Discussing the article: "Reimagining Classic Strategies (Part 18): Searching For Candlestick Patterns"
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Check out the new article: Reimagining Classic Strategies (Part 18): Searching For Candlestick Patterns.
This article helps new community members search for and discover their own candlestick patterns. Describing these patterns can be daunting, as it requires manually searching and creatively identifying improvements. Here, we introduce the engulfing candlestick pattern and show how it can be enhanced for more profitable trading applications.
For today’s discussion, we will focus on candlestick patterns, commonly referred to as engulfing candlesticks. There are many challenges that make it hard for practitioners to find reliable candlestick patterns. The first problem most practitioners will run into is that, there are materially many different candlestick patterns that any trader can follow. To make matters worse, this space can only be searched manually, meaning that the practitioner must often define by hand the rules and conditions in their algorithm that describe the specific candlestick pattern they have in mind.
As we know, there are numerous existing candlestick patterns, and searching through this space by hand, on your own may be intimidating for new and inexperienced members of our community. This article seeks to offer a practical guide on how we can improve a well-known candlestick pattern. The engulfing candlestick pattern that we will examine today is commonly recognized by most traders as a sign of a potential breakout in the market. These candlestick patterns often indicate accumulating open interest and, therefore, the possibility of a strong breakout on one side of the market.
In most of our articles in this series, we mostly focus on AI-powered trading strategies and technical indicators as the main signal generators. Rarely do we provide opportunities to candlestick patterns as the driver of the algorithm’s decision-making. Among many reasons, we’ll name a few why candlestick patterns can be more challenging to integrate into trading strategies.
Author: Gamuchirai Zororo Ndawana