{"title":"Estimating Correlation Dimension on Japanese Candlestick, Application to FOREX Time Series","authors":"S. Mahmoodzadeh, J. Shahrabi, M. A. Torkamani, J. Sabaghzadeh Ghomi","volume":6,"journal":"International Journal of Economics and Management Engineering","pagesStart":260,"pagesEnd":265,"ISSN":"1307-6892","URL":"https:\/\/publications.waset.org\/pdf\/8276","abstract":"Recognizing behavioral patterns of financial markets\r\nis essential for traders. Japanese candlestick chart is a common tool to\r\nvisualize and analyze such patterns in an economic time series. Since\r\nthe world was introduced to Japanese candlestick charting, traders\r\nsaw how combining this tool with intelligent technical approaches\r\ncreates a powerful formula for the savvy investors.\r\nThis paper propose a generalization to box counting method of\r\nGrassberger-Procaccia, which is based on computing the correlation\r\ndimension of Japanese candlesticks instead commonly used 'close'\r\npoints. The results of this method applied on several foreign\r\nexchange rates vs. IRR (Iranian Rial). Satisfactorily show lower\r\nchaotic dimension of Japanese candlesticks series than regular\r\nGrassberger-Procaccia method applied merely on close points of\r\nthese same candles. This means there is some valuable information\r\ninside candlesticks.","references":"[1] Gary S. Wagner, Bradley L. Matheny A,\" Trading Applications of\r\nJapanese Candlestick Charting \", John Wiley and Sons Press, Oct 28,\r\n1993, ISBN 0471587281.\r\n[2] Grassberger, P. and I. Procaccia, 1983,\" Measuring the Strangeness of\r\nStrange Attractors\", Physica 9D, 189-208.\r\n[3] J. Banks, D. Valentina, J.Arthur; \"Chaos: A Mathematical Introduction\",\r\nCambridge University Press, 2003.\r\n[4] Granger, C. W. J. and Terasvirta, T. (1993), Modeling Nonlinear\r\nEconomic Relationships, Oxford University Press.\r\n[5] Shintani, Mototsugu, Oliver Linton. 2001. Is There Chaos in the World\r\nEconomy? A Nonparametric Test Using Consistent Standard Errors.\r\nVanderbilt University Department of Economics Working Paper.\r\n[6] S. Boccaletti, C. Grebogi, C. Lai, H. Mancini, D. Maza, \"The control of\r\nchaos: theory and applications\", Physics Reports 329, 103-197, 2000.\r\n[7] A M. Ataei, B. Lohmann, A. Khaki-Sedigh, C. Lucas, \"Determining\r\nminimum embedding dimension from chaotic time series\", Nonlinear\r\nPhenomena in Complex Systems, 6:4, pp. 842 - 851, 2003.\r\n[8] H. Dewachter, M. Lyrio \"The cost of technical trading rules in the Forex\r\nmarket: A utility-based evaluation\" International Money and\r\nFinance, Vol.25, pp1072-1089, 2006.\r\n[9] B. Davies; \"Exploring Chaos: Theory And Experiment (Studies in\r\nNonlinearity S.)\",Westview Press, 2005.\r\n[10] W. Barnett, A. Serletis; \"Martingales, nonlinearity, and chaos\", Journal\r\nof Economic Dynamics & Control 703-724, 2000.","publisher":"World Academy of Science, Engineering and Technology","index":"Open Science Index 6, 2007"}