in trading decision.
Naive Trading (NT)
We call our trading strategy “naive trading” because it is simplistic. In NT, we buy the stock if we are not holding a share and the purchase cost is lower than the value at which we sold previously. By the same token,
we sell the stock if we hold a share and we can make profit from that sale of any margin. Thus, short-selling is included. That is, we sell the stock if the value received exceeds the value at which we bought previously.
Trading based on Trend Prediction (TTP)
TTP is a slight variation of NT. The only difference is that we consider the forward trend of the stock
price. We sell the share only if the trend prediction is downward.
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