The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis
Read the paperopens doi.org in a new tab
What they found
A survey of why professional currency traders keep using technical analysis despite academic skepticism. The authors review questionnaire evidence showing that almost all FX professionals use technical analysis, especially for short horizons, and review the empirical studies of technical rule profitability in currencies, which were positive through the 1980s and declined afterward. They argue technical analysis persists in FX because it helps process the information in order flow and because non-fundamental influences on exchange rates are real.
What you can use
- Technical analysis is close to universal among professional FX traders, and they use it most at horizons of days to weeks.
- Technical rule profits in currencies were real historically but have declined as markets deepened.
- The most defensible use of technical analysis is as a way of reading order flow and crowd positioning.
Caveats
A literature review with heavy reliance on surveys of what traders say they do. Coverage ends in the mid-2000s.
Tags: technical-analysis, forex, survey, professionals
Summaries are our own reading of the paper, not the authors' words. Educational only, not advice. Discuss it in Book Club.