Mitigating investment losses

In a bid to glean insights into risk management during trading, Year 1’s TEOH Tze Tzun, who is reading a double degree in Mathematics and Computer Science, and his friends - Jeffinson DARMAWAN, Year 1, Computer Engineering and Philosophy and Ian HARIYANTO, Year 1 Computer Engineering and Business - decided to participate in the CGS-CIMB National Investment Challenge 2022.

Tze Tzun says, “I aspire to apply my mathematical skills in areas of society that could lead to a positive change, be it in machine learning and artificial intelligence (AI), or in finance and economics.”

The interdisciplinary team had the opportunity to put to practice their knowledge in mathematics, data analytics and economics to ‘invest’ in the stock market. Working with a simulated trading account as ‘investment capital’, they gained exposure to markets in Singapore and the United States and learned more about leveraged products and the risks.

Tze Tzun adds, “I have always been fascinated by the applications of mathematics in computer science.” Together with his team, he used Python programmes to backtest their trading strategies and applied statistical techniques to optimise their risk and reward ratio.

Their solution, which emerged as one of the competition finalists, was based on fundamental analysis of the macro-economy, paired with the use of technical indicators to identify favourable objective entries in the market.

They discovered that with a proper strategy - aligned with macro-economic sentiment and based on proper risk-reward ratios - investment risks can be managed, and profit margins increased.