Currency orders and exchange-rate dynamics
Subtitle: explaining the success of technical analysis
By: Carol L. Osler.
Contributors: Federal Reserve Bank of New York.
Series: Staff reports ;; no. 125; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 125.
Publisher: Federal Reserve Bank of New York
Published: 2001
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Description: "This paper provides a microstructural explanation for the success of two familiar predictions from technical analysis: (1) trends tend to be reversed at predictable support and resistance levels, and (2) trends gain momentum once predictable support and resistance levels are crossed.  The explanation is based on a close examination of stop-loss and take-profit orders at a large foreign exchange dealing bank.  Take-profit orders tend to reflect price trends, and stop-loss orders tend to intensify trends.  The requested execution rates of theseorders are strongly clustered at round numbers, which are often used as support and resistance levels.  Significantly, there are marked differences between the clustering patterns of stop-loss and take-profit orders, and between the patterns of stop-loss buy and stop-loss sell orders.  These differences explain the success of the two predictions"--Federal Reserve Bank of New York web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 2/22/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.