HUELUM Trading System: A Low-Frequency Algorithm Proposal

Abstract

This paper aims to build a set of algorithmic trading strategies to capture the persistence of financial series. HUELUM Trading System is proposed to make algorithmic trading in a low-frequency environment and is tested with the Exchange Traded Fund (ETF) iShares NAFTRAC daily prices. HUELUM Trading System includes one mean and one trend technical analysis indicators which are compared to a buy & hold strategy as a benchmark. The strategy's implementation is recommended for moderate-high risk profiles and positions with short-term horizons (days or weeks). The principal contribution of this work is that HUELUM Trading System can adapt to NAFTRAC, capturing its behavior, trends, and persistence or momentum. HUELUM is validated through a rolling walk forward and works with any security as long as it has Open, High Low Close (OHLC) prices. When we are in a market with little liquidity and deepness, HUELUM gives accurate buy and sell signals compared to a buy & hold strategy and reduces potential equity losses.