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http://dx.doi.org/10.7737/KMSR.2013.30.1.043

Trading Using Trend Reversal Pattern Recognition in the Korea Stock Market  

Kwon, Soonchang (인천대학교 동북아경제통상대학 무역학부)
Publication Information
Korean Management Science Review / v.30, no.1, 2013 , pp. 43-58 More about this Journal
Abstract
Although analysis of charts, which used in stock trading by distinguishing standardized patterns in the movements of stock prices, is simple and easy to use, there can be problems stemming from specific patterns being distinguished as a result of the subjective perspectives of analysts. In accordance with such problems, through the method of template pattern matching, 4 trend reversal patterns were designed and the fitness of the patterns were quantitatively measured. In cases when a stock is purchased when the template pattern fitness value is within a certain range and held for at least 20-days, the average return ratio was analyzed to be higher-with the difference being statistically significant-than the average return ratio attained from trading a stock according to the same method per the Efficient Market Hypothesis. From the results of stock trades of 2 domestic corporations to which the values of the 4 patterns had been applied based on the 4 strategies, it was possible to ascertain differences in the strategy- and pattern-dependent return ratios. Through this study, along with presenting the exceptions for the Efficient Market Hypothesis in stock trading, the fitness level of quantitative chart patterns was measured and the theoretical basis for application of such fitness level was proposed.
Keywords
Pattern Recognition; Stock Market; Technical Analysis;
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Times Cited By KSCI : 2  (Citation Analysis)
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