Predictive Power of Adaptive Candlestick Patterns in Forex Market. Eurusd Case
Conselleria d’Educació, Cultura i Esport, Avda. de Campanar, 32, ES-46015 València, Spain
Mathematics 2020, 8(5), 802; https://doi.org/10.3390/math8050802
Received: 26 March 2020 / Revised: 27 April 2020 / Accepted: 8 May 2020 / Published: 14 May 2020
(This article belongs to the Special Issue On Interdisciplinary Modelling and Numerical Simulation in the Realm of Physics & Engineering)
The Efficient Market Hypothesis (EMH) states that all available information is immediately reflected in the price of any asset or financial instrument, so that it is impossible to predict its future values, making it follow a pure stochastic process. Among all financial markets, FOREX is usually addressed as one of the most efficient. This paper tests the efficiency of the EURUSD pair taking only into consideration the price itself. A novel categorical classification, based on adaptive criteria, of all possible single candlestick patterns is presented. The predictive power of candlestick patterns is evaluated from a statistical inference approach, where the mean of the average returns of the strategies in out-of-sample historical data is taken as sample statistic. No net positive average returns are found in any case after taking into account transaction costs. More complex candlestick patterns are considered feeding supervised learning systems with the information of past bars. No edge is found even in the case of considering the information of up to 24 preceding candlesticks.
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Keywords:
FOREX; efficient market hypothesis; adaptive candlestick patterns; decision trees; random forest; adaboost; finance
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MDPI and ACS Style
Orquín-Serrano, I. Predictive Power of Adaptive Candlestick Patterns in Forex Market. Eurusd Case. Mathematics 2020, 8, 802.
AMA Style
Orquín-Serrano I. Predictive Power of Adaptive Candlestick Patterns in Forex Market. Eurusd Case. Mathematics. 2020; 8(5):802.
Chicago/Turabian StyleOrquín-Serrano, Ismael. 2020. "Predictive Power of Adaptive Candlestick Patterns in Forex Market. Eurusd Case" Mathematics 8, no. 5: 802.
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