By comparing the given stars on Steve Nison's Candlestick Charting book on Amazon (4.5 stars, 98 customer reviews), and comparing it with other popular investing books by successful investors, The Intelligent Investor (4.5 stars, 154 reviews) and Technical Analysis of the Financial Markets (4.5 stars, 110 reviews). I would hardly doubt the credibility of candlestick charting techniques. (okay. I know this is not a good argument, probably doesn't even constitute as a valid argument.)
However, as an engineer and researcher, there is always room and time to doubt.
A need to question how useful candlestick charting is.
Single Candlestick Quantification
In order to do a quantitative analysis, the different types of candlesticks needs to be quantified. One way of doing so, would be to find characteristics of the various looking candlesticks, which are:
- color (white or black)
- size of body relative to the entire candlestick (large, medium or small)
- location of body relative to the entire candlestick (upper, middle or lower)
This can then be binerized to, at the minimum, 5 binary digits; this is very similar to what Likhovidov proposed in his article. (I used 6 digits in the implementation, the source code will be provided in the 2nd part of the article.)
Candlestick Patterns
There are numerous existing candlestick patterns. For this article, I will only identify and analyze 4 kinds of patterns.
-Morning Doji (bullish)
-Evening Doji (bearish)
-Hammer (bullish)
-Hanging Man (bearish)
I'm assuming the straight lines on the patterns above are just 'don't cares', except for the price trend.
- to be continued -
0 comments:
Post a Comment