Sigma Journal of Engineering and Natural Sciences - Research Article - Candlestick chart based trading system using ensemble learning for financial assets

Oct 13, 2026

Candlestick charts, developed in the 18th century for the Japanese rice market, are widely used across financial markets to visualize opening, high, low, and closing values in a single graphic. Despite their practical value, the sheer number of chart patterns hinders efficient application. A four-stage software framework is proposed to recognize candlestick patterns and predict trend direction using labeled datasets and machine learning, including xgboost. Results across 11 global indices show higher profit than a Buy&Hold strategy.

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Sigma Journal of Engineering and Natural Sciences Web page info: [https://sigma.yildiz.edu.tr](https://sigma.yildiz.edu.tr) DOI: 10.14744/sigma.2022.00039 | Research Article
Candlestick chart based trading system using ensemble learning for financial assets
Yunus SANTUR1,*
1Firat University, Faculty of Technology, Elazig, Türkiye | | | | --- | --- | --- | | ARTICLE INFO
Article history
Received: 10 January 2021
Accepted: 04 April 2021 Key words:
Algorithmic Trading; Candlestick Patterns; Ensemble Learning; Financial Forecasting |
ABSTRACT
The candlestick charts, which were developed in the 18th century and were initially used in the Japanese rice market, are widely used in trading strategies in all financial markets after 1991. Candlestick charts can interpret opening, high, low and closing values of an asset in a single visual. In addition to these advantages, the large number of candlestick chart patterns makes their practical use difficult. In the study developed forthis purpose, a software framework that uses candlestick charts and predicts the trend direction was created. The study consists of four stages. In the first step, a system that recognizes candle patterns is created. In the second stage, the performance of the model is measured by running training and testing processes on data sets in which candlestick chart types and trend direction are labeled. In the machine learning phase, community methods such as xgboost were used. In the last stage of the study, it was seen that with the strategy based on only recognizing the candlestick pattern and taking position in the direction of the trend based on proposed approach, higher profit was obtained in 11 world indices compared to Buy&Hold strategy.
Cite this article as: Santur Y. Candlestick chart based trading system using ensemble learning for financial assets. Sigma J Eng Nat Sci 2022;40(2):370–379 . | | | INTRODUCTION
In financial markets, prices are assumed to move in a trend that bullish or bearihs as well as volatile. Investors and portfolio managers try to gain profits and minimize risks by taking positions in the right direction and at the right time. For this purpose, technical analysis is used to interpret price charts made up of time series [1] . It includes many tools such as technical analysis, moving averages, indicators and oscillators, statistical-based series and | | pattern-based formations. Therefore, it is widely used by real investors and technical analysts, as well as algorithmic robots that perform autonomous transactions in crypto and stock markets [2] .
In the trading, some of the earliest technical trading analysis was used to track prices of rice in the 18th century. Much of the credit for candlestick charting goes to Munehisa Homma, a rice merchant from Sakata, Japan | | *Corresponding author.
*[E-mail address: ysantur@firat.edu.tr](E-mail address: ysantur@firat.edu.tr)
This paper was recommended for publication in revised form by Regional Editor Ahmet Selim Dalkılıç | | | Published by Yıldız Technical University Press, İstanbul, Turkey Copyright 2021, Yıldız Technical University. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/) . who traded in the Ojima Rice market in Osaka during the Tokugawa Shogunate. According to Steve Nison, however, candlestick charting came later, probably beginning after 18th century [3] . Candlestick charts and their interpretation are one of the technical analysis tools mentioned above. As shown in Fig. 1, they are formed by consolidating all price movements in a certain period, such as the hourly, daily, weekly in a single visual. Every candlestick consists of a real body and wicks (or shadows) that stand out vertically top and bottom from the body, looking like the wick of a candle, the body representing the candle body. Although the lengths of the candlestick charts are different, there is no as

FAQs

What problem does the study address about candlestick chart patterns?

The study addresses that the large number of candlestick chart patterns makes practical use difficult in trading strategies.

How is the proposed trading framework structured?

It is built in four stages: creating a system to recognize candlestick patterns, measuring model performance with labeled datasets, applying ensemble/community machine-learning methods such as xgboost, and evaluating a strategy against Buy&Hold.

What trading performance comparison is reported in the study?

The approach that combines candlestick-pattern recognition with taking positions in the trend direction produced higher profit than the Buy&Hold strategy across 11 world indices.

Oct 13, 2026

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