After knowing the two previous of the most profitable candlestick pattern that support your successful trading, let’s continue our discussion about the next three.
Let’s check out the most profitable candlestick patterns:
Three Outside Up and Three Outside Down patterns
Three Outside Up and Three Outside Down patterns also include the development of the Inside Bar pattern. The difference is the first candle is smaller or inside the next candle. Thus, the first and second bars indicate the pressure between the seller and the buyer.
Three Inside Up pattern indicates a bearish reversal (price reversal from up to down). While the Three Inside Down pattern signifies a bullish reversal opportunity (price reversal from down to up).
Evening Star and Morning Star Patterns
According to Market Realist, the Evening Star and Morning Star formations are three candlestick patterns that indicate doubts among market participants. However, the third candlestick confirms the direction of the next price direction. Evening Star patterns indicate a bearish reversal (price reversal from rising to decreasing).
Conversely, if the Morning Star pattern appears after a downtrend period, there will be a high probability for a bullish reversal (reversal of prices from going down to going up).
Multi-Bar Reversal Pattern (Falling and Rising Three Methods)
Generally, the more stems in a formation, the less likely it will be to appear. However, the accuracy of trading signals from Falling and Rising Three Methods patterns is higher than patterns with the fewer number of bars.
This advantageous candlestick pattern has the characteristic of three bars flanked in the middle but then opposed by the last bar. The closing price of the last candle determines the accuracy of this multi-bar pattern. In the Falling Three Methods pattern, a bullish reversal (price reversal from down to up) is confirmed after the last closing bar closes lower than the first bar. Conversely, in the Rising Three Methods pattern, please place a long position (buy) after the last bar closes higher than the first bar.
Additional Notes
One important factor in filtering the accuracy of candlestick patterns is by paying attention to the choice of timeframes. High timeframes (above H4) generally have lower noise. thus, the accuracy of the trading signal is higher than the candlestick pattern at low timeframes. Second, don’t rush to execute the market order before there is confirmation from another candlestick bar. For example, when a Pin Bar pattern is formed, wait until the next candlestick bar touches the confirmation line. Alternatively, use indicators such as MACD or RSI to confirm the accuracy of trading signals.
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