Technically Trading The Yen With Money
By Timothy L. Krebiel, Thomas P. Drinka, Gisele F. Hamm
Any good trading methodology includes selecting the best indicators for a tradeable and applying money
management techniques to hold on to profits. In the April 1990 STOCKS & COMMODITIES, 34 indicators
were tested for profitability. Here, Timothy Krehbiel, Thomas Drinka and Gisele Hamm take the
indicator that was found to be most profitable and combine it with different money management
techniques to statistically test for profitability. First, the indicator and money management strategy was
optimized over one year's worth of data. Then the strategy was tested for the following quarter. Next, the
simulator moved everything up one quarter and repeated the process. The goal of the study was to
determine if money management strategies could enhance the profitability of optimized trading strategies.
Speculators and commercial hedgers who trade currency futures often use technical analysis to
determine trading signals. Previously, we reported on the profitability of 34 technical indicators used to
simulate trading of the International Money Market (IMM) yen futures contract; some of these indicators
exploited price trends, while others exploited price volatility.
This time, we report on the results of a second study that builds on the results of the speculation study
only. For this study, we selected the technical indicator that appeared to be the most profitable in the
previous study and used it with various money management strategies to assess the impact of these
strategies on profitability.