The use of technical analysis in the foreign exchange market

Taylor, Mark P.; Allen, Helen

doi:10.1016/0261-5606(92)90048-3

Cited by 836 publications

(527 citation statements)

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“…The results of the survey were striking, with two per cent of the respondents reported never to use fundamental analysis in forming their exchange rate expectations, while 90 per cent reported placing some weight on technical analysis at the intraday to one week horizon. At longer time horizons, however, Taylor and Allen (1992) found that the importance of chartism became less pronounced.…”

Section: Introductionmentioning

confidence: 92%

“…Dornbusch (1976), however, disregard from the fact that a large proportion of chief foreign exchange dealers also use other tools than macroeconomic analysis in their currency trade. In November 1988, Taylor and Allen (1992) conducted a questionnaire survey for the Bank of England on the foreign exchange market in London. The survey covered 353 banks and …nancial institutions, with a response rate of over 60 per cent, and was among the …rst to ask speci…cally about the use of technical analysis, or chartism, among chief foreign exchange dealers.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Chartism and exchange rate volatility

Bask

2007

Int. J Fin Econ

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The purpose of this paper is to implement theoretically, the observation that the relative importance of fundamental versus technical analysis in the foreign exchange market depends on the time horizon in currency trade. For shorter time horizons, more weight is placed on technical analysis, while more weight is placed on fundamental analysis for longer horizons. The theoretical framework is the Dornbusch (1976) overshooting model, where moving averages is the technical trading technique used by the chartists. The perfect foresight path near long-run equilibrium is derived, and it is shown that the magnitude of exchange rate overshooting is larger than in the Dornbusch (1976) model. Specifically, the extent of overshooting depends inversely on the time horizon in currency trade. How changes in the model's structural parameters endogenously affect this time horizon and the magnitude of exchange rate overshooting along the perfect foresight path are also derived. JEL Classification: F31, F41

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Section: Introductionmentioning

confidence: 92%

Section: Introductionmentioning

confidence: 99%

Chartism and exchange rate volatility

Bask

2007

Int. J Fin Econ

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show abstract

“…To this end, both quantitative and qualitative surveys have been conducted. Taylor and Allen (1992) show, based on a questionnaire survey, that 90% of the foreign exchange dealers based in London use some form of technical analysis in forming expectations about future exchange rates, particularly for short-term horizons. The foreign exchange dealers further stated that they see fundamental and technical analyses as complementary strategies for making forecasts and that technical analysis can serve as a self-fulfilling mechanism.…”

Section: Supporting Evidence On the Micro Levelmentioning

confidence: 99%

Heterogeneous Beliefs and Asset Price Dynamics: A Survey of Recent Evidence

Ellen¹,

Verschoor

2017

SSRN Journal

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“…Nonetheless, about 30 to 40 percent of practitioners appear to believe that technical analysis is important in determining price movements in shorter time horizons which last up to six months 1 . Taylor and Allen [1992], based on a survey among foreign exchange dealers in London, found that at least 90 per cent of respondents place some weight on technical analysis. In addition, the results of this survey revealed preference for technical, rather than fundamental, analysis at shorter time horizons.…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%