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Abstract
We offer further evidence on the relevance of technical trading in exchange-rate markets using daily data for 95 currencies against the US dollar. To that end, we investigate the profitability of a simple technical trading rule based on Taylor's (Citation1980) price trend model, generating optimal one-step-ahead forecasts of returns using genetic algorithms. These trading rules, that bear similarity to the popular trading rules based on moving averages, overcome the buy-and-hold strategy in 25 of 39 cases where trends are detected, even in the presence of transaction costs.
Acknowledgements
The authors thank Ethan Ilzetzki for providing us with the updated database on exchange-rate arrangements. The authors gratefully acknowledge financial support from the Spanish Ministry of Science and Innovation, through the research projects ECO2008-05565 and ECO2010-21318. Adrián Fernández-Pérez also acknowledges the financial support from INNOVA CANARIAS 2020.
Notes
1This period differs between series depending on data availability.