Application Of Dynamic Genetic Fuzzy Expert Trading System To A Declining Stock Market

It is hard to make profit under a declining market but a good market timing system absolutely provides extraordinary rewards for investors by giving them good buy-sell signals during the short-term rebound in the market. Investors frequently use simple technical trading rules for market timing. Most of the trading rules are vague and fuzzy. LAM et al. [4] proposed a Genetic Fuzzy Expert Trading System (GFETS) that could optimize trading rules and give a profitable return in NASDAQ market. However, stock market is dynamic and changes rapidly with time. The performance of trading systems in different time periods depends on the set of trading rules being used. So, GFETS must dynamically adjust the set of trading rules. In this paper, we focus on the dynamic GFETS and evaluate its performance in a declining market, the Shenzhen B shares market. Although its index dropped by 22.37% in the past one year, experimental results showed that the dynamic GFETS could give more than 7.6% profit in one year and probably outperform many stock funds.