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Components of the profitability of technical currency trading

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  • Stephan Schulmeister

Abstract

This paper investigates the sources of the profitability of 1024 technical models when trading in the German mark (euro)/U.S. dollar market. The main results are as follows. First, each of these models would have been profitable over the entire sample period. Second, this profitability is exclusively due to the exploitation of exchange rate trends. Third, these results do not change substantially when trading is examined within subperiods. Fourth, the 25 best performing models in each in-sample period examined were profitable also out of sample in most cases. Fifth, the profitability of technical currency trading has been declining since the late 1980s.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100701335416
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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 18 (2008)
Issue (Month): 11 ()
Pages: 917-930

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Handle: RePEc:taf:apfiec:v:18:y:2008:i:11:p:917-930

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Cited by:
  1. Stephan Schulmeister, 2008. "Aggregate Trading Behaviour of Technical Models and the Yen-Dollar Exchange Rate 1976-2007," WIFO Working Papers 324, WIFO.
  2. Menkhoff, Lukas & Taylor, Mark P., 2006. "The Obstinate Passion of Foreign Exchange Professionals : Technical Analysis," The Warwick Economics Research Paper Series (TWERPS) 769, University of Warwick, Department of Economics.
  3. Schulmeister, Stephan, 2006. "The interaction between technical currency trading and exchange rate fluctuations," Finance Research Letters, Elsevier, vol. 3(3), pages 212-233, September.
  4. Christopher J. Neely & Paul A. Weller, 2011. "Technical analysis in the foreign exchange market," Working Papers 2011-001, Federal Reserve Bank of St. Louis.
  5. Todea, Alexandru & Zoicas Ienciu, Adrian, 2011. "Technical Analysis and Stochastic Properties of Exchange Rate Movements: Empirical Evidence from the Romanian Currency Market," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 175-192, March.
  6. Stephan Schulmeister, 2007. "Performance of Technical Trading Systems in the Yen/Dollar Market," WIFO Working Papers 291, WIFO.
  7. Stephan Schulmeister, 2007. "The Interaction Between the Aggregate Behaviour of Technical Trading Systems and Stock Price Dynamics," WIFO Working Papers 290, WIFO.
  8. Schulmeister, Stephan, 2009. "Profitability of technical stock trading: Has it moved from daily to intraday data?," Review of Financial Economics, Elsevier, vol. 18(4), pages 190-201, October.

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