Paper: arXiv 2407.08036

Abstract

Based on geometrical considerations, we propose a new oscillator for technical market analysis, the tube oscillator. This oscillator measures the trending behavior of a fixed market instrument based on its past history. It is shown in an empirical analysis of the German DAX and the Forex EUR/USD exchange rate that a simple trading strategy based on this oscillator and fixed threshold leads to consistent positive monthly returns of average magnitude of 2% or more. The oscillator is derived from a broader understanding of the geometric behavior of prices throughout a fixed period, which we term financial market geometry. The remarkable profit results of the presented technique show that 1) prices of financial market instruments have a strong underlying deterministic component which can be detected and quantified with a matching approach and 2) financial market geometry is capable of providing such detectors.

Complexity vs Empirical Score

  • Math Complexity: 4.0/10
  • Empirical Rigor: 6.0/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper introduces a geometric oscillator with relatively simple linear algebra and geometric concepts, lacking advanced stochastic calculus or rigorous statistical inference. However, it provides backtest-ready trading rules and reports consistent positive returns (2%+ monthly) on real financial data (DAX, EUR/USD) over empirical analysis.

Research Flowchart

  flowchart TD
  A["Research Goal<br>Find deterministic component<br>in financial markets"] --> B["Concept: Financial Market Geometry"]
  B --> C{"Data: DAX & EUR/USD<br>Historical Prices"}
  C --> D["Compute Tube Oscillator"]
  D --> E{"Test: Fixed Threshold<br>Trading Strategy"}
  E -->|Trading Signal| F["Simulate Trades"]
  F --> G["Outcomes: Consistent<br>Positive Monthly Returns<br>Avg 2%+"]
  G --> H["Conclusion: Prices have<br>deterministic component<br>detectable via geometry"]