Candlestick patterns
A candlestick shows a bar's open, high, low and close as a body and two wicks. Named patterns such as the hammer or the engulfing bar are short sequences of candles.
How Candlestick patterns is calculated
The body spans the open to the close and is filled or coloured by direction. The wicks reach the high and low. A hammer, for example, can be defined as a small body in the upper third of the range with a lower wick at least twice the body. Any named pattern has to be turned into numbers like these before it can be counted or tested.
How it is read
Patterns are read as a record of who controlled the bar. Each name comes with a story about what price does next.
Common mistakes
- Trusting a pattern name without its numeric definition. Teachers define the same pattern differently.
- Reading a pattern with no context such as trend, level or volume.
- Remembering the pattern that worked. Most hammers do nothing.
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
Lessons that cover it
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.