and taxes. Unfortunately, the using of the MH indica-
tor generates a large number of transactions.
We simulated a real investment of 2000 into NAS-
DAQ for a start, and we used the fee of 1% for each
transaction (BUY or SELL) because it corresponds
with the reality. After the whole period (i.e.,1996-
2014), we finished with 7819.8, and we spent 34497.3
on fees. To make a picture clear, using Buy & Hold
on NASDAQ, we would finish with 16648.1, and we
would pay only 187.7 for fees.
Tax rules are different in different countries, e.g.,
between 15% − 25%, but it is evident that they re-
duce the profit, too. Usually, the tax has to be paid
immediately after the transaction is finished. So, the
reinvestment of profit is reduced.
However, the transaction fees depend on the stock
exchange provider. Big investors can use the strategy
of scalping that represents many thousands transac-
tions in a day. Such investors are classified as market
makers, and they are not charged by transactions fees.
The more detailed explanation is out of the scope of
our paper.
6 CONCLUSIONS
The goal of our investigation was to develop and test
a new indicator MH for technical analysis based on
chaos measure represented by Hurst exponent of the
underlying time series of prices.
We found a construction described in Section 4.1,
and we evaluated it in comparison to the strategy us-
ing MACD or Buy & Hold for data described in Sec-
tion 5.
Using hypothesis testing, we proved our hypothe-
sis that the new MH indicator developed in this work,
i.e., our non-linear method described in Section 4.1,
generates more profit compared to the MACD techni-
cal indicator and to the Buy & Hold investment strat-
egy.
On DAX, MH was 4.5 times better than
Buy & Hold and 7.2 times better than MACD. On
NASDAQ, it was 2.9 times better than Buy & Hold
and 16.8 times better than MACD.
In Subsection 5.2, we explained why the indicator
MH cannot be used as a money generating machine.
However, we believe that complex, non-linear sys-
tems with problematic stationarity are an important
research topic. More research has to be done to an-
swer questions about filtering of BUY- and SELL-
signals. In our future research, we will apply meth-
ods of genetic programming to improve it like in our
previous work (Kroha and Friedrich, 2014).
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