Effectiveness of simple technical trading rules in the Hong Kong futures markets

Abstract

Weak-form market efficiency states that past information cannot be used to consistently generate excess returns. So, technical analysis which uses past information on securities should not help generate abnormal profits consistently in a weak-form efficient market. In the present study, two simple technical trading strategies - Moving-Average-Oscillator and Trading Range Break-Out - are implemented to test whether they result in excess returns. The study is performed on the Hang Seng Futures Index, traded at the Hong Kong Futures Exchange. It is found that the moving average strategy does not produce significant excess returns, but four out of the six Trading Range Break-Out rules resulted in significant positive returns for the buy signal.