Please use this identifier to cite or link to this item: https://www.um.edu.mt/library/oar/handle/123456789/38858
Title: Can forex algorithmic trading based on technical analysis generate abnormal returns?
Authors: Spagnol, Luke
Keywords: Foreign exchange market
Algorithms
Efficient market theory
Issue Date: 2018
Citation: Spagnol, L. (2018). Can forex algorithmic trading based on technical analysis generate abnormal returns? (Bachelor's dissertation).
Abstract: Technical Analysis has long been common practice in financial markets. Logical statements built from mathematical formulas are the foundations of technical trading rules. Traditionally trading based on technical analysis used to be done by human beings. However, the rapid growth in the processing power of computers is making humans a less important part of the financial markets due to the fact that trading rules can be automated. The purpose of this study is to analyse whether algorithmic trading based on technical rules may be used generate returns which are higher than the risk-free rate, which is taken to be the 1 Month Daily Treasury Bill Rate. The rules were tested on currency pair, mainly four currency pairs, the EURUSD, EURGBP, EURJPY and EURCHF. A number of indicators managed to generate positive returns. The largest profit was generated on the EURUSD pair, while the largest loss was generated on the EURGBP. The most profitable trading rule was found to be the 50-100 day moving average crossover. However, the main finding in this study was the fact that no indicator generated returns which are statistically higher than the risk-free rate. Hence, this study concludes that algorithmic trading based on technical analysis is not enough to generate abnormal returns in the Forex market.
Description: B.SC.(HONS)MATHS,BANK.&FIN.
URI: https://www.um.edu.mt/library/oar//handle/123456789/38858
Appears in Collections:Dissertations - FacEma - 2018
Dissertations - FacEMABF - 2018

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