Currency Orders and Exchange-Rate Dynamics: Explaining the Success of Technical Analysis

Abstract

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Extended evidence on the use of technical analysis in foreign exchange

“…models, too (see, e.g. Allen and Taylor, 1990;Chang and Osler, 1999;Fiess and MacDonald, 2002;Osler, 2000Osler, , 2003. Further in-depth analyses confirm the earlier finding of a complementary use of technical analysis even for a world where flows matter besides fundamentals and charts.…”

The market microstructure approach to foreign exchange: Looking back and looking forward

“…These predictions have been substantiated for support and resistance levels distributed to customers by major market players (Osler 2000). As outlined in Osler (2003), this highly non-linear behavior follows logically when one combines the influence of order flow on returns with the asymmetric clustering of stop-loss and take-profit orders near round numbers.…”

Micro Approaches to Foreign Exchange Determination

“…Unfortunately, this does not appear to always be the case. Osler (2003) found that stop-loss buy orders are more strongly clustered above than below trigger points with round numbers, and the opposite is true for stop-loss sell orders. This means that estimates of order flow derived from portfolio holdings may be less accurate when the spot rate is the neighborhood a trigger point with round numbers.…”