During the time of research to write the book "Candlestick Charting Explained", many people are using inaccurate patterns. Includes Candlestick and Classic chart patterns. See an example of what is said. Consider the following chart:



"What do you see in that Graph?"

The answer is probably going to be a bunch of bars that look like the Head and Shoulders pattern, but since you have no idea of the previous trend you don't know for sure. If the previous trend is bullish it will be a reversal Head and Shoulders pattern, but it can also be a trend continuation pattern if it is in a downtrend. But again, you don't know that either because the trend is not shown in the illustration above.

Many people, especially novice traders, often define classic patterns and candlestick patterns out of their context; they don't need to know what the previous trend was. This is a sloppy approach to analysis and approach and it won't be of any value. "Reverses and Continues patterns are Reversal and Continuation patterns of something and something that are Previous Trends." Further discussion on this will cover exactly what the previous trend needed to be in order to make the model more effective. If you see a Head and Shoulders pattern in an uptrend, you should be the size of the previous uptrend at least equal to the distance from the head to the neckline in the pattern. In other words, the larger the previous trend (in the price direction), the more valuable the "reversal" is. If the uptrend is not as large as the head-to-neck distance, then this pattern is ineffective. And will ignore it.

Let's continue with the illustration below:
The chart above is a Japanese candlestick pattern. We will come to the same questions as above:

What is this model?

Most would define it as an Evening Star model - a 3 days model.

The Evening Star pattern is a bearish reversal pattern. However, you don't know what the previous trend was so you're just saying it was just like a Daystar and not sure. However, once you have determined that it is in an uptrend, you are right. The chart below shows that the previous trend was in fact bullish:


While all of this may seem obvious, most people often come across analysts/experts who give patterns regardless of trend. And actually, we are being misunderstood, huge misunderstandings. You have to spend a lot of time and effort researching different patterns and only validating their potential after a trend has been identified.

Next, are ways that are helpful in using chart patterns and candlestick patterns:

Can we use Candle Patterns on intraday data (intraday - H1, H4, M15, ..) or weekly data (Weekly)?

Of course, you can, but, ... you shouldn't. The Japanese take the time from the end of a trading day to the opening of the next day very seriously. This is an extremely important time for the psychological development of traders and thus to the development of the patterns. This period is the period during which investors reassess their decisions and many decisions are made. With intraday charts, candles are just a continuation of data, investors do not have much time for judgment or decision making. Meanwhile, weekly candles negate the importance of the highest and lowest prices, and the sentiment of some trading sessions can be ignored. Imagine a Week candlestick that opens on Monday, closes on Friday, but highs can happen on any day of the week, and lows are possible. happens any day of the week. Trading is of course an art, if it is right for you, use it; don't find it suitable.

Why aren't one-day candlestick patterns recommended for trading?

One-day candlestick patterns are patterns that appear only in the form of a single candle. It differs from candlestick clusters, which appear patterns with series of candles. One-day patterns are not patterns that allow you to observe the development of trader sentiment in the same way you would with more complex candlestick patterns. Of course, single candlestick patterns still send certain messages to us but we shouldn't trade on them!

Why are there more reversal patterns than continuing ones?

Because defining the start and end of a trend is more important than identifying the on-going trend. It helps us to exit positions, and can open new positions when the trend reverses!