Does the efficient market theory apply on the FOREX market? - Essay Example

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Does the efficient market theory apply on the FOREX market?

The aim of this discussion is to decide whether the efficient market hypothesis is applicable to the foreign exchange market or not. We will try to analyze a small portion from the history of the price fluctuations of the US Dollar Vs the Euro. We will see how the figures react against the technical analysis. We will test their validity and present our conclusion. My reason for choosing this topic is the huge appeal in the foreign exchange market. The greatest portion of finance is in the foreign exchange by volume. The reason for this trade’s usefulness is that every trade of goods, stocks, bonds, gold silver and the like is done through currency and there comes the conversion process. That is why it is so prevalent that to escape the ups and downs of the foreign exchange becomes impossible. The other rationale is that I’m interested in both the fundamental and technical analysis. I believe in the perfect fusion of the both. One important thing for the efficient market hypothesis to be effective is the assumptions, which serve as the rationale for it. One of the assumptions is that a large number of market participants are constantly analyzing the stocks and bonds. They do it on their own, independent of each other. This gives a more subtle and objective evaluation of the security. ...Show more

Summary

The efficient market hypothesis is applicable to the foreign exchange market. The technical analysis is based on the price movement of the stock. Any company with a transparent history of the stock trade is potential candidate for technical analysis. Consider two people who are studying a company. …
Author : mparker
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