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Sustainability 2018, 10(12), 4641; https://doi.org/10.3390/su10124641

Pattern Matching Trading System Based on the Dynamic Time Warping Algorithm

1
Department of Industrial Engineering, Yonsei University, 50 Yonsei-ro, Seodaemun-gu, Seoul 03722, Korea
2
Department of Business Administration, Sejong University, 209 Neungdong-ro, Gwangjin-gu, Seoul 03722, Korea
*
Author to whom correspondence should be addressed.
Received: 27 October 2018 / Revised: 22 November 2018 / Accepted: 1 December 2018 / Published: 6 December 2018
(This article belongs to the Special Issue Sustainable Financial Markets)
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Abstract

The futures market plays a significant role in hedging and speculating by investors. Although various models and instruments are developed for real-time trading, it is difficult to realize profit by processing and trading a vast amount of real-time data. This study proposes a real-time index futures trading strategy that uses the KOSPI 200 index futures time series data. We construct a pattern matching trading system (PMTS) based on a dynamic time warping algorithm that recognizes patterns of market data movement in the morning and determines the afternoon’s clearing strategy. We adopt 13 and 27 representative patterns and conduct simulations with various ranges of parameters to find optimal ones. Our experimental results show that the PMTS provides stable and effective trading strategies with relatively low trading frequencies. Financial market investors are able to make more efficient investment strategies by using the PMTS. In this sense, the system developed in this paper contributes the efficiency of the financial markets and helps to achieve sustained economic growth. View Full-Text
Keywords: dynamic time warping; pattern matching trading system; time series data; sliding window dynamic time warping; pattern matching trading system; time series data; sliding window
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Kim, S.H.; Lee, H.S.; Ko, H.J.; Jeong, S.H.; Byun, H.W.; Oh, K.J. Pattern Matching Trading System Based on the Dynamic Time Warping Algorithm. Sustainability 2018, 10, 4641.

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