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Essays on Exchange Rates Deterministic Chaos and Technical Analysis

3.1.2 Momentum lines

Another, but less common, trading rule used by chartists is the momentum line rule (Taylor and Allen, 1992).

According to this trading rule, a buy signal is generated when the current rate of change begins to increase relative to the rate of change n days ago. A sell signal is otherwise generated."

In its simplest form, n = 0, which means that a buy signal is generated when the current rate of change begins to increase.

Prof. Mikael Bask

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