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How profitable are FX technical trading rules?

Coakley, J and Marzano, M and Nankervis, JC (2016) 'How profitable are FX technical trading rules?' International Review of Financial Analysis, 45. 273 - 282. ISSN 1057-5219

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Abstract

This paper provides a comprehensive empirical investigation of the profitability of foreign exchange technical trading rules over the 1996:10?2015:06 period for 22 currencies quoted in US dollars. It reports evidence of profitability across a universe of 113,148 rules that include traditional moving average rules and those constructed on the basis of technical indicators such as Bollinger bands and the relative strength index. The best trading rules achieve annualised returns of up to 30%. The Step-SPA test (Hsu, Hsu, & Kuan, 2010) results show a sharp fall in the total number of rules that are robust to data snooping bias. Virtually no traditional rule is significant in the 2006?2015 sub-sample, in line with the adaptive markets hypothesis. By contrast, rules based on new technical indicator such as Bollinger Band and relative strength index rules remain robustly profitable across all currencies over the more recent sub-sample.

Item Type: Article
Uncontrolled Keywords: Data Snooping; Foreign Exchange; Technical Trading; Stepwise SPA test
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Jim Jamieson
Date Deposited: 28 Mar 2016 12:01
Last Modified: 21 Sep 2018 12:15
URI: http://repository.essex.ac.uk/id/eprint/16362

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