chosen, then fundamental traders are too risk averse to drive prices to the fundamental steady state and the price exhibits quasi periodic behavior. However, if the risk aversion parameter is high and the technical traders use a very fast moving average, which follows the price closely, then the price does converge to the fundamental value.
We study a case in which we choose parameter values that are economically sensible. The solution of the dynamical system is quasi periodic price behavior. Interaction between fundamentalists and technical analysts may thus destabilize the market and lead to persistent price fluctuations around an unstable fundamental steady state. It turns out that fundamental traders change the direction of a prevailing price trend, but that once the direction has changed, the technical traders push prices back to the fundamental value. Moreover it is found that volume goes by the prevailing trend, that is if the primary trend is upwards or downwards, then volume increases, only dropping if a change in the direction of the trend occurs. This is an important concept in technical analysis. Dynamic noise to the deterministic skeleton is added and leads to irregular price behavior. The features of the return distribution of the dynamical system are examined, but it is concluded that although the model generates returns series which show zero autocorrelation and fat tails, the model fails in mimicking the important characteristic of volatility clustering.