An Appraisal of the Merit of Candlestick Technical Trading Strategies in Tehran Stock Exchange

In this paper، merit of the oldest known form of technical analysis، candlestick charting is investigated. Candlestick technical analysis is a short-term timing technique that generates signals based on the relationship between open، high، low، and close prices. In this paper we use stock prices of 17 companies listed in Tehran stock market from 1374/10/1 to 1387/9/10 to investigate the merit of 28 candlestick patterns. The method employed to test the hypotheses is Bootstrapping simulation based on GARCH-M model. Results show that comparing with buy-and-hold strategy، candlestick trading rules can earn extra benefits، but these returns vanish if we take commissions into account. So we conclude that candlestick trading rules can not beat the market in Tehran stock exchange.