In this project, quant analyst Urs Hiegemann, Veronica Larsson, and Jie Yang investigate the double tops and bottoms pattern and trading strategies in the forex market. The analysis was done on exchange rates of seven currency pairs minute-data ranging between 2017 and 2020.
Double tops and double bottoms are well-known patterns within technical analysis used to predict future price movements. Double tops indicate a bearish market and double bottoms indicate a bullish market. By going long in when double bottoms occur, and going short when double tops occur, one is expected to gain excess return.
We found contradictory results when we applied our five trading strategies to the double top and double bottom pattern. Double bottoms in particular performed poorly, and one could suggest to turn the logic around, as this would imply positive returns. In addition, we found some significant abnormal performance on Friday and Monday.
To read the full report, please see attached PDF below: