Technical analysis and trading strategy in Chinese stock market

Abstract

Technical analysis and trading strategy have been widely used in stock markets since the market is not efficient all the time. This paper uses rule-based method to identify yearly based bull and bear markets in Chinese stock market for stocks traded on Shanghai Stock Exchange. Specific trading strategy is being designed to do simulation trading in bull and bear market respectively. Findings suggest that there is a significant difference of simulation returns between bull and bear market situation. Conservative bear strategy for bear markets performs better than aggressive bull strategy.