Random walks : reality or myth? : technical analysis in the foreign exchange market : a theoretical and empirical examination

Abstract

The goal of this thesis is to assess the profitability of several technical trading tools in the FOREX market. The indicators tested are: Bollinger bands, Simple Moving Average, Moving Average Convergence Divergence, Relative Strength Index and Stochastic Oscillator. This paper explores the ability these technical tools have to predict future price movements and in turn generate higher returns than an average buy and hold strategy. An algorithmic approach is taken over the period starting from 01/01/2009 and ending at 31/12/2007, using C# as the chosen programming language. The collected results imply the unprofitability of technical analysis which subsequently suggest that the forex market is an efficient one.