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Intraday Technical Trading in the Foreign Exchange Market

  • Paul Weller
  • Christopher Neely

This paper examines the out-of-sample performance of intraday technical trading strategies selected using two methodologies, a genetic program and an optimized linear forecasting model. When realistic transaction costs and trading hours are taken into account, we find no evidence of excess returns to the trading rules derived with either methodology. Thus, our results are consistent with market efficiency. We do, however, find that the trading rules discover some remarkably stable patterns in the data.

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File URL: http://www2.warwick.ac.uk/fac/soc/wbs/research/wfri/rsrchcentres/ferc/wrkingpaprseries/fwp99-02.pdf
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Paper provided by Warwick Business School, Finance Group in its series Working Papers with number wp99-02.

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Date of creation: 1999
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Handle: RePEc:wbs:wpaper:wp99-02
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  1. Cheung, Yin-Wong & Chinn, Menzie David, 2001. "Currency traders and exchange rate dynamics: a survey of the US market," Journal of International Money and Finance, Elsevier, vol. 20(4), pages 439-471, August.
  2. Neely, Christopher & Weller, Paul & Dittmar, Rob, 1997. "Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(04), pages 405-426, December.
  3. Riccardo Curcio & Charles Goodhart, 1992. "When Support/Resistance Levels are Broken, Can Profits be Made? Evidence from the Foreign Exchange Market," FMG Discussion Papers dp142, Financial Markets Group.
  4. Yin-Wong Cheung & Menzie D. Chinn & Ian W. Marsh, 2000. "How Do UK-Based Foreign Exchange Dealers Think Their Market Operates?," NBER Working Papers 7524, National Bureau of Economic Research, Inc.
  5. Goodhart, C. A. E. & Figliuoli, L., 1991. "Every minute counts in financial markets," Journal of International Money and Finance, Elsevier, vol. 10(1), pages 23-52, March.
  6. Lyons, Richard K., 1998. "Profits and position control: a week of FX dealing1," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 97-115, February.
  7. Andrew W. Lo & Craig A. MacKinlay, . "An Econometric Analysis of Nonsyschronous-Trading," Rodney L. White Center for Financial Research Working Papers 19-89, Wharton School Rodney L. White Center for Financial Research.
  8. Ramazan GenÁay & Giuseppe Ballocchi & Michel Dacorogna & Richard Olsen & Olivier Pictet, 2002. "Real-Time Trading Models and the Statistical Properties of Foreign Exchange Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 463-492, May.
  9. Sweeney, Richard J, 1986. " Beating the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 41(1), pages 163-82, March.
  10. Baillie, Richard T & Bollerslev, Tim, 1991. "Intra-day and Inter-market Volatility in Foreign Exchange Rates," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 565-85, May.
  11. Paul Weller & Christopher Neely, 1999. "Technical Analysis and Central Bank Intervention," Working Papers wp99-04, Warwick Business School, Finance Group.
  12. Chang, P H Kevin & Osler, Carol L, 1999. "Methodical Madness: Technical Analysis and the Irrationality of Exchange-Rate Forecasts," Economic Journal, Royal Economic Society, vol. 109(458), pages 636-61, October.
  13. 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.
  14. repec:fth:pennfi:70 is not listed on IDEAS
  15. Yin-Wong Cheung & Menzie D. Chinn, 1999. "Macroeconomic Implications of the Beliefs and Behavior of Foreign Exchange Traders," NBER Working Papers 7417, National Bureau of Economic Research, Inc.
  16. Neely, Christopher J. & Weller, Paul A., 1999. "Technical trading rules in the European Monetary System," Journal of International Money and Finance, Elsevier, vol. 18(3), pages 429-458.
  17. Taylor, Mark P. & Allen, Helen, 1992. "The use of technical analysis in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 304-314, June.
  18. Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. " Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-64, December.
  19. Mark J Ready, 2002. "Profits from Technical Trading Rules," Financial Management, Financial Management Association, vol. 31(3), Fall.
  20. Goodhart, Charles A. E. & O'Hara, Maureen, 1997. "High frequency data in financial markets: Issues and applications," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 73-114, June.
  21. Zhou, Bin, 1996. "High-Frequency Data and Volatility in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 45-52, January.
  22. Curcio, Riccardo, et al, 1997. "Do Technical Trading Rules Generate Profits? Conclusions from the Intra-day Foreign Exchange Market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(4), pages 267-80, October.
  23. Jon Danielsson & Richard Payne, 1999. "Real Trading Patterns and Prices in Spot Foreign Exchange Markets," FMG Discussion Papers dp320, Financial Markets Group.
  24. Bollerslev, Tim & Domowitz, Ian, 1993. " Trading Patterns and Prices in the Interbank Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 48(4), pages 1421-43, September.
  25. 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.
  26. 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, vol. 12(5), pages 451-474, October.
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