Probability Analysis of Candlestick Formations

Discussion in 'Technical Analysis' started by JT47319, Apr 28, 2003.

  1. JT47319


    I saw a book at the store, something like Candlesticks Explained, that had an appendix of various candlestick formations that they "tested" on various stocks and futures at various different daily timeframes. The table gave the percentage predictive success that each pattern had which I thought was pretty interesting.

    Does anyone have further back tested data on this?
  2. I have the book myself...the first 2/3 of the book is decent for basic understanding until it starts getting into the backtested and statistical stuff in the latter 1/3.

    That latter 1/3 is useless info for actual trading.

    Yet...if your a guy into backtesting can easily do your own backtesting.

    There are several data vendors you can buy historical data.

    Next...there are several popular software programs that does candlestick pattern recognition and allow you to input your own custom codes.

    A lot better than paying for an unknown trade methodology of yester-years via someone elses backtesting results.

    Backtested candlesticks info (usually not accurate) is more useful for just showing someone backtesting results whom put a lot of weight on such info.

    If your going to apply candlesticks to your trading...

    just stick with the common repetitive patterns on daily charts along with whatever filtering system your using (indicators, pivot analysis, s/r levels...whatever).

    Then only apply these common candlestick patterns to a few trading vehicles.

    In other words...don't be bouncing from stock to stock if your trading stocks.

    If you need to know what are common daily chart patterns...use ET search menu here (upper right corner) because they have been discussed here in the past.

    Note: Some of the best candlestick traders I know don't use a lot of filters...just one your comfortable with will do nicely.

  3. cwb1014


    The website has extensive back-testing features, including the ability to see which candle patterns have been most profitable on stocks you specify; see[url][/url] for a rough description of what they offer along these lines.

    They also have a Free 30 day trial. I'm not presently a member of the site and haven't looked at it closely in quite a while, but do have some interest in what candle patterns are most effective generally. So if you come up with anything earth-shattering (or even interesting :) ) in this regard, don't hesitate to let us know.

    Hope this helps.



  4. That's a very interesting website. In fact, I like their chart descriptions of candlestick patterns and their realtime signals.

    Can't knock anybody that post realtime candlestick signals for all to judge.

    Their alot better than