The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis
Open accessAbstract
Technical analysis involves the prediction of asset price movements from inductive analysis of past movements. We establish a number of stylized facts, including that technical analysis is widespread in the foreign exchange market and that it may be profitable. We then analyze four arguments that have been put forward to explain this: that the market may not be fully rational; that technical analysis may exploit the influence of official interventions; that it may be an efficient form of information processing; and that it may inform on nonfundamental influences. While each may have some validity, the latter is the most plausible. As for the foreign exchange, it is almost as romantic as young love, and quite as resistant to formulae.
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There is a trend in the literature for the performance of technical trading rules to diminish over time.
“This is especially important for technical trading rules since there is a trend in the literature for the performance of the rules to diminish over time (Menkhoff 2007).”
From Technical trading and cryptocurrencies (2021) · cites this paper as Menkhoff 2007
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“Thus, on this argument, inferring future price movements from past price movements, as in technical analysis, may not be so irrational after all (Treynor and Ferguson, 1985; Brown and Jennings, 1989).”
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Neely, C. J., & Weller, P. A. (2003) · Journal of International Money and Finance · doi:10.1016/s0261-5606(02)00101-8 · Cited by 148 · cited 1× · see citing works
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Do currency markets absorb news quickly?
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Technical Analysis and Liquidity Provision
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Under the microscope: the structure of the foreign exchange market
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“3 Second, foreign exchange markets consist almost entirely of professional traders (Sager and Taylor, 2006), so that the impact of individual private investors may be neglected without loss of generality (in contrast to equity markets— see, e.g., Griffin, Harris and Topaloglu, 2003).”
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Can Markov Switching Models Predict Excess Foreign Exchange Returns?
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Dominguez, K. M. E., & Panthaki, F. (2006) · Journal of International Money and Finance · doi:10.1016/j.jimonfin.2005.10.009 · Cited by 104 · see citing works
Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange
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Can Markov switching models replicate chartist profits in the foreign exchange market?
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“Sixth, stimulated by the apparent success of longer-term exchange rate modelling via a Markov switching approach (Engel and Hamilton, 1990), studies have found some links between regime switches and technical trading rules (Dewachter, 1997, 2001; Vigfusson, 1997).”
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BackgroundTechnical analysis and central bank intervention
Neely, C. J., & Weller, P. A. (2001) · Journal of International Money and Finance · doi:10.1016/s0261-5606(01)00033-x · Cited by 94 · cited 1× · see citing works
“…Lucke, 2003), candlestick formations (Fiess and MacDonald, 2002), neural networks (Gencay, 1999), genetic programming (Neely, Weller and Dittmar, 1997; Neely and Weller, 1999, 2001), Markov switching models (Marsh, 2000; Dueker and Neely, 2005) and real-time trading models (Gencay et al., 2003).”
On the consistency of short-run and long-run exchange rate expectations
Froot, K. A., & Ito, T. (1989) · Journal of International Money and Finance · doi:10.1016/0261-5606(89)90032-6 · Cited by 92 · see citing works
Official Intervention in the Foreign Exchange Market: Is it Effective, and, If so, How Does it Work?Preprint
Taylor, M., & Sarno, L. (2001) · SSRN Electronic Journal · doi:10.1257/jel.39.3.839 · Cited by 91 · cited 3× · see citing works
“Second, central banks that do not explicitly intend to make profits by intervening, may nevertheless do so (Sweeney, 1997; Sarno and Taylor, 2001a).”
BackgroundSelf-citationAnalysis of Short-Run Exchange Rate Behavior March, 1973 to September, 1975
Dooley, M. P., & Shafer, J. R. (1976) · International Finance Discussion Paper · doi:10.17016/ifdp.1976.76 · Cited by 90 · see citing works
Silber, W. L. (1994) · The Journal of Derivatives · doi:10.3905/jod.1994.407887 · Cited by 87 · see citing works
Strategies for Pairwise Competitions in Markets and Organizations
Cornell, B., & Roll, R. W. (1981) · The Bell Journal of Economics · doi:10.2307/3003517 · Cited by 87 · see citing works
Taylor, S. J. (1992) · Economic Record · doi:10.1111/j.1475-4932.1992.tb02298.x · Cited by 84 · cited 5× · see citing works
“Going more into detail, there is, first, evidence that time-varying risk premia might explain some of the excess return of technical analysis but not all or even most of it (Taylor, 1992; Kho, 1996).”
BackgroundInfluentialCharting: Chaos theory in disguise?
