The Best Candlestick Patterns To Profit In Forex

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The Best Candlestick Patterns To Profit In Forex – Our research shows that the most reliable and predictive candlestick chart patterns are the Inverted Hammer, with a success rate of 60%, Bearish Marubozu (56.1%), Gravestone Doji (57%), and Bearish Engulfing (57%). The most profitable candlestick pattern is the Inverted Hammer, with a profit of 1.12% per trade.

After hundreds of hours of extensive backtesting using TrendSpider, I have gained valuable insight into the success and profitability of 25 famous candlestick patterns. Join me as I share this invaluable original research.

The Best Candlestick Patterns To Profit In Forex

The Best Candlestick Patterns To Profit In Forex

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Candlestick Cheat Sheet For Forex Traders

I tested 25 candlestick patterns in each of the 30 Dow Jones Industrial Average stocks over the past 20 years. This is a total of 56,680 trades, panning 10,199 years of data. The table below shows two key candlestick pattern success metrics. Profit per trade is the average profit per trade, including all winning and losing trades in bull and bear markets. The winning % shows the number of trades that have made a profit by increasing their value. All tests were long trades; no short-selling included.

Performance Data © Barry D. Moore -. We independently research and recommend the best products. We also work with partners to negotiate discounts for you and may earn a small fee through our links.

In the past, you had to manually find each chart pattern on a stock chart, draw trend lines, plot price targets, and track results. Today, all patterns in this are automatically detected, plotted, and backtested using TrendSpider. TrendSpider is my favorite tool for AI-powered pattern recognition, strategy testing, and stock trading; I highly recommend you try it, and if you do, here’s a 40% discount code, “LIB40”.

How to Backtest Bullish Harami & Harami Cross Patterns: Step by Step Explanation. Using TrendSpider to Backtest Candle Patterns & Chart Indicators Easily with Strategy Tester

Bullish Harami Candlestick Pattern

After performing 1,702 trades on 588 years of data, we confirmed the Inverted Hammer profit per trade to be 1.12%. The 1.12% win rate means that trading Inverted Hammer will earn you an average profit of 1.12% per trade if you sell after ten days. Conversely, short-selling and Inverted Hammer, you should expect to lose 1.12% per trade. This proves this pattern is very bullish.

The percentage of Inverted Hammer winning trades is 60% versus 40% losing trades, higher than the average performance of 55.8% across all types of candlesticks. Max Drawdown was -29.6%, versus the stock’s drawdown of -59.4%, which shows less volatility than the buy-and-hold strategy.

The Inverted Hammer usually forms at the bottom of a downtrend, signaling a potential change in the price trajectory. This signals bullish sentiment, which indicates that the market is trying to push prices higher, as shown by the extended upper axis. However, sellers can regain control by closing the trading period, pushing the price down to close near the opening level, thus creating a small body on the lower side.

The Best Candlestick Patterns To Profit In Forex

Bearish Marubozu’s percentage of winning trades is 56.1%, with the average winning trade equal to 4.1%, higher than the average performance of all types of candlesticks. Max Drawdown was -31%, versus the stock’s drawdown of -59.7%, which shows less volatility than the buy-and-hold strategy.

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The average winning trade was 4.1% over ten days, and the average losing trade was -3.5%; this represents a reasonable profit margin, especially when combined with 56.1% of successful trades. The average win for all trades is 0.8% per trade.

Bearish Marubozu’s reward-to-risk ratio is 1.21, the highest of the 25 candles tested. We just saw a better Reward/Risk ratio in our test “The most successful chart pattern.”

A Bearish (Black) Marubozu signals a strong downward price movement. It is formed when the opening price is the highest for the period (day, hour, etc.) and the closing price is the lowest. In other words, bears control the price from the beginning to the end of the period, reflecting the dominance of selling pressure in the entire period.

After doing 1,553 trades in 575 years of data, we confirmed the win rate to be 0.65% per trade. The 0.65% win rate means that long Gravestone Doji trades will earn you an average profit of 0.65% per trade if you sell after ten days. Conversely, short-selling a Gravestone Doji, you should expect to lose -0.65% per trade.

