Balancing risk and return: A case study of Ichimoku trading in the Indonesian Sharia Stock Market

Abstract

In line with Sharia principles, this study explores the correlation between increased returns and heightened risks, aligned with Al-Ghunm bi Al-Ghurm. Daily data from the Jakarta Islamic Index 70, spanning December 2021 to November 2023, was analysed using quantitative methods. Four key trading strategies were assessed: buy-and-hold and three Ichimoku strategies (Conservative, Moderate, and Aggressive). The results indicate the effectiveness of a moderate Ichimoku strategy because of its well-balanced approach. Despite no significant performance differences between Ichimoku's trading rules and buy-and-hold, the study emphasizes nuanced decision-making for diverse investor preferences. The insights benefited Indonesian Sharia investors, suggesting enhancements in risk mitigation techniques, and considering external factors. Enriching technical analysis and Sharia-compliant investments, this study underscores the importance of aligning financial objectives with ethical considerations, contributing to the evolving landscape of the Indonesian Sharia stock market.