Clyde, W. C., & Osler, C. L. (1997) · Journal of Futures Markets · doi:10.1002/(sici)1096-9934(199708)17:5 · Cited by 83 · see citing works
The use of flow analysis in foreign exchange: exploratory evidence
Gehrig, T. P., & Menkhoff, L. (2004) · Journal of International Money and Finance · doi:10.1016/j.jimonfin.2003.12.006 · Cited by 83 · see citing works
Self-citationTrading rule profits in european currency spot cross-rates
Lee, C. I., & Mathur, I. (1996) · Journal of Banking & Finance · doi:10.1016/0378-4266(95)00037-2 · Cited by 76 · see citing works
Foreign Exchange Rate Forecasting Techniques: Implications for Business and Policy
Goodman, S. H. (1979) · The Journal of Finance · doi:10.1111/j.1540-6261.1979.tb02104.x · Cited by 74 · cited 1× · see citing works
“The widespread use of technical analysis by foreign exchange professionals was first brought to the attention of academic researchers by Goodman (1979), Group of Thirty (1985), Frankel and Froot (1986) (1990a) (1990b) and Goodhart (1988) .”
BackgroundFiess, N., & MacDonald, R. R. (2002) · Economic Modelling · doi:10.1016/s0264-9993(01)00067-0 · Cited by 73 · see citing works
Do central banks lose on foreign-exchange intervention? A review article
Sweeney, R. J. (1997) · Journal of Banking & Finance · doi:10.1016/s0378-4266(97)00033-2 · Cited by 70 · cited 1× · see citing works
“Second, central banks that do not explicitly intend to make profits by intervening, may nevertheless do so (Sweeney, 1997; Sarno and Taylor, 2001a).”
BackgroundPrice Leadership in the Spot Foreign Exchange Market
Sapp, S. G. (2002) · Journal of Financial and Quantitative Analysis · doi:10.2307/3594987 · Cited by 68 · cited 1× · see citing works
“Probably, this finding should not be generalized to other banks as the persistent forecasting power could not be found for other situations as well (Sapp, 2002; Dominguez, 2003).”
BackgroundThe interaction between technical currency trading and exchange rate fluctuations
Schulmeister, S. (2006) · Finance research letters · doi:10.1016/j.frl.2006.03.005 · Cited by 63 · cited 1× · see citing works
“In another recent innovative study, Schulmeister (2006) analyzes market-wide relations between signals from technical analysis (using 1024 different trading rules), exchange rates and order flow.”
BackgroundTechnical analysis and the effectiveness of central bank intervention
Saacke, P. (2002) · Journal of International Money and Finance · doi:10.1016/s0261-5606(02)00009-8 · Cited by 60 · cited 4× · see citing works
“…most of the stylized facts that can be drawn from profitability examinations are already found in this early literature (Table 4) and that they are supported by later studies (e.g. Surajas and Sweeney, 1992; Menkhoff and Schlumberger, 1995; Pilbeam, 1995; Neely, 1997; LeBaron, 1999; Saacke, 2002).”
BackgroundMethodResultInfluentialSpeculative behavior of foreign exchange rates during the current float
Logue, D. E., Sweeney, R. J., & Willett, T. D. (1978) · Journal of Business Research · doi:10.1016/0148-2963(78)90006-1 · Cited by 55 · see citing works
Gregoir, S. M., & Lenglart, F. (2000) · Journal of Forecasting · doi:10.1002/(sici)1099-131x(200003)19:2 · Cited by 50 · see citing works
In Defense of Technical Analysis
Treynor, J. L., & Ferguson, R. (1985) · The Journal of Finance · doi:10.2307/2327800 · Cited by 48 · see citing works
Technical Trading Rules in the European Monetary SystemPreprint
Neely, C. J., & Weller, P. A. (1998) · SSRN Electronic Journal · doi:10.2139/ssrn.141609 · Cited by 46 · see citing works
Expectations driven distortions in the foreign exchange market
Westerhoff, F. H. (2002) · Journal of Economic Behavior & Organization · doi:10.1016/s0167-2681(02)00151-8 · Cited by 43 · see citing works
Are technical trading rules profitable? Evidence for head-and-shoulder rules
Lücke, B. (2003) · Applied Economics · doi:10.1080/00036840210150884 · Cited by 43 · see citing works
Sager, M. J., & Taylor, M. (2004) · Journal of International Money and Finance · doi:10.1016/j.jimonfin.2004.08.002 · Cited by 43 · see citing works
Self-citationForeign exchange trading models and market behavior
Ramazan Gençay, A., Dacorogna, M. M., OLSEN, R. A., & Pictet, O. V. (2003) · Journal of Economic Dynamics and Control · doi:10.1016/s0165-1889(02)00049-0 · Cited by 42 · cited 3× · see citing works
“17 The technical trading rules that have been examined in this literature include those based on head and shoulders patterns (Chang and Osler, 1999; Lucke, 2003), candlestick formations (Fiess and MacDonald, 2002), neural networks (Gencay, 1999), genetic programming (Neely, Weller and Dittmar, 1997; Neely and Weller,…”
BackgroundResultSwitching between Chartists and Fundamentalists: A Markov Regime-Switching ApproachPreprint
Vigfusson, R. J. (1996) · SSRN Electronic Journal · doi:10.2139/ssrn.50562 · Cited by 36 · see citing works
Foreign‐Exchange Trading Volume and Federal Reserve Intervention
Chaboud, A., & LeBaron, B. D. (2001) · Journal of Futures Markets · doi:10.1002/fut.1904 · Cited by 34 · see citing works
Are all Central Bank interventions created equal? An empirical investigation
Sapp, S. (2003) · Journal of Banking & Finance · doi:10.1016/s0378-4266(02)00410-7 · Cited by 28 · cited 1× · see citing works
“A final piece of evidence on the relation between intervention and technical analysis profitability is provided by Sapp (2004).”
