Does Technical Analysis Beat the Market? – Evidence from High Frequency Trading in Gold and Silver

Abstract

Previous research has identified that investors place more emphasis on technical analysis than fundamental analysis, however the research has largely been confined to daily data and stock market indices. This paper studies whether intraday technical trading rules produce significant payoffs in the gold and silver market using three popular moving average rules. We find that using the standard parameters previously used in the literature, technical trading rules offer are not profitable. However after utilising a universe of parameters, we find a number of parameter combinations offer significant profits in the gold market, but there remains no significant payoff in the silver market. Our results show that parameters that use longer histories are more successful than the traditional parameters chosen in the literature. Intraday technical trading rules can be profitable in the gold market but offer no significant profit in the silver market.