A Comparison of Investment Strategy with Technical Indicators

Abstract

This research is aimed to compare the investment strategies among 4 approaches, namely Dollar cost averaging strategy (DCA), Value averaging strategy (VA), Constant share purchasing strategy (CS), and Lump sum strategy. Each strategy would be tested with and without technical indicators on hypothesis of market timing and then its result would be calculated for comparison. The methodology throughout this research is a quantitative analysis based on a secondary data from the daily closed price of the ETF Gold99 as a case study from January 2012 until June 2014. The data were processed by financial and statistic software. The results of this study showed that all four investment strategies had negative return and high risk. Statically, they also had difference in an investing capital, return and risk of investment. The CS Strategy required the highest amount of investing capital whereas the LS strategy showed the largest negative return. For technical indicators, the study found that the stochastic indicator required the largest amount of investing capital and had the highest negative return. Therefore, an investor should be careful on applying an investment strategy and technical indicator that requires the large amount of capital but resulting in negative return.