Abstract
M.Comm.
The Johannesburg Stock Exchange provides an opportunity for investors to realise
huge returns. A variety of tools are used by these investors to invest capital in shares
for growth in excess of the market movement. Technical analysis is one of the techniques claimed by some parties to be the key aspect in investment decision making. A trading system can be derived from technical indicators to provide the investor with buying and selling signals. It is the objective of this investigation to make a judgement on the effectiveness of a few technical trading systems based on performance relative to the normal market movement.
The trading systems under investigation are the basic moving average system,
multiple moving average crossing system, real strength indicator system, multiple
moving average convergence-divergence trading system, moving average chord
system and the market momentum system. The results show that these trading systems all performed worse than the normal market movement on the 95% statistical confidence interval. It is therefore concluded that the use of technical analysis in isolation will not insure a good investment decision on the Johannesburg Stock Exchange.