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Home » Tips for candlestick patterns analysis

Tips for candlestick patterns analysis


How to improve pattern analysis skill by using data-ming result and pattern indicator.


Candlestick pattern is a specific price movement shown graphically on chart. The most efficient and direct way to master patters is to learn from chart. Only if you go through enough real cases, analyzing, interpreting and summarizing the formation, you will capture essential factors and be proficient in technical analysis.

Candlestick Pattern is crucial in technical analysis. To improve the ability in technical analysis, knowing definition of patterns is not enough at all. The original definition is based on generalization of certain examples and cannot be used as sole evaluation criteria. For example, bullish reversal pattern may turn into bearish continuation pattern under certain circumstances. If you only know the textbook definition of a pattern, but not fully grasp the changes that may occur under different conditions, you may derive opposite outcome with your analysis.

Learning a pattern doesn't always require the help and guidance of a teacher. One can learn and develop skills in a variety of ways.

  1. Understanding the definition of candlestick pattern. There are dozens of popular patterns, you don't have to remember all of them, start with something easy, such as Hammer, Hanging Man or Morning Star. If you don't want to spend a lot of time to memorize the definitions, our pattern indicator can help you to identify and highlight the patterns on chart. 
     
  2. The original definitions of candlestick patterns would be misleading in modern time. This is simply because they were created decades ago. As you may notice that sometimes a bullish pattern followed by a down breakout. Therefore, traders need to find out what really could happen after a pattern occurs in market. In order to achieve this goal, it is necessary to review the up-to-date performance data of patterns. Our data-mining results contain most popular patterns' performance with specific price movement.
     
  3. Candlestick pattern is always a good signal, but it can not be used as sole evaluation criteria. We need to examine how various market conditions such as current volume, average volume, and price level will impact the result. So we need to depend on indicators. Every trader has their favorite indicators, most indicators are created based on the combination of: Price, Length and Volume. That's why there are lots of similar ones. It doesn't matter what indicator you prefer, as long as it can help you to detect and avoid false signals.
     
  4. Only correct practice makes perfect. After familiar with every aspect of pattern analysis, you can create a very own way to practice and improve your skill. Do test and simulation on your paper/demo account, don't waste your real money on market if you don't have a very good winning percentage.



 


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