The academic discussion about technical analysis has a long tradition, in American literature as well as in the German scientific
community. Lo et al. (2000) laid the foundation for empirical research on the “classical” technical indicators (like “head-and-shoulders”
formations) with their paper “Foundations of Technical analysis”.
The candlestick technique is based on the visual recognition of patterns called “Candlesticks”, a special method of visualizing
the behavior of asset prices. Candlesticks are very popular in Asia and their popularity is growing in western countries.
Until now there has not been done much empirical research concerning the performance of technical analysis with candlesticks.
This is probably due to the fact that no automatic and deterministic way to classify candlestick patterns has been developed
thus far.
The purpose of this work is to lay the basis for future empirical investigations and to develop a systematic approach by which
candlestick charts can be classified.