Generating and Testing Candlestick Patterns from Basic Candle Types

Summary

This article describes a tool for generating and evaluating new candlestick patterns from six basic candle shapes, split into bullish and bearish variants except for doji. Patterns contain one to three candles, and repetition can be enabled. Users choose which candle types to include and configure the analysis before the application evaluates generated combinations using the same approach as its earlier candlestick analyzer.

The interface presents results alongside settings for the chosen instrument, timeframe, sample range, and other measures such as occurrence frequency and the probability of a subsequent move in either direction. Examples highlight two three-candle sequences that showed promising directional probabilities and efficiency coefficients in the author's tests. These are exploratory historical findings, not evidence of future profitability. Results depend on the instrument and test conditions, and the article cautions that analyzing all 1,463 possible combinations can take considerable time, even before varying other parameters.

Key ideas

• Generated patterns combine one to three basic candle types, with optional repetition.
• Bullish and bearish versions are treated as distinct types, while doji has no direction.
• The tool evaluates generated patterns under selected instrument, timeframe, sample, and metric settings.
• The examples are historical results that require verification for the conditions where a pattern will be used.
• Testing every possible combination alongside other parameter variations can be computationally time-consuming.

Tags

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