BackgroundPılbeam, K. (1995) · Oxford Economic Papers · doi:10.1093/oxfordjournals.oep.a042180 · Cited by 27 · cited 1× · see citing works
“…most of the stylized facts that can be drawn from profitability examinations are already found in this early literature (Table 4) and that they are supported by later studies (e.g. Surajas and Sweeney, 1992; Menkhoff and Schlumberger, 1995; Pilbeam, 1995; Neely, 1997; LeBaron, 1999; Saacke, 2002).”
ResultThe Adaptive Markets Hypothesis: Evidence from the Foreign Exchange Market,
Neely, C. J., Ulrich, J. M., & Weller, P. A. (2006) · doi:10.20955/wp.2006.046 · Cited by 20 · see citing works
Sign predictions of exchange rate changes: Charts as proxies for Bayesian inferences
Dewachter, H. (1997) · Review of World Economics · doi:10.1007/bf02707675 · Cited by 18 · cited 1× · see citing works
“Sixth, stimulated by the apparent success of longer-term exchange rate modelling via a Markov switching approach (Engel and Hamilton, 1990), studies have found some links between regime switches and technical trading rules (Dewachter, 1997, 2001; Vigfusson, 1997).”
BackgroundTemporal Patterns in Foreign Exchange Returns and Options
Charlebois, M., & SAPP, S. (2007) · Journal of money credit and banking · doi:10.1111/j.0022-2879.2007.00032.x · Cited by 16 · cited 1× · see citing works
“In a recent paper, Charlebois and Sapp (2006), using daily data on dollar-mark over the period 1988-1998, find that moving-average trading rules generate significant excess returns and that the excess returns increase when information is included on the open interest differential on currency…”
BackgroundTechnical Analysis in the Foreign Exchange Market: A Cointegration-Based Approach
Fiess, N., & MacDonald, R. R. (1999) · Multinational Finance Journal · doi:10.17578/3-3-1 · Cited by 14 · cited 1× · see citing works
“Fifth, studies have explored the relation between non-linear exchange rate modelling and technical analysis (Clyde and Osler, 1997; Fiess and MacDonald, 1999; Kilian and Taylor, 2003; De Grauwe and Grimaldi, 2006, 2006a; Reitz and Taylor, 2006).”
BackgroundThe economic value of technical trading rules: a nonparametric utility-based approach
Dewachter, H., & Lyrio, M. (2005) · International Journal of Finance & Economics · doi:10.1002/ijfe.256 · Cited by 12 · cited 1× · see citing works
“24 In this vein, Dewachter and Lyrio (2005) find that the application of moving average rules can provide a significant return to investors.”
The Stability of the Canadian Fexible Exchange Rate, 1950–1962
Poole, W. H. (1967) · The Canadian Journal of Economics and Political Science · doi:10.2307/139772 · Cited by 9 · see citing works
Frenkel, M. R., & Stadtmann, G. (2004) · Jahrbücher für Nationalökonomie und Statistik · doi:10.1515/jbnst-2004-0603 · Cited by 4 · see citing works
Mills (1997) · doi:10.1002/(sici)1099-1158(199710)2:4
Can Markov Switching Models Predict Excess Foreign Exchange Returns?
