The aim of this paper is to determine the potential profitability of technical analysis applied on the foreign exchange market. Eight simple rules are tested in five markets. Only long positions are tracked and reported. When neither commissions nor indexation are included in the analysis, some investment strategies outperform the index. There is little evidence that these excess returns are compensation for bearing excessive risk.
However, the most of these strategies require too many transactions and produces only marginal returns. In that sense, when commissions and indexation are introduced, it is concluded that only an investor with the ability to get very low or null commissions and taxes would benefit.
Prof. F. Rubio