Proceedings of the 2022 International Conference on Artificial Intelligence, Internet and Digital Economy (ICAID 2022)

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Momentum Trading in Chinese Derivatives Market: Investigation and Reflection

Authors
Chengxun Wu1, *, Yibin Cao2, Muxi Qian3, Haoyu Sun4
1Honors Mathematics and Data Science, NYU Shanghai, Shanghai, China
2Environmental Engineering and Economics, Peking University, Beijing, China
3Finance (CFA Concentration), Ocean University of China, Qingdao, China
4Human Resource Management, Tianjin Polytechnic University, Tianjin, China
*Corresponding author. Email: cw2961@nyu.edu
Corresponding Author
Chengxun Wu
Available Online 2 December 2022.
DOI
10.2991/978-94-6463-010-7_59How to use a DOI?
Keywords
Momentum Trading; Financial Derivatives; Chinese Market; Systematic Trading; Trading Algorithms
Abstract

Momentum trading strategies are universally popular among investors and financial institutions. However, momentum trading is juvenile in China due to the lack of diversity in China’s derivatives market. This study examines the feasibility of momentum trading strategies in discretionary and systematic trading in the Chinese financial derivatives market. The research uses quantitative methods to implement the trading strategy: an algorithm based on relative strength indexes for foreign exchange forward trading, an algorithm combining moving average convergence and divergence with a 5-day moving average for commodities and derivatives trading and risk-parity weight assignment. In the 5-year backtest evaluation of systematic trading in the Chinese derivatives market, this approach yields satisfactory outcomes despite the exclusion of some practical factors. The study discovers that although momentum trading faces challenges from market incompleteness and a limited reservoir, momentum trading strategies in the Chinese derivatives market have great potentials. With the expansion of the Chinese derivatives market and more robust momentum trading strategies integrating advanced ones from the Western market, momentum trading in China embraces lots of opportunities.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2022 International Conference on Artificial Intelligence, Internet and Digital Economy (ICAID 2022)
Series
Atlantis Highlights in Intelligent Systems
Publication Date
2 December 2022
ISBN
10.2991/978-94-6463-010-7_59
ISSN
2589-4919
DOI
10.2991/978-94-6463-010-7_59How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Chengxun Wu
AU  - Yibin Cao
AU  - Muxi Qian
AU  - Haoyu Sun
PY  - 2022
DA  - 2022/12/02
TI  - Momentum Trading in Chinese Derivatives Market: Investigation and Reflection
BT  - Proceedings of the 2022 International Conference on Artificial Intelligence, Internet and Digital Economy (ICAID 2022)
PB  - Atlantis Press
SP  - 566
EP  - 585
SN  - 2589-4919
UR  - https://doi.org/10.2991/978-94-6463-010-7_59
DO  - 10.2991/978-94-6463-010-7_59
ID  - Wu2022
ER  -