Performance of Technical Trading Rules: Evidence from the Crude Oil Market

The European Journal of Finance, Volume 25, Issue 17, pp. 1793-1815, September 2019, DOI: 10.1080/1351847X.2018.1552172 (Previously, it was entitled "Technical Trading, False Discoveries and Familywise Errors: The Case of Crude Oil")

54 Pages Posted: 31 Aug 2016 Last revised: 24 Sep 2019

See all articles by Ioannis Psaradellis

Ioannis Psaradellis

University of St Andrews School of Economics and Finance

Jason Laws

University of Liverpool - Accounting and Finance Division

Athanasios A. Pantelous

Monash University - Department of Econometrics & Business Statistics

Georgios Sermpinis

University of Glasgow

Date Written: December 5, 2018

Abstract

This study investigates the debatable success of technical trading rules, through the years, on the trending energy market of crude oil. In particular, the large universe of 7846 trading rules proposed by Sullivan et al. (1999), divided into five families (filter rules, moving averages, support and resistance rules, channel breakouts, and on-balance volume averages), is applied to the daily prices of West Texas Intermediate (WTI) light, sweet crude oil futures as well as the United States Oil (USO) fund, from 2006 onwards. We employ the k-familywise error rate (k-FWER) and false discovery rate (FDR) techniques proposed by Romano and Wolf (2007) and Bajgrowicz and Scaillet (2012) respectively, accounting for data snooping in order to identify significantly profitable trading strategies. Our findings explain that there is no persistent nature in rules performance, contrary to the in-sample outstanding results, although tiny profits can be achieved in some periods. Overall, our results seem to be in favor of interim market inefficiencies.

Keywords: Crude Oil; Technical Trading; Data Snooping; Transaction Costs; Persistence; Market Efficiency

JEL Classification: C12, C15, G11, G14

Suggested Citation

Psaradellis, Ioannis and Laws, Jason and Pantelous, Athanasios A. and Sermpinis, Georgios, Performance of Technical Trading Rules: Evidence from the Crude Oil Market (December 5, 2018). The European Journal of Finance, Volume 25, Issue 17, pp. 1793-1815, September 2019, DOI: 10.1080/1351847X.2018.1552172 (Previously, it was entitled "Technical Trading, False Discoveries and Familywise Errors: The Case of Crude Oil"). Available at SSRN: https://ssrn.com/abstract=2832600 or http://dx.doi.org/10.2139/ssrn.2832600

Ioannis Psaradellis

University of St Andrews School of Economics and Finance ( email )

Castlecliffe, The Scores
St Andrews, KY16 9AR
United Kingdom

Jason Laws

University of Liverpool - Accounting and Finance Division ( email )

United Kingdom

Athanasios A. Pantelous (Contact Author)

Monash University - Department of Econometrics & Business Statistics ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Georgios Sermpinis

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

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