Swing Pivot Labels and Candlestick Reversal Patterns

Summary

This indicator marks swing highs and lows, labels their sequence as higher highs, higher lows, lower highs, or lower lows, and associates pivots with selected candlestick patterns: hammer, inverted hammer, bullish engulfing, hanging man, shooting star, and bearish engulfing. A length setting controls pivot sensitivity, with shorter lengths responding to smaller price swings. The intended use is retrospective study of whether particular candle shapes occur around turning points.

The labels are delayed because pivots require later bars for confirmation, so the document explicitly says the tool is not suited to real-time top or bottom detection. It also warns that large length settings may produce errors. The included source has apparent limitations: the bearish engulfing condition mirrors the bullish one, and the strategy entries trade at detected pivots without showing a validation method or performance results. The supplied BTC futures backtest settings do not establish whether the patterns predict reversals.

Key ideas

• The indicator labels pivot highs and lows and classifies their sequence as HH, HL, LH, or LL.
• It checks for six named candlestick formations around detected pivots.
• Pivot labels appear with delay, making the tool unsuitable for real-time turning-point detection.
• The source’s bearish engulfing condition appears to duplicate its bullish engulfing condition.
• No evidence is provided that the patterns predict profitable reversals.

Tags

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