Application of technical analysis in trading forex; comparison of trend indicators vs oscillators
Date
2017
Authors
Amunga, Jeff Chibole
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
This paper tests the hypothesis that in the long term, the use of technical analysis can produce positive returns. It particularly looks at the use of two of the most commonly used types of technical analysis which are momentum based indicators and oscillators. In order to assess the performance of this types of technical analysis, two popular momentum based indicators are chosen, namely Moving Average and Bollinger bands, while two popular oscillators are chosen namely, Relative Strength Index and Moving Average Convergence common. To gauge the performance of the indicators, the parameters of each of the indictors is subjected to six most traded currency pairs which were USDJY, EURUSD, USDCAD, GBPUSD, USDCHF and AUDUSD. The daily closing prices of each of the currency pairs are used, and based on the parameters of the individual indicator, a buy or sell signal is conveyed by the indicator, and the profit or loss, of each of the signals is measured and summed up so that comparison of performance is possible. Daily closing prices from 2000-2015 are used. The findings suggest it is possible for technical analysis tools to make positive returns over the long term. It also suggests that momentum indicators are better than oscillators and that Bolliriger bands are the best of the four indicators measured in this paper:
Description
A Research project submitted in partial fulfillment of the requirements for the Degree of Bachelor Business Science Finance at Strathmore University
Keywords
Trading forex, Trend indicators, Bolliriger