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Do Technical Trading Rules Generate Profits? Conclusions from the Intra-day Foreign Exchange Market

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  • Curcio, Riccardo, et al
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    Abstract

    Several recent studies have demonstrated the profitability of technical analysis by simulating certain trading rules over a very long period of daily foreign exchange rates. In this paper, we use filter rules identified and supplied by technical analysts on the intra-daily foreign exchange market. We provide evidence that, although some profits could be made by following these rules in periods of trends, this was not the case on average. Our results are further strengthened when we incorporate transaction costs. We also simulate some of the rules used in previous studies and show that they would not be profitable when applied to our intra-daily data set. Copyright @ 1997 by John Wiley & Sons, Ltd. All rights reserved.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

    Volume (Year): 2 (1997)
    Issue (Month): 4 (October)
    Pages: 267-80

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    Handle: RePEc:ijf:ijfiec:v:2:y:1997:i:4:p:267-80

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    Cited by:
    1. Nguyen, James, 2004. "The Efficient Market Hypothesis: Is It Applicable to the Foreign Exchange Market?," Economics Working Papers wp04-20, School of Economics, University of Wollongong, NSW, Australia.
    2. Menkhoff, Lukas & Taylor, Mark P., 2006. "The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis," Hannover Economic Papers (HEP) dp-352, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    3. Stephan Schulmeister, 2005. "The Interaction between Technical Currency Trading and Exchange Rate Fluctuations," WIFO Working Papers 264, WIFO.
    4. Christopher J. Neely & Paul A. Weller, 2001. "Intraday technical trading in the foreign exchange market," Working Papers 1999-016, Federal Reserve Bank of St. Louis.
    5. Mark P. Taylor, 2004. "Is Official Exchange Rate Intervention Effective?," Economica, London School of Economics and Political Science, vol. 71, pages 1-11, 02.
    6. Gehrig, Thomas & Menkhoff, Lukas, 2003. "Technical Analysis in Foreign Exchange - The Workhorse Gains Further Ground," Hannover Economic Papers (HEP) dp-278, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    7. Y. Shi & A. N. Gorban & T. Y. Yang, 2013. "Is it possible to predict long-term success with k-NN? Case Study of four market indices (FTSE100, DAX, HANGSENG, NASDAQ)," Papers 1307.8308, arXiv.org.
    8. Jon Danielsson & Richard Payne, 1999. "Real Trading Patterns and Prices in Spot Foreign Exchange Markets," FMG Discussion Papers dp320, Financial Markets Group.
    9. Bertrand Maillet & Thierry Michel, 2005. "Technical analysis profitability when exchange rates are pegged: A note," The European Journal of Finance, Taylor & Francis Journals, vol. 11(6), pages 463-470.
    10. Carol Osler, 2000. "Support for resistance: technical analysis and intraday exchange rates," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-68.
    11. Stephan Schulmeister, 2007. "Performance of Technical Trading Systems in the Yen/Dollar Market," WIFO Working Papers 291, WIFO.

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