hanzam's Blog

[hanzam]

Candlesticks - Massey University research

The Massey University Finance Dept. carried out research by Ben R. Marshall, Martin R. Young and Lawrence C. Rose,Dept. of Finance established from their research that candlesticks do not work and are not profitable, this research was released 16 April 2007.

We investigate the profitability of the quantitative market timing technique of candlestick technical analysis in the U.S. equity market. Despite being used for centuries in Japan and now having a wide following amongst market practitioners globally, there is little research documenting its profitability or otherwise. We find that these strategies are not generally profitable when applied to large U.S. stocks. Basing trading decisions solely on these techniques does not seem sensible but we cannot rule out the possibility that they compliment some other market timing techniques.

 

[hanzam]

Massey University research document link:

http://ssrn.com/abstract=980583

 

[LondonUSTrader]

Most academic research always has, and always will IMHO, find that the particular technical indicator they are testing, whether it be candlesticks or another technique, are not profitable and does not work.

However, this demonstates little understanding of the realities of trading. Often it has more to do with the testing methodology than any indication of the usefulness to a trader of the technique. If you ask the wrong questions you will get the wrong answers.