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Technical analysis in the foreign exchange market: a layman's guide

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  • Christopher J. Neely

Abstract

Economists have traditionally been skeptical of the value of technical analysis, the use of past price behavior to guide trading decisions in asset markets. Instead, they have relied on the logic of the efficient markets hypothesis. Christopher J. Neely briefly explains the fundamentals of technical analysis and the efficient markets hypothesis as applied to the foreign exchange market, evaluates the profitability of simple trading rules, and reviews recent ideas that might justify extrapolative technical analysis.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (1997)
Issue (Month): Sep ()
Pages: 23-38

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Handle: RePEc:fip:fedlrv:y:1997:i:sep:p:23-38

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Keywords: Foreign exchange;

References

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  18. Richard Meese & Kenneth Rogoff, 1981. "Empirical exchange rate models of the seventies: are any fit to survive?," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 184, Board of Governors of the Federal Reserve System (U.S.).
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  20. Treynor, Jack L & Ferguson, Robert, 1985. " In Defense of Technical Analysis," Journal of Finance, American Finance Association, American Finance Association, vol. 40(3), pages 757-73, July.
  21. Levich, Richard M. & Thomas, Lee III, 1993. "The significance of technical trading-rule profits in the foreign exchange market: a bootstrap approach," Journal of International Money and Finance, Elsevier, Elsevier, vol. 12(5), pages 451-474, October.
  22. Ray Ball, 1995. "The Theory Of Stock Market Efficiency: Accomplishments And Limitations," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 8(1), pages 4-18.
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