Dueker, M., & Neely, C. J. (2006) · SSRN Electronic Journal · doi:10.2139/ssrn.648227
Chapter 33 Empirical research on nominal exchange rates
Frankel, J. A., & Rose, A. K. (1995) · Handbook of International Economics · doi:10.1016/s1573-4404(05)80013-9
On the Consistency of Short-run and Long-run Exchange Rate Expectations
Froot, K., & Ito, T. (1988) · doi:10.3386/w2577
The use of flow analysis in foreign exchange: exploratory evidence
GEHRIG, T. (2004) · Journal of International Money and Finance · doi:10.1016/s0261-5606(03)00119-0
Overconfidence in Currency Markets
Oberlechner, T., & Osler, C. L. (2005) · doi:10.2139/ssrn.677081
Peiers, B. (1997) · The Journal of Finance · doi:10.2307/2329448
Is There Private Information in the FX Market? The Tokyo Experiment
Ito, T., Lyons, R., & Melvin, M. (1997) · doi:10.3386/w5936
Why is it so Difficult to Beat the Random Walk Rorecast of Exchange Rates?
Kilian, L., & Taylor, M. P. (2003) · doi:10.2139/ssrn.356266
Self-citationThe Long Memory of the Efficient Market
Lillo, F., & Farmer, J. D. (2004) · Studies in Nonlinear Dynamics & Econometrics · doi:10.2202/1558-3708.1226
‘WHITE‐NOISE’ IN IMPERFECT MARKETS: THE CASE OF THE FRANC/DOLLAR EXCHANGE RATE
Logue, D. E., & Sweeney, R. J. (1977) · The Journal of Finance · doi:10.1111/j.1540-6261.1977.tb01986.x
The Purchasing Power Parity Debate
Taylor, A., & Taylor, M. (2004) · doi:10.3386/w10607
Self-citation2. Exchange-Rate Behavior under Alternative Exchange-Rate Arrangements
Taylor, M. (1995) · Understanding Interdependence · doi:10.1515/9780691231136-005
Self-citation
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Cited by
Sorted by citations
Forecasting the Equity Risk Premium: The Role of Technical IndicatorsPreprint
Neely, C. J., Rapach, D. E., Tu, J., & Zhou, G. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.1568267 · Cited by 190 · see citing works
The Adaptive Markets Hypothesis: Evidence from the Foreign Exchange MarketPreprint
Neely, C. J., Weller, P. A., & Ulrich, J. M. (2006) · SSRN Electronic Journal · doi:10.2139/ssrn.922345 · Cited by 120 · see citing works
International Diversification Benefits with Foreign Exchange Investment Styles
Kroencke, T. A., Schindler, F., & Schrimpf, A. (2013) · European Finance Review · doi:10.1093/rof/rft047 · Cited by 102 · see citing works
“Menkhoff and Taylor (2007) and Pojarliev and Levich (2008) report evidence for the popularity of trend-following FX strategies among currency fund managers.”
Technical Analysis and Individual Investors
Hoffmann, A. O. I., & Shefrin, H. (2014) · Journal of Economic Behavior & Organization · doi:10.1016/j.jebo.2014.04.002 · Cited by 97 · see citing works
The Use of Predictive Analytics in Finance
Broby, D. (2022) · The Journal of Finance and Data Science · doi:10.1016/j.jfds.2022.05.003 · Cited by 116 · see citing works
Technical trading and cryptocurrencies
Hudson, R., & Urquhart, A. (2021) · Annals of Operations Research · doi:10.1007/s10479-019-03357-1 · Cited by 90 · see citing works
“Practitioners have been found to use technical analysis extensively, with Smith et al. (2016) showing that 21.6% of live hedge funds use technical analysis while Menkhoff (2007) reports that technical analysis is widespread in the foreign exchange market.”
InfluentialA General Financial Transaction Tax Motives, Revenues, Feasibility and EffectsPreprint
Schulmeister, S. (2010) · SSRN Electronic Journal · doi:10.2139/ssrn.1714395 · Cited by 81 · see citing works
Technical Trading Revisited: False Discoveries, Persistence Tests, and Transaction CostsPreprint
Bajgrowicz, P., & Olivier Scaillet, B. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.1095202 · Cited by 74 · see citing works
The interaction between technical currency trading and exchange rate fluctuations
Schulmeister, S. (2006) · Finance research letters · doi:10.1016/j.frl.2006.03.005 · Cited by 63 · see citing works
Components of the profitability of technical currency trading
Schulmeister, S. (2008) · Applied Financial Economics · doi:10.1080/09603100701335416 · Cited by 56 · see citing works
“…al. (2003) find this type of trading to be profitable, Curcio et al. (1997) and Neely and Weller (2003) arrive at the opposite result (excellent surveys of studies on technical analysis are Park and Irwin, 2004, for all asset markets, and Menkhoff and Taylor, 2006, for the foreign exchange market).”
