Trading Models

Behavioural Finance research has unearthed a wealth of discoveries about human behaviour in situations of financial risk. Of these, one of the most prevalent and reliable findings is the Dispositions-Effect: risk-takers have a greater propensity to realise profitable positions than losing positions.
The short-run impact of this behaviour is to allow traders and investors to 'feel good': a realised gain gives a positive feedback and a loss that remains unrealised keeps alive the hope that it will one day return to profit. However, the long-run impact of this phenomenon is sub-optimal investment performance, because one uncontrolled losing position can erase the gains of all the winners combined. It is precisely here that a systematic approach can help institutional investors to limit the 'human factor' in the management of their portfolios.

The cognitrend approach is not simply to model prices - the product of multiple trading decisions - but the human psychology itself. From the latest findings of respected researchers, we seek to identify the human behaviour that ultimately leads to a given price behaviour. In this respect, the approach is the bridge between theory and practice.

Each trading model translates a particular behavioural philosophy into fixed rules. These algorithms take into account not only the market environment and specifications, but also the predictable features of the human agents that make the market. We thoroughly test all models on historical and real-time data.