Modeling fuzzimetric cognition of technical analysis decisions: reducing emotional trading

Stock traders' forecasting strategies are mainly dependent on Technical Analysis (TA) indicators. However, some traders would follow their intuition and emotional aspects when trading instead of following the mathematically solid forecasting techniques of TA(s). The objective of this paper is to help traders to rationalize their choices by generating the maximum and minimum tolerances of possible prices (termed in this paper as "fuzzy spectrum") and hence reducing their "emotional" trading decisions. This would be an important aspect towards avoiding an undesired outcome. Fuzzy logic has been used in this paper to identify such tolerances based on the most popular TA(s). Fuzzification of these TA(s) was used via a modular approach of fuzzy logic and by adopting "fuzzimetric sets" described in this paper to achieve the "fuzzy spectrum" of forecasted price tolerances when buying and selling decisions. Experimental results show the success of developing the "fuzzy spectrum" based on the "fuzzy" tolerances discovered from the TA(s) outputs. As a result, this paper contributes towards a better "rationalized" decision making when it comes to buying and selling stocks in this kind of industry.

Keywords:

cognitive modelling , Fuzzy System , Technical Analysis , trading systems , stock trading optimization , Fuzzimetric sets