Candlestick- and technical analysis part of investment decisions : Making investment decisions based only on candlestick- and technical analysis
Oksanen, Niklas (2024)
2024
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2024122138003
https://urn.fi/URN:NBN:fi:amk-2024122138003
Tiivistelmä
Candlestick charting, a method developed by Japanese rice trader Munehisa Homma in the 18th century, serves as a foundational tool in financial market analysis. This technique, which gained popularity in the West in the late 1980s, provides insights into market sentiment through graphical representation of price data open, close, high, and low prices over specified timeframes. Each candlestick's structure reflects trading activity, with its body and wicks indicating price movements and market dynamics. Patterns identified within candlestick charts, such as continuation or reversal signals, assist traders in forecasting market trends and timing their trades effectively.
Technical indicators, such as Moving Averages, Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD), Bollinger Bands, and volume, are essential tools for traders seeking to predict future price actions based on historical data. Schwager & Etzkorn (2017) define technical indicators as mathematical formulas derived from market data, providing insights into potential market direction changes that may not be visible through fundamental analysis alone.
Through historical examination and pattern recognition, candlestick charting enhances traders' ability to navigate complex market dynamics, providing a visual and strategic approach to predicting price movements.
This thesis evaluates the effectiveness of technical indicators for market predictions, focusing on case studies of the S&P 500 and Facebook stock. The findings emphasise that relying on a single indicator, such as candlestick patterns, is often insufficient for making informed investment decisions. Instead, combining multiple technical tools like RSI, MACD, and Bollinger Bands provides a more comprehensive and reliable assessment of market conditions.
Technical indicators, such as Moving Averages, Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD), Bollinger Bands, and volume, are essential tools for traders seeking to predict future price actions based on historical data. Schwager & Etzkorn (2017) define technical indicators as mathematical formulas derived from market data, providing insights into potential market direction changes that may not be visible through fundamental analysis alone.
Through historical examination and pattern recognition, candlestick charting enhances traders' ability to navigate complex market dynamics, providing a visual and strategic approach to predicting price movements.
This thesis evaluates the effectiveness of technical indicators for market predictions, focusing on case studies of the S&P 500 and Facebook stock. The findings emphasise that relying on a single indicator, such as candlestick patterns, is often insufficient for making informed investment decisions. Instead, combining multiple technical tools like RSI, MACD, and Bollinger Bands provides a more comprehensive and reliable assessment of market conditions.