Discussing the article: "Price Action Analysis Toolkit Development (Part 43): Candlestick Probability and Breakouts"
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Check out the new article: Price Action Analysis Toolkit Development (Part 43): Candlestick Probability and Breakouts.
Enhance your market analysis with the MQL5-native Candlestick Probability EA, a lightweight tool that transforms raw price bars into real-time, instrument-specific probability insights. It classifies Pinbars, Engulfing, and Doji patterns at bar close, uses ATR-aware filtering, and optional breakout confirmation. The EA calculates raw and volume-weighted follow-through percentages, helping you understand each pattern's typical outcome on specific symbols and timeframes. On-chart markers, a compact dashboard, and interactive toggles allow easy validation and focus. Export detailed CSV logs for offline testing. Use it to develop probability profiles, optimize strategies, and turn pattern recognition into a measurable edge.
In this article we perform a probability analysis of three common candlestick types, Doji, Engulfing and Pinbar, to measure how they influence price action across different instrument pairs. These candles often signal either trend continuation or reversal. For example, in a downtrend a bullish Pinbar or bullish Engulfing may indicate a possible reversal to the upside, and conversely, in an uptrend a bearish Pinbar or bearish Engulfing can precede a downside reversal. A Doji often represents indecision: inside a strong trend it can signal a brief pause followed by continuation, while at key support or resistance, or after a long move, it may indicate a potential reversal. A Doji formed in a sideways market, or without volume context, is frequently neutral.
A common problem traders face is premature entries, such as seeing a bullish Pinbar and buying immediately, only to be left in a losing position when the market fails to reverse. Different instruments and timeframes respond differently to the same formation; some pairs show higher follow-through after certain patterns. This EA is built as a probability analyst; it scans historical bars and quantifies how often each pattern leads to continuation, reversal, or successful breakouts on a particular pair and timeframe. That empirical view helps price-action traders know which patterns are more reliable for reversal or continuation signals in the markets they trade.
If you look closely at the diagram above, pattern A is a bullish engulfing, which resembles a buy signal, and we see the market moving higher after the formation, confirming a positive outcome. In B we observe a Doji followed by a bearish pinbar, and the market subsequently moves in the bears' favor, which validates the bearish signal. The same applies to C, which is a bearish engulfing that signaled a sell and produced the expected decline.
Author: Christian Benjamin