Candlesticks And Oscillators For Successful Swing Trades

The percentage of winning trades Gravestone Doji is 57% versus 43% of losing trades, higher than the average performance of 55.8% in all types of candlesticks, in fact, the third best. The Max Drawdown was -28.6%, versus the stock drawdown of -59.3%, which shows less volatility than the buy-and-hold strategy.

The Gravestone Doji candlestick pattern appears when the trading session’s open, close, and low prices are almost identical. This type of candle looks like a tombstone, with a tall axis at the top. This indicates that buyers fail to raise the price, and sellers can bring it back to the opening price at the end of the trading session.

After executing 4,096 trades on 568 years of data, we confirm the Bearish Engulfing profit per trade to be 0.62%. The 0.62% win rate means that long Bearish Engulfing trades will earn you an average profit of 0.62% per trade if you sell after ten days. Conversely, short-selling a Bearish Engulfing, you should expect to lose -0.62% per trade. This proves this pattern is very bullish.

The Best Candlestick Patterns To Profit In Forex

The percentage of Bearish Engulfing winning trades is 57% versus 43% losing trades, higher than the average performance of 55.8% across all types of candlesticks. Max Drawdown was -39.7%, versus the stock’s drawdown of -59.3%, which shows less volatility than the buy-and-hold strategy.

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The average winning trade was 3.7% over ten days, and the average losing trade was -3.5%; this represents a reasonable profit margin, especially when combined with 57% of successful trades.

The data shows Bearish Engulfing candles can occur during an uptrend or downtrend and can be a reversal or continuation pattern. The image below shows four Bearish Engulfing candles, three of which occurred during a downtrend, thereby accelerating the price decline, and one occurred during an uptrend indicating a reversal.

The winning percentage of Bullish Harami Cross trades is 55.3%, with the average winning trade equal to 4.0%, higher than the average performance of all types of candlesticks. Max Drawdown was -31.7%, versus the stock’s drawdown of -59.3%, which shows less volatility than the buy-and-hold strategy.

The average winning trade was 4.0% over ten days, and the average losing trade was -3.7%; this represents a reasonable profit margin, especially when combined with 56.1% of successful trades. The average win for all trades is 0.58% per trade.

Advanced Candlestick Patterns

The Bullish Harami Cross pattern is similar to the Bullish Harami in that it also signals the possible end of a bearish trend and the beginning of a bullish trend. When the first candle is still a bearish pattern with a significant move down, the second candle is usually above the Spinning or Doji, meaning that the opening and closing prices are the same and still within the limits of the first candle.

The percentage of winning trades Bearish Harami Cross is 57%, with the average winning trade equal to 3.6%, higher than the average performance in all types of candlesticks. Max Drawdown was -28.9%, versus the stock’s drawdown of -59.30%, which shows less volatility than the buy-and-hold strategy.

The average winning trade was 3.6% over ten days, and the average losing trade was -3.5%; this represents a tight profit margin, but when combined with 57% trading success, the strategy is profitable. The average profit for all trades is 0.57% per trade.

The Best Candlestick Patterns To Profit In Forex

The Bearish Harami Cross pattern is a two-candlestick chart pattern that usually means the end of a bullish trend and the potential start of a bearish trend. The first candlestick will often be a bullish bar, indicating that the market has increased during the period. The second candle is bearish, indicating buyers have entered and pushed the price down from the previous high.

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The Shooting Star candlestick pattern achieved an overall success rate of 57.1% and produced an average gain of 0.56% with a reward/risk ratio of 1.11. The average win was 3.4%, while the average loss was -3.19%. With a solid reward/risk ratio of 1.11, this supposed bearish pattern is actually very bullish.

The Shooting Star is the third candle in a three-candle pattern. With a long tail and a small green body with a price that is open and close during the day, it looks like a star falling from the sky. Traditionally considered a bearish reversal pattern, our data shows this candle is 57-1% bullish in all market conditions.

After doing 8029 trades, in 548 years of data, we confirmed the Doji Win Rate to be 0.52% per trade. A win rate of 0.52% means that trading long Doji candles will earn you an average profit of 0.52% per trade if you sell after ten days. Conversely, short-selling the Doji candle, you should expect to lose 0.52% per trade.

The percentage of winning trades was 55.6% versus

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