Multiscale Analysis of Foreign Exchange Order Flows and Technical Trading Profitability

Nikola Gradojevic and Camillo Lento

No 2014-ACF-03, Working Papers from IESEG School of Management

Abstract: This paper investigates the multiscale (frequency-dependent) relationship between technical trading profitability and feedback trading effects in the Canada/U.S. dollar foreign exchange market. The results suggest weak evidence that technical trading activities of financial and non-financial customers drive frequent violations of the FX market microstructure assumption that exchange rate movements are driven by order flow. After controlling for transaction costs, we find that the contribution of financial customers in feedback trading dominates the contribution of non-financial customers at lower frequencies, while the opposite holds at higher frequencies. An additional, novel contribution is that technical indicators constructed from order flows can be profitable.

Keywords: Foreign Exchange Markets; Order Flows; Technical Trading; Frequency Domain (search for similar items in EconPapers)
JEL-codes: C53 F31 G14 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ieseg.fr/wp-content/uploads/2014-ACF-03_Gradojevic.pdf (application/pdf)

Related works:
Journal Article: Multiscale analysis of foreign exchange order flows and technical trading profitability (2015)
Working Paper: Multiscale analysis of foreign exchange order flows and technical trading profitability (2015)
Working Paper: Multiscale Analysis of Foreign Exchange Order Flows and Technical Trading Profitability (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ies:wpaper:f201403

Access Statistics for this paper

More papers in Working Papers from IESEG School of Management Contact information at EDIRC.
Bibliographic data for series maintained by Lies BOUTEN ().