ResultForecasting Government Bond Risk Premia Using Technical IndicatorsPreprint
Goh, J. C., Jiang, F., Tu, J., & Zhou, G. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.1914227 · Cited by 35 · see citing works
Lai, H.-W., Chen, C.-W., & Huang, C. (2010) · Emerging Markets Finance and Trade · doi:10.2753/ree1540-496x460502 · Cited by 30 · see citing works
“1 Nevertheless, despite the largely controversial findings throughout these academic studies, technical analysis still serves as the most common source of information for practitioners; indeed, Menkhoff and Taylor (2007) note that technical analysis remains a passionate obsession of many professionals in the foreign e…”
BackgroundInfluentialForecasting the Equity Risk Premium: The Role of Technical IndicatorsPreprint
Neely, C. J., Rapach, D. E., Tu, J., & Zhou, G. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.1787554 · Cited by 31 · see citing works
Prices, Debt and Market Structure in an Agent-Based Model of the Financial Market
Fischer, T., & Riedler, J. (2012) · Journal of Economic Dynamics and Control · doi:10.1016/j.jedc.2014.08.013 · Cited by 28 · see citing works
“The implied assumption that real traders choose and switch between these two strategies finds strong support in the literature (see e.g. Menkhoff and Taylor, 2007) and chartist-fundamentalist approaches figure among the most common agent-based financial market models (see e.g. Lux and Marchesi,…”
BackgroundTrader see, trader do: How do (small) FX traders react to large counterparties’ trades?
Menkhoff, L., & Schmeling, M. (2010) · Journal of International Money and Finance · doi:10.1016/j.jimonfin.2010.04.001 · Cited by 27 · see citing works
Self-citationMarket Microstructure, Foreign Exchange
Osler, C. L. (2009) · Encyclopedia of Complexity and Systems Science · doi:10.1007/978-0-387-30440-3_321 · Cited by 26 · see citing works
EXCHANGE-RATES FORECASTING: EXPONENTIAL SMOOTHING TECHNIQUES AND ARIMA MODELS
Dezsi, E., & Maria, F. C. (2011) · Annals of Faculty of Economics · Cited by 23 · see citing works
Components of the Profitability of Technical Currency TradingPreprint
Schulmeister, S. (2010) · SSRN Electronic Journal · doi:10.2139/ssrn.1714394 · Cited by 19 · see citing works
The Adaptive Markets Hypothesis: Evidence from the Foreign Exchange Market,
Neely, C. J., Ulrich, J. M., & Weller, P. A. (2006) · doi:10.20955/wp.2006.046 · Cited by 20 · see citing works
Predictive modeling of foreign exchange trading signals using machine learning techniques
Enkhbayar, S., & Ślepaczuk, R. (2025) · Expert Systems with Applications · doi:10.1016/j.eswa.2025.127729 · Cited by 16 · see citing works
Strategy Switching in the Japanese Stock Market
Yamamoto, R., & Hirata, H. (2012) · Journal of Economic Dynamics and Control · doi:10.1016/j.jedc.2013.05.006 · Cited by 16 · see citing works
Aggregate Trading Behaviour of Technical Models and the Yen/Dollar Exchange Rate 1976-2007Preprint
Schulmeister, S. (2010) · SSRN Electronic Journal · doi:10.2139/ssrn.1714341 · Cited by 15 · see citing works
Exchange Rate Dynamics in a Target Zone - A Heterogeneous Expectations ApproachPreprint
Bauer, C., GRAUWE, P. D., & Reitz, S. (2008) · SSRN Electronic Journal · doi:10.2139/ssrn.1157769 · Cited by 15 · see citing works
An Agent-Based Model for Designing a Financial Market That Works WellPreprint
Mizuta, T. (2019) · SSRN Electronic Journal · doi:10.2139/ssrn.3403461 · Cited by 15 · see citing works
Schulmeister, S. (2010) · SSRN Electronic Journal · doi:10.2139/ssrn.1705628 · Cited by 13 · see citing works
Saks, P., & Maringer, D. G. (2009) · Lecture notes in computer science · doi:10.1007/978-3-642-01129-0_20 · Cited by 12 · see citing works
MABROUK, N., CHIHAB, M., Hachkar, Z., & CHIHAB, Y. (2022) · International Journal of Advanced Computer Science and Applications · doi:10.14569/ijacsa.2022.0130369 · Cited by 10 · see citing works
“(i) technical analysis has existed since [11], this method is based on the use of historical data such as prices, trading volumes, and other data to predict price trends that are expected to persist in the future [12], [11].”
