Chapter 1 Technical trading rules and regime shifts in foreign exchange

BLAKE. LEBARON

1.1 INTRODUCTION

Techniques for using past prices to forecast future prices have a long and colourful history. Since the introduction of floating rates in 1973, the foreign exchange market has become another potential target for ‘technical’ analysts who attempt to predict potential trends in pricing using a vast repertoire of tools with colourful names such as channels, tumbles, steps and stumbles. These market technicians have generally been discredited in the academic literature since their methods are sometimes difficult to put to rigorous tests. This chapter attempts to settle some of these discrepancies through the use of bootstrapping techniques. ...

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