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New Evidence of Technical Trading Profitability

Author

Listed:
  • Viktor Manahov

    () (University of Newcastle)

  • Robert Hudson

    () (University of Hull)

Abstract

We developed profitable foreign exchange forecasts by applying a special adaptive form of the Strongly Typed Genetic Programming (STGP)-based learning algorithm to five-minute high frequency data of six of the most traded currency pairs. We examined the out-of-sample performance of these intraday technical trading models based on STGP and optimised linear forecasting. We found evidence of economically and statistically significant out-of-sample excess returns, after taking into account appropriate transaction costs.

Suggested Citation

  • Viktor Manahov & Robert Hudson, 2013. "New Evidence of Technical Trading Profitability," Economics Bulletin, AccessEcon, vol. 33(4), pages 2493-2503.
    • Handle: RePEc:ebl:ecbull:eb-13-00465
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I4-P235.pdf
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    References listed on IDEAS

    as
    1. Marcucci Juri, 2005. "Forecasting Stock Market Volatility with Regime-Switching GARCH Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(4), pages 1-55, December.
    2. Neely, C. J. & Weller, P. A., 2003. "Intraday technical trading in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 223-237, April.
    3. Terrence Hendershott & Charles M. Jones & Albert J. Menkveld, 2011. "Does Algorithmic Trading Improve Liquidity?," Journal of Finance, American Finance Association, vol. 66(1), pages 1-33, February.
    4. Atanasova, Christina V. & Hudson, Robert S., 2010. "Technical trading rules and calendar anomalies -- Are they the same phenomena?," Economics Letters, Elsevier, vol. 106(2), pages 128-130, February.
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    Cited by:

    1. Simone Cirillo & Stefan Lloyd & Peter Nordin, 2014. "Evolving intraday foreign exchange trading strategies utilizing multiple instruments price series," Papers 1411.2153, arXiv.org.

    More about this item

    Keywords

    Foreign Exchange; Genetic Programming;

    JEL classification:

    • F3 - International Economics - - International Finance

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