MethodRevisiting Purchasing Power Parity for Central and East European Countries
Su, C., & Chang, H. (2011) · Eastern European Economics · doi:10.2753/eee0012-8775490101 · Cited by 10 · see citing works
Capturing Order Book Dynamics in the Interbank EUR/PLN Spot Market
Bień‐Barkowska, K. (2014) · Emerging Markets Finance and Trade · doi:10.2753/ree1540-496x500105 · Cited by 10 · see citing works
“Menkhoff et al. (2011) and Menkhoff and Taylor (2007) each provide a survey of the literature on the profitability of trade-following strategies in currency markets.”
Hsu, P., & Taylor, M. (2014) · SSRN Electronic Journal · doi:10.2139/ssrn.2517125 · Cited by 10 · see citing works
“Moreover, even if the predictability and profitability of technical analysis exists with statistical significance for certain currencies at certain times, as some studies appear to show (Menkhoff and Taylor, 2007), a further question arises, namely why should technical analysis work in the foreign exchange market? Men…”
BackgroundResultInfluentialSelf-citationCurrency Momentum StrategiesPreprint
Menkhoff, L., Sarno, L., Schmeling, M., & Schrimpf, A. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.1773543 · Cited by 10 · see citing works
Self-citationExchange Rate Expectations of Chartists and FundamentalistsPreprint
Dick, C. D., & Menkhoff, L. (2012) · SSRN Electronic Journal · doi:10.2139/ssrn.2038396 · Cited by 9 · see citing works
“Finally, dealers say that that they use primarily charts at shorter horizons and rely more on fundamentals at longer horizons (Taylor and Allen, 1992), a robust result which also extends to fund managers (see survey by Menkhoff and Taylor, 2007).”
BackgroundMethodInfluentialSelf-citationTechnical analysis, spread trading, and data snooping control
Psaradellis, I., Laws, J., Pantelous, A. A., & Sermpinis, G. (2021) · International Journal of Forecasting · doi:10.1016/j.ijforecast.2021.10.002 · Cited by 8 · see citing works
Performance of Technical Trading Systems in the Yen/Dollar MarketPreprint
Schulmeister, S. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.1714397 · Cited by 8 · see citing works
Asset Price Fluctuations, Financial Crises and the Stabilizing Effects of a General Transaction TaxPreprint
Schulmeister, S. (2010) · SSRN Electronic Journal · doi:10.2139/ssrn.1714339 · Cited by 8 · see citing works
The out-of-sample performance of carry trades
Hsu, P., Taylor, M., Wang, Z., & Li, Y. (2024) · Journal of International Money and Finance · doi:10.1016/j.jimonfin.2024.103042 · Cited by 7 · see citing works
Self-citationProspect Theory and Currency Returns: Empirical EvidencePreprint
Xu, Q. L., Kozhan, R., & Taylor, M. (2020) · SSRN Electronic Journal · doi:10.2139/ssrn.3629061 · Cited by 6 · see citing works
Self-citationWealth Dynamics and a Bias Toward Momentum Trading
LeBaron, B. D. (2011) · Finance research letters · doi:10.1016/j.frl.2011.09.001 · Cited by 5 · see citing works
Campanella, E. (2010) · SSRN Electronic Journal · doi:10.2139/ssrn.1726750 · Cited by 5 · see citing works
“Pelizzari and Westerhoff (2007) show that transaction taxes are only effective under certain market structures, while they will not work under some other market structures.”
BackgroundTrading on Noise: Moving Average Trading Heuristics and Private InvestorsPreprint
Etheber, T., Hackethal, A., & Meyer, S. (2014) · SSRN Electronic Journal · doi:10.2139/ssrn.2520346 · Cited by 5 · see citing works
“Thus, when technical analysis actually helps to acquire relevant information (e.g., Brown and Jennings, 1989; Blume et al., 1994; Kavajecz and Odders-White, 2004), its usage is also very cost efficient (Menkhoff and Taylor, 2007).”
InfluentialThe Role of Hormones in Financial MarketsPreprint
Bose, S., Ladley, D., & Li, X. (2016) · SSRN Electronic Journal · doi:10.2139/ssrn.2743087 · Cited by 5 · see citing works
Trading Volume Effects of Moving Average HeuristicsPreprint
Etheber, T. (2014) · SSRN Electronic Journal · doi:10.2139/ssrn.2517005 · Cited by 5 · see citing works
Improving performance of exchange rate momentum strategy using volatility information
ZHUANG, C.-J. (2018) · Physica A Statistical Mechanics and its Applications · doi:10.1016/j.physa.2018.07.030 · Cited by 4 · see citing works
Statistical testing of DeMark technical indicators on commodity futures
Lissandrin, M., Daly, D., & Sornette, D. (2017) · The Journal of Investment Strategies · doi:10.21314/jois.2017.086 · Cited by 3 · see citing works
Jihad, A. G., & Ismail, A. M. (2022) · International Journal of Health Sciences · doi:10.53730/ijhs.v6ns6.9726 · Cited by 3 · see citing works
“Where the research community consisted of (25) Iraqi private commercial banks, while the research sample consisted of (5) banks with a rate of (20%) of the research community.”
BackgroundMethodThreshold effects in purchasing power parity for African Countries
Shao, Y., Liu, Nan, M., Zhu, Wei, C., & Su (2011) · AFRICAN JOURNAL OF BUSINESS MANAGEMENT · doi:10.5897/ajbm10.387 · Cited by 2 · see citing works
Individual Exchange Rate Forecasts and Expected FundamentalsPreprint
Dick, C. D., MacDonald, R. R., & Menkhoff, L. (2012) · SSRN Electronic Journal · doi:10.2139/ssrn.1981877 · Cited by 2 · see citing works
“Finally, market participants do not only use fundamentals but also non-fundamentals as information in their decision making (Menkhoff and Taylor, 2007).”
Self-citationTaylor, M., & Reitz, S. (2008) · SSRN Electronic Journal · doi:10.2139/ssrn.1157679 · Cited by 2 · see citing works
Self-citationThe Impact of Financial Market Volatility on Investments in China and Southeast Asia
Xu, J. (2023) · Frontiers in Business Economics and Management · doi:10.54097/fbem.v10i3.11458 · Cited by 1 · see citing works
“Menkhoff and Taylor (2007) study how foreign exchange market investors use technical analysis tools to adapt to market volatility.”
BackgroundInvestment Strategy and Risk Management
Suryadi, I. G. I., Yasa, I. K., & Prayustika, P. A. (2021) · European Journal of Business and Management · doi:10.7176/ejbm/13-10-14 · Cited by 1 · see citing works
Espinosa‐Méndez, C., & Gorigoitía, J. (2014) · El Trimestre Económico · doi:10.20430/ete.v81i323.124 · Cited by 1 · see citing works
Estimating the portion of technical analysts in a market
Cook, J. A. (2017) · Applied Economics · doi:10.1080/00036846.2016.1276274 · Cited by 1 · see citing works
“Reviews of this literature are available in Park and Irwin (2007) and Menkhoff and Taylor (2007).”
Machine learning based forecasting of significant daily returns in foreign exchange markets
Kamalov, F., & Gurrib, I. (2021) · International Journal of Business Intelligence and Data Mining · doi:10.1504/ijbidm.2022.10043208 · Cited by 1 · see citing works
“While opposing views exist as to the success of technical analysis trading in foreign exchange markets, the survey in [29] found substantial evidence of excess return when using technical indicators.”
BackgroundRANDOM STRATEGY VERSUS TECHNICAL ANALYSIS STRATEGY IN THE US MARKET
Svoboda, M., & Sponerová, M. (2020) · International Scientific Conference ITEMA. Recent Advances in Information Technology, Tourism, Economics, Management and Agriculture · doi:10.31410/itema.2020.121 · Cited by 1 · see citing works
“A study by Sager and Taylor, 2006, Menkhoff and Taylor, 2007 examines the efficiency of the foreign exchange market with respect to small investors influencing the market.”
BackgroundMethodMarket Ecologies: The Interaction and Profitability of Technical Trading StrategiesPreprint
Jackson, A., & Ladley, D. (2012) · SSRN Electronic Journal · doi:10.2139/ssrn.2188917 · Cited by 1 · see citing works
“Menkhoff and Taylor (2007) discuss the method in which a long position is taken upon a short period moving average crossing a long period moving average from below, and a short position when the short period moving average crosses the long period from above.”
InfluentialThe Role of Technical Analysis in Retail Investor TradingPreprint
Fritz, F., & Weinhardt, C. (2015) · SSRN Electronic Journal · doi:10.2139/ssrn.2734884 · Cited by 1 · see citing works
“For example Flanegin and Rudd (2005), Menkhoff and Taylor (2007), and Menkhoff (2010) show that fund managers and professional traders believe that TA has some relevance in financial markets.”
BackgroundLessons from the Evolution of Foreign Exchange Trading Strategies,
Neely, C. J., & Weller, P. A. (2011) · doi:10.20955/wp.2011.021 · Cited by 1 · see citing works
Expectations in financial markets
Jongen, R. (2007) · doi:10.26481/dis.20071206rj
The Coordination Channel of Foreign Exchange Intervention: The Australian CasePreprint
Taylor, M., Ruelke, J. C., & Reitz, S. (2008) · SSRN Electronic Journal · doi:10.2139/ssrn.1157784
Self-citationEconomic foundations of technical analysis
Wang, W. (2013) · doi:10.32657/10356/55293
“According to Menkho¤ and Taylor (2007), technical analysis is as important as fundamental analysis for short term predictions and trading decisions.”
