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Are simple technical trading rules profitable in bitcoin markets?

Author

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  • Deprez, Niek
  • Frömmel, Michael

Abstract

This paper examines the profitability of simple technical trading rules in bitcoin markets comprehensively, by taking into account realistic investor behaviour and transaction costs, and data mining problems. Realistic investor behaviour is replicated by first employing 75,360 simple technical trading rules, divided over 6 commonly used trading rule classes and daily and intraday frequencies. Next, we select the best performing rules after transaction costs using a multiple hypothesis procedure. Finally, we form portfolios combining the selected rules and analyse their out-of-sample performance. We find that, especially risk–return wise, simple technical trading rules can outperform a buy-and-hold strategy in the bitcoin market out-of-sample.

Suggested Citation

  • Deprez, Niek & Frömmel, Michael, 2024. "Are simple technical trading rules profitable in bitcoin markets?," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 858-874.
    • Handle: RePEc:eee:reveco:v:93:y:2024:i:pb:p:858-874
    DOI: 10.1016/j.iref.2024.05.003
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    More about this item

    Keywords

    Bitcoin; Technical analysis; False discovery rate; Intraday;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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