FOREIGN EXCHANGE PROFITS FROM TECHNICAL ANALYSIS

Abstract

The proliferation of internet based trading sites has increased the ordinary citizen’s access to international financial markets. Several of these sites recommend technical trading methods such as the moving average for successful trading. While aspects of efficiency of foreign exchange markets have received extensive attention in the literature in recent years, especially with regard to technical trading, few research papers have been written on the South African Rand. This report applied the moving average trading rule to the Rand / Dollar exchange rate from 1995 to 2001 to examine if abnormal returns were possible. The results demonstrated that the yield on the South African government bond, the R150 out-performed the trading rule and that the returns achieved by using the trading rule were not abnormal