Publication: Profitability of candlestick charting patterns in the stock exchange of Thailand
Issued Date
2017-10-01
Resource Type
ISSN
21582440
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2-s2.0-85037051777
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Mahidol University
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SCOPUS
Bibliographic Citation
SAGE Open. Vol.7, No.4 (2017)
Suggested Citation
Piyapas Tharavanij, Vasan Siraprapasiri, Kittichai Rajchamaha Profitability of candlestick charting patterns in the stock exchange of Thailand. SAGE Open. Vol.7, No.4 (2017). doi:10.1177/2158244017736799 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/41618
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Title
Profitability of candlestick charting patterns in the stock exchange of Thailand
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Abstract
© The Author(s) 2017. 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.