Financial market geometry: The tube oscillator

TL;DR

This paper introduces the tube oscillator, a new geometric-based technical analysis tool for financial markets, demonstrating its effectiveness through empirical testing on German DAX and Forex data, yielding consistent positive returns.

Contribution

It proposes the tube oscillator, a novel geometric indicator for market trending behavior, and shows its practical profitability in empirical trading strategies.

Findings

The tube oscillator yields over 2% monthly returns.

Prices exhibit a deterministic component detectable by the oscillator.

Financial market geometry can effectively identify market trends.

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.