Technical Trading Techniques with Statistical Profitability Back-Testing Analysis

Technical analysis is a category of securities trading that utilizes mathematical formulas in order to signal buying and selling points. This paper will evaluate the profitability of various technical methods over a five-year period starting January 1, 2003, with securities in the Dow Jones Industrial Average (DJIA). The technical strategies evaluated in this paper will be explained conceptually as well. Computer software will be used to complete the actual back testing. Computer back testing will be used via TD Ameritrade’s StrategyDesk trading platform software. The back testing will utilize a base value of $100,000 per trade, neglecting trading transaction fees and short-term capital gains taxes. The results section of the paper will evaluate each method on a statistical and profitability basis as compared to a “buy and hold” strategy.