Order Flow, Volatility and Fuzzy Logic: Technical Analyses for Currency Trading

53 Pages Posted: 4 Jun 2017  

Vincent Kleinbrod

affiliation not provided to SSRN

Xiaoming Li

Massey University - School of Economics and Finance (Albany)

Date Written: May 15, 2017

Abstract

This paper proposes a multivariate fuzzy logic approach to boosting the profitability of technical analysis for currency trading. The approach incorporates information on underlying market volatility in addition to order-flow-based exchange-rate return forecasts. We show the superiority of our approach by comparing it with the performances of various strategies such as simple trading rules and neural-fuzzy-logic trading rules proposed in the literature. Our approach yields consistently and remarkably higher Sharpe ratios for all the three major and all the three commodity exchange rates investigated. The results provide currency traders with a useful guide to conceiving profitable trading strategies.

Keywords: Order flow; Volatility; Multivariate fuzzy logic; Neuro fuzzy logic; Technical analysis; Currency trading

JEL Classification: F31; G14; C45; C52; C53

Suggested Citation

Kleinbrod, Vincent and Li, Xiaoming, Order Flow, Volatility and Fuzzy Logic: Technical Analyses for Currency Trading (May 15, 2017). Available at SSRN: https://ssrn.com/abstract=2976558

Vincent Kleinbrod

affiliation not provided to SSRN

Xiaoming Li (Contact Author)

Massey University - School of Economics and Finance (Albany) ( email )

Private Bag 102904
North Shore
Auckland, 0745
New Zealand
+64 9 4140800 ext. 43177 (Phone)
+64 9 441 8177 (Fax)

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