Timing in the stock market in Brazil with candlesticks patterns and associated indicators

Abstract

The biggest challenge for stock market traders is to identify the timing to enter and exit in a trade. In order to present a new strategy, this research uses a trading system based on bullish and bearish candlesticks patterns to identify buy and sell signals in the brazilian’s stock market with exit through the chandelier method. The trading system was tested during the period 2005 and 2010 for application in strategy between 2011 and 2016 through the walk-forward methodology. The statistical significance and robustness of the strategies were evaluated through skewness, kurtosis, Monte Carlo simulation, z-score and t-test. These tests revealed some prediction in bullish candlesticks standards.