Charting Technical Trading Rules and the Lottery of Technical Analysis: Empirical Evidence from Foreign Exchange Market

Alexandre Repkine ()

MPRA Paper from University Library of Munich, Germany

Abstract: We use trend-following, trend continuation and trend reversal pattern recognition techniques to apply technical charting rules to trading seven major currency pairs for the period of 1999 through early 2007. Our results suggest that the persistent popularity of technical analysis among practicing traders may be the result of a “lottery” wherein most of the participants end up with zero profits. However, the rest of the participants are much more likely to end up winning rather than losing. In this way, the popularity of technical trading rules may co-exist with the validity of market efficiency hypothesis.

Keywords: market efficiency; technical analysis; forecasting; foreign exchange markets (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2008-02
New Economics Papers: this item is included in nep-ifn and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:7849

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