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Technical Trading

Does technical trading work, or not? Rationalists dismiss it; behavioralists investigate it. Is there any verdict? These blog entries relate to technical trading.

Technically, It Pays to Think Small

In a March 2005 update of his paper entitled “Simple Technical Trading Strategies: Returns, Risk and Size”, Satyajit Chandrashekar investigates the effectiveness of simple moving average technical trading strategies across ten market capitalization size deciles for the period 1963-2002. He finds that: Keep Reading

Information-Based Trading

Anyone attempting or contemplating day-trading should take a look at “Information-based Trading, Price Impact of Trades, and Trade Autocorrelation” of May 2004 by Kee Chung, Mingsheng Li and Thomas McInish. The authors examine how the price impact of trades and the persistence of trading direction relate to the probability of information-based trading, as opposed to liquidity trading (for example, by market makers) or noise trading (by the uninformed). Here’s what they find: Keep Reading

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