Effect of Quantitative Finance / Technical Analysis on Stock Returns

Abstract

This text deals with logic, the mathematics of various investment instruments, technical trading and its implementation, how it works and how to profit from it. By knowing the technical details behind the various instruments, the informed investor can make better decisions and invest with more confidence. Traders know that logic is good and emotions are dangerous, and by distancing themselves from their investments, they can get better returns. The tools developed here will work in any stock market that is liquid and on any stock with good liquidity. Vast arrays of books have been written on the subject of mathematical finance, and quantitative finance being a growing field, it is imperative that more investors learn to cover themselves and profit from modern financial instruments. Finance requires a very unique set of skills, with topics from geometry, physics, mathematics and computer algorithms, and this text makes use of some of the mathematics and computer software which modern finance uses. Practicality is the forefront of this text and track has not been lost while working with theories as to their application. For novice investors, simplicity is more important than anything else, which has been kept in mind while this text and accompanying software was developed. For more advanced users, who are being paid to develop those systems, it is imperative that they understand the theories behind the formulas. Some of these theories have been covered in the text. The reader will need to be proficient in basic algebra and calculus to make sense of the mathematical part and basic software training to understand the implementation. The reader will not understand all the software implementation unless he is well versed in Visual C++. This is not an exercise in regurgitating what university books say about finance, but the practical applications of it. The computer code written to accompany this text has been attached, and the reader is encouraged to follow the implementation to gain valuable experience.