Profitability of Candlestick Charting Patterns in the Stock Exchange of Thailand

Bibliographic Data

ID3435192
AuthorsPiyapas Tharavanij (0000-0001-5152-4865, Mahidol University, corresponding author), Vasan Siraprapasiri (Mahidol University), Kittichai Rajchamaha (0000-0003-2156-7930, Mahidol University)
Year2017
Volume7
Issue4
Publication date2017-10-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueSAGE Open (JOURNAL)
Journal identifiersISSN: 2158-2440 • E-ISSN: 2158-2440
PublisherSAGE Publications Inc (PUBLISHER)
DOI10.1177/2158244017736799
OpenAlexW2765311804
LanguageEN
Citations received18
References cited22

This article investigates the profitability of candlestick patterns. The holding periods are 1, 3, 5, and 10 days. Two exit strategies are studied. One is the Marshall-Young-Rose (MYR) exit strategy and the other is the Caginalp-Laurent (CL) exit strategy. The MYR applies a prespecified date to exit the market. In contrast, the CL sets an exit price equal to an average holding period closing price, assuming that investors liquidate their positions evenly within this period. The daily data include open, high, low, and close prices of component stocks of the SET50 index (the 50 largest capitalization stocks in the Stock Exchange of Thailand [SET]) for a 10-year period from July 3, 2006, to June 30, 2016. This study tests the predictive power of bullish and bearish candlestick reversal patterns both without technical filtering and with technical filtering (Stochastics [%D], Relative Strength Index [RSI], Money Flow Index [MFI]) by applying the skewness adjusted t test and the binomial test. The statistical analysis finds little use of both bullish and bearish candlestick reversal patterns since the mean returns of most patterns are not statistically different from zero. Even the ones with statistically significant returns do have high risks in terms of standard deviations. The binomial test results also indicate that candlestick patterns cannot reliably predict market directions. In addition, this article finds that filtering by %D, RSI, or MFI generally does not increase profitability nor prediction accuracy of candlestick patterns

Econometrics · Economics · Financial economics · Geography · Profitability index · Skewness · Statistics · Stock exchange · Stock market · Stock market index · Technical analysis · Complex Systems and Time Series Analysis · Computer Science · Financial Markets and Investment Strategies · Mathematics · Stock Market Forecasting Methods · Finance

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