In this paper, the analysts Joachim Nilsson, Michal Nowak and Victor Tiet explore a pattern in technical analysis referred to as a breakout. A breakout occurs when the price of an underlying asset breaks through a price barrier that has been formed during a consolidation period. This period is characterized by market indecisiveness causing the price of the asset to move between two price barriers, the support and resistance.
Real consolidation periods were identified from historical FX data using custom algorithms and were later subjected to a simple trading strategy, with an adjustable price target.
In the investigation, different types of data were collected from the trades and further analyzed. The goal was to identify potential bias in the market which could be utilized in the process of creating an optimal trading strategy.
It was found that by setting the target price a relatively long distance from the breakout price a substantial profit could be made. Some market bias was also identified. More on this is covered in the report.
To read the full report, please see attached PDF below:
