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For students of union College.it is based on share markets
Typology: Lecture notes
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(^) Step 1: Adjust the data; for example use return series instead of a raw price data (^) Step 2 : Test of randomness in the data set; for example test the data set for ARIMA (0,1,0), or run test (^) Step 3: Use technical indicators provided the return series is non-random. Do a diagnosis test to check the extent, direction and strength of the trend through ADX, + DI, - DI and ATR (^) Step 4: Use lagging indicators like Moving average or MACD for trending data; use leading indicators like RSI, William’s R for trading data (^) Step 5: Use volume based indicators like OBV, NBV or MFI for convergence and divergence (^) Step 6: Look out for the existing bigger pattern and cycle – reversal, continuation, flat (^) Step 7: Use candlestick patterns before final buy or sell decision
(^) Method – ARIMA (0,1,0) (^) ARIMA (a dynamic time series model) will be used to check whether the return series depends on the past values of the return series and past disturbance elements. The model is generally referred to as an ARIMA (p, d, q) model where p, d, and q are integers greater than or equal to zero and refer to the order of the autoregressive, integrated, and moving average parts of the model respectively. (^) Autoregressive orders (AR) - specify which previous values from the series are used to predict current values. (^) Difference (I) - Specifies the order of differencing applied to the series before estimating models. (^) Moving average (MA) orders specify how deviations from the series mean for previous values are used to predict current values. (^) Null hypothesis – Data set is not random (^) Level of significance – 5% generally
(^) Long white candlesticks show strong buying pressure. The longer the white candlestick is, the further the close is above the open. This indicates that prices advanced significantly from open to close and buyers were aggressive. While long white candlesticks are generally bullish, much depends on their position within the broader technical picture. After extended declines, long white candlesticks can mark a potential turning point or support level. If buying gets too aggressive after a long advance, it can lead to excessive bullishness. (^) Long black candlesticks show strong selling pressure. The longer the black candlestick is, the further the close is below the open. This indicates that prices declined significantly from the open and sellers were aggressive. After a long advance, a long black candlestick can foreshadow a turning point or mark a future resistance level. After a long decline a long black candlestick can indicate panic or capitulation.
(^) Marubozu do not have upper or lower shadows and the high and low are represented by the open or close. A White Marubozu forms when the open equals the low and the close equals the high. This indicates that buyers controlled the price action from the first trade to the last trade. Black Marubozu form when the open equals the high and the close equals the low. This indicates that sellers controlled the price action from the first trade to the last trade.
