Review of Quantitative Finance and Accounting

, Volume 31, Issue 2, pp 191–207 | Cite as

Are candlestick technical trading strategies profitable in the Japanese equity market?

  • Ben R. Marshall
  • Martin R. Young
  • Rochester Cahan
Original Paper


We show that candlestick charting, the oldest known form of technical analysis, is not profitable in the Japanese equity market over the 1975–2004 period. Candlestick technical analysis, which was developed in Japan in the 1600s, is deeply intertwined with Japanese culture and is very popular in Japan. However, there is no evidence candlestick technical trading strategies add value in either the entire 30 year period, in three 10 year sub-periods or in bull or bear markets.


Candlestick Technical analysis Japan Market timing 

JEL Classifications

G12 G14 



We thank the editor, Cheng-few Lee, and two anonymous referees for comments that have improved the paper.


  1. Bartov E, Kim E (2004) Risk, mispricing, and value investing. Rev Quant Finance Acc 23:353–376CrossRefGoogle Scholar
  2. Brusia J, Lui P (2004) The day-of-the-week and week-of-the-month effects: an analysis of investors’ trading activities. Rev Quant Finance Acc 23:19–30CrossRefGoogle Scholar
  3. Brock W, Lakonishok J, LeBaron B (1992) Simple technical trading rules and the stochastic properties of stock returns. J Finance 47(5):1731–1764CrossRefGoogle Scholar
  4. Carter, RB, Van Auken HE (1990) Security analysis and portfolio management: a survey and analysis. J Portfol Manage, Summer:81–85.Google Scholar
  5. Corrado CJ, Lee SH (1992) Filter rule tests of the economic significance of serial dependence in daily stock returns. J Finan Res 154:369–387Google Scholar
  6. Day T, Wang P (2002) Dividends, nonsynchronous prices, and the returns from trading the Dow Jones Industrial Average. J Empirical Finance 9:431–454CrossRefGoogle Scholar
  7. Efron B (1979) Bootstrap methods: another look at the jackknife. Ann Stat 71:1–26CrossRefGoogle Scholar
  8. Fama EF (1998) Market efficiency, long-term returns, and behavioural finance. J Finan Econ 49(3):283–306CrossRefGoogle Scholar
  9. Fock JH, Klein C, Zwergel B (2005) Performance of candlestick analysis on intraday futures data. J Futures Markets, Fall:28–40Google Scholar
  10. Ito A (1999) Profits on technical trading rules and time-varying expected returns: evidence from pacific-basin equity markets. Pacific-Basin Finance J 7(3–4):283–330CrossRefGoogle Scholar
  11. Jorion P, Goetzman WN (1999) Global stock markets in the twentieth century. J Finance 54:953–986CrossRefGoogle Scholar
  12. Kavajecz KA, Odders-White RE (2004) Technical analysis and liquidity provision. Rev Financial Stud 17(4):1043–1071CrossRefGoogle Scholar
  13. Lo AW, Mamaysky H, Wang J (2000) Foundations of technical analysis: computational algorithms, statistical inference, and empirical implementation. J Finance 55:1705–1770CrossRefGoogle Scholar
  14. Malkiel B (1981) A random walk down wall street, 2nd edn. Norton, New YorkGoogle Scholar
  15. Marshall BR, Young MR, Rose LC (2006) Candlestick technical trading strategies: can they create value for investors? J Banking Finance 30:2303–2323Google Scholar
  16. Miller, EM (1990) Atomic bombs, the depression and equilibrium. J Portfol Manage, Summer:37–41Google Scholar
  17. Morris G (1995) Candlestick charting explained: timeless techniques for trading stocks and futures, 2nd edn. McGraw-Hill Trade, New YorkGoogle Scholar
  18. Nison S (1991) Japanese candlestick charting techniques: a contemporary guide to the ancient investment technique of the Far East. New York Institute of FinanceGoogle Scholar
  19. Nison S (2004) Candlestick trading principles. Technical analysis of stocks and commodities November, 22–27Google Scholar
  20. Olson D (2004) Have trading rule profits in the currency markets declined over time? J Banking Finance 28:85–105CrossRefGoogle Scholar
  21. Osler C (2003) Currency orders and exchange-rate dynamics: An explanation for the predictive success of technical analysis. J Finance 58(5):1791–1820CrossRefGoogle Scholar
  22. Pring M (2002) Candlesticks explained. McGraw-Hill, New YorkGoogle Scholar
  23. Treynor JL, Ferguson R (1984) In defence of technical analysis. J Finance 40(3):757–773CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Ben R. Marshall
    • 1
  • Martin R. Young
    • 1
  • Rochester Cahan
    • 1
  1. 1.Department of Finance, Banking and Property, College of BusinessMassey UniversityPalmerston NorthNew Zealand

Personalised recommendations