Verification of Technical Analysis Rules using Matlab

Abstract

In this thesis, we verify technical analysis based on the historical trading data of EUR/USD currency pair and the historical trading data of the stock of Alibaba Group Holding Ltd. Technical analysis is the study of prices in freely traded markets with the intent of making profitable trading or investment decisions. The main instruments which are used in technical analysis are charts, indicators and trading rules. In this thesis, we make the verification of technical analysis based on three types of indicators, they are Moving Average (MA), Bollinger Bands and Relative Strength Index (RSI). In our verification, we find that technical analysis helps a lot if we choose the suitable tools like technical indicators during the trading, however, if we wish to increase the possibility to make profit, we should also consider the fundamental analysis and psychological analysis, the combination of these three analytical methods can help investors to make profitable decisions in their financial activities.

In this thesis, we verify technical analysis based on the historical trading data of EUR/USD currency pair and the historical trading data of the stock of Alibaba Group Holding Ltd. Technical analysis is the study of prices in freely traded markets with the intent of making profitable trading or investment decisions. The main instruments which are used in technical analysis are charts, indicators and trading rules. In this thesis, we make the verification of technical analysis based on three types of indicators, they are Moving Average (MA), Bollinger Bands and Relative Strength Index (RSI). In our verification, we find that technical analysis helps a lot if we choose the suitable tools like technical indicators during the trading, however, if we wish to increase the possibility to make profit, we should also consider the fundamental analysis and psychological analysis, the combination of these three analytical methods can help investors to make profitable decisions in their financial activities.