Candle Pattern Sentiment Scores with Time-Based Trade Exits

Summary

The strategy builds three rolling scores from candlestick formations: indecision patterns such as dojis and spinning tops, bearish patterns such as shooting stars and bearish engulfing candles, and bullish patterns such as hammers, marubozu candles, bullish engulfing candles, and three rising bullish candles. It averages these scores into one index. Crosses above separate thresholds trigger long and short entries when no position is open and a candle cooldown has elapsed.

Exits combine volume and candle direction with a profitable-price condition, maximum holding periods, and loss thresholds evaluated after a shorter holding period. The script also offers adjustable pattern thresholds, lookback length, volume multiplier, and cooldown. Although the accompanying description presents volume confirmation as a condition for entries, the code uses volume in its take-profit conditions instead. It reports no backtest outcomes, assets, timeframe, or validation. The score components are unweighted occurrence rates, and the document gives no evidence that the combined thresholds predict returns; pattern definitions and implementation behavior should be checked before evaluating the approach.

Key ideas

• The index averages rolling frequencies of candle patterns grouped as indecision, fear, and greed.
• Crossings above different index thresholds trigger long and short entries.
• Volume above its moving average multiple is used in profitable exit conditions in the code.
• Maximum holding durations and loss thresholds provide additional exit rules.
• The document reports no performance evidence, and its prose misstates volume as an entry filter.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.