Testing a price breakout strategy using Donchian Channels

 

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dc.contributor.advisor Van Rensburg, Paul en_ZA
dc.contributor.author Swart, Justin-Niall en_ZA
dc.date.accessioned 2016-09-14T12:50:51Z
dc.date.available 2016-09-14T12:50:51Z
dc.date.issued 2016 en_ZA
dc.identifier.citation Swart, J. 2016. Testing a price breakout strategy using Donchian Channels. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/21754
dc.description.abstract This research report implements and tests the effectiveness of a trend following trading strategy on the South African Futures Exchange (SAFEX) through utilising Donchian Channels and modelled after the 'Turtle method' which was first popularized in the United States in the 1970s before the automation of trading models. Prior literature focused on the commodities and equity indices spectrum of futures contracts in North American and Asian markets while this report replicates the model and attempts to optimize it for use on the SAFEX. The objective of this research is to invigorate academic study of trading strategies in the South African market by employing what was a successful, albeit very simple, trend following strategy on a sparsely studied academic field in South Africa. The contrarian trading strategy comprises three systems that generate idiosyncratic entry and exit signals using Donchian Channel theory to identify a price breakout from an average true range (ATR) band in the attempt to profitably trade on a price trend. The three systems implemented include: The short term system (System 1) generating a 'long' position when an instrument price moves above the 20-day 'high' and exit when it moves below the 10-day 'low', and vice versa for short positions; the long term system (System 2) following the same logic with 55-day entries and 20-day exits, and a third system (Integrated system) integrating the short and long term systems. A 20-day average true range is used to determine position sizing, stop-losses and additional contract purchases when a price-trend is potentially identified, while fractional asset allocation theory is drawn upon to determine optimal capital allocation to position. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Investment Management en_ZA
dc.title Testing a price breakout strategy using Donchian Channels en_ZA
dc.type Thesis / Dissertation en_ZA
uct.type.publication Research en_ZA
uct.type.resource Thesis en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Commerce en_ZA
dc.publisher.department Department of Finance and Tax en_ZA
dc.type.qualificationlevel Masters en_ZA
dc.type.qualificationname MCom en_ZA
uct.type.filetype Text
uct.type.filetype Image


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