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Can technical oscillators outperform the buy and hold strategy?

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  • Gil Cohen
  • Elinor Cabiri

Abstract

This study compares returns from the traditional buy and hold (B&H) strategy to well-known technical oscillators applied to diverse indices leading the global market (DJI, FTSE, NK225 and TA100) during the period 2007-2012. Our aim was to establish whether technical tools can consistently achieve returns exceeding those of the B&H strategy across various financial markets. We found the relative strength index (RSI) to be the best oscillator, outperforming the DJIA, the FTSE100 and the NK225 for five of the six years examined. The only index that did better than the RSI was TA100, which outperformed all the examined oscillators. In second place was the moving average convergence/divergence (MACD) oscillator, which outperformed the NK225 B&H strategy and came in second for TA100. The results show that during bear markets the RSI and MACD generally produce better gains than the indices, while the opposite occurs during bull markets.

Suggested Citation

  • Gil Cohen & Elinor Cabiri, 2015. "Can technical oscillators outperform the buy and hold strategy?," Applied Economics, Taylor & Francis Journals, vol. 47(30), pages 3189-3197, June.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:30:p:3189-3197
    DOI: 10.1080/00036846.2015.1013609
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    Cited by:

    1. Piekunko-Mantiuk Iwona, 2019. "Parameterized Trade on the Futures Market on the WIG20," Folia Oeconomica Stetinensia, Sciendo, vol. 19(1), pages 114-125, June.
    2. Po-Keng Cheng, 2020. "Listen to the Signals from an Interactive Agent-Based Model," Working Papers hal-02982908, HAL.
    3. Umar, Muhammad & Ji, Xiangfeng & Mirza, Nawazish & Li, Haiping, 2022. "Crypto swings and the performance of carbon-intensive equity funds in China," Resources Policy, Elsevier, vol. 78(C).

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