Theoretical Properties of Technical Range and Its Applications
Haibin Xie, Guohua Zou and Shouyang Wang*
Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, China
- *Corresponding Author:
- Shouyang Wang
Academy of Mathematics and Systems Science
Chinese Academy of Sciences, Beijing, China
E-mail: [email protected]
Received Date: May 18, 2012; Accepted Date: August 30, 2012; Published Date: September 02, 2012
Citation: Xie H, Zou G, Wang S (2012) Theoretical Properties of Technical Range and Its Applications. J Stock Forex Trad 1:103. doi: 10.4172/2168-9458.1000103
Copyright: © 2012 Xie H, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
As a technical indicator, technical range is widely used by chartists to read the minds of the markets. Theoretical properties and applications of this technical indicator would be of great interest to both academics and chartists. The main findings of this paper are: (1) technical range is a unit root process; (2) technical range is co-integrated with closing prices; (3) technical ranges are co-integrated if the corresponding closing prices are co-integrated. These findings are of great significance as it indicates that it is possible to scrutinize the predictive power of technical indicators by co-integration analysis. An empirical study performed on the US Apple Inc. stock prices demonstrates that trading strategy based on these findings could beat the simple buy-and-hold even after the trading costs have been removed.