BackgroundResultTechnical Analysis Phenomenon in the Light of Agent-Based Modeling
Kubińska, E. A., & Wira, T. (2017) · Annales Universitatis Mariae Curie-Skłodowska sectio H Oeconomia · doi:10.17951/h.2016.50.4.279
Heterogeneous expectations and housing market
Huang, Z. (2017) · doi:10.32657/10356/72318
Chan, J. (2019) · Springer eBooks · doi:10.1007/978-981-13-9945-9_3
al., N. K. E. A. N. K. E., & TJPRC (2020) · International journal of mechanical and production engineering research and development · doi:10.24247/ijmperdjun2020471
Lessons from the Evolution of Foreign Exchange Trading StrategiesPreprint
Neely, C. J., & Weller, P. A. (2012) · SSRN Electronic Journal · doi:10.2139/ssrn.1932844
Speculative dynamical systems: How technical trading rules determine price dynamics
Wang, L.-X. (2014) · IEEE Symposium on Computational Intelligence in Control and Automation (CICA) · doi:10.1109/cica.2014.7013230
Should Ethical Traders Employ Technical Analysis?Preprint
Urquhart, A., & Zhang, H. (2018) · SSRN Electronic Journal · doi:10.2139/ssrn.3200440
Technical Indicators and Realized Volatility: What is the Source of Predictability?Preprint
Souropanis, I., & Vivian, A. J. (2020) · SSRN Electronic Journal · doi:10.2139/ssrn.3701590
Information content of order flows in the FX market: importance of nonfundamental factors
Hammami, Y., & Kharrat, S. (2021) · Managerial Finance · doi:10.1108/mf-07-2020-0376
Peer Review #1 of "Using algorithmic trading to analyze short term profitability of Bitcoin (v0.2)"
(2021) · PeerJ Computer Science · doi:10.7287/peerj-cs.337v0.2/reviews/1
“Despite the debate in the literature questioning the effectiveness of technical analysis,70 there is a plethora of research work based on technical analysis (Coakley et al., 2016; Hsu et al., 2010;71 Menkhoff and Taylor, 2007).”
BackgroundJihad, A. G., & Ismael, A. M. (2023) · Journal of Techniques · doi:10.51173/jt.v5i2.1144
Statistica Afacerilor: Aplicaţii, partea a șaptea (Business Statistics: Exercises, Part 7)Preprint
Ştefanescu, R., & Dumitriu, R. (2023) · SSRN Electronic Journal · doi:10.2139/ssrn.4528392
Filippou, I., Hsu, P., Ma, T., Sermpinis, G., & Taylor, M. (2024) · SSRN Electronic Journal · doi:10.2139/ssrn.4716505
Self-citationAgah, S. A., Varjani, A. Y., Boroujeni, F. Z., & Yazdani, S. (2025) · SSRN Electronic Journal · doi:10.2139/ssrn.5245961
- Authors
- Menkhoff, L., & Taylor, M. P.
- Affiliations
- Leibniz University Hannover (DE)
- Venue
- Journal of Economic Literature
- Publisher
- American Economic Association
- Published
- 2007-11-01
- Volume
- 45
- Issue
- 4
- Pages
- 936-972
- ISSN
- 0022-0515 (ISSN-L)
- OpenAlex
- W1588551349
- Cited by
- 78
- References
- 108
- Citations by year
- 2025: 2 · 2024: 2 · 2023: 3 · 2022: 3 · 2021: 8 · 2020: 4 · 2019: 4 · 2018: 2 · 2017: 4 · 2016: 1 · 2015: 1 · 2014: 7 · 2013: 2 · 2012: 6
- FWCI
- 8.87
- Type
- journal article
- Language
- en
- Open access
- green
- ageconsearch.umn.edu
- Licence
- cc-by-nc-nd
- Locations
- Journal of Economic Literature (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- AgEcon Search (University of Minnesota, USA) (submittedVersion, cc-by-nc-nd)
- Econstor (Econstor) (submittedVersion)
- AgEcon Search (University of Minnesota, USA)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
- Social Sciences › Decision Sciences › Management Science and Operations Research › Stock Market Forecasting Methods
- Social Sciences › Economics, Econometrics and Finance › Finance › Financial Risk and Volatility Modeling
- Keywords
- technical analysis, foreign exchange market, asset price prediction, market efficiency, behavioral finance, official intervention, information processing, stylized facts
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