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Actually when you define patterns rigorously enough for a script to detect they are anything but random. |
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Actually doing this is the main reason that anyone that has ever doing back testing via script, finds that they fail miserable. Since candle patterns are more of an art form than science, trying to code them will be a daunting task. Here's and example:
Script Rules for a Hammer:
1) Upper Shadow no more than 1 tick
2) Lower shadow at least 2* the real body
3) Real body no greater than the previous 3 candles.
Seems easy and logical enough. So you run your test and see that it fails miserable. Then you dive a little deeper and see that the program "missed" some patterns. Some of these hammers might of had an upper shadow of 2 ticks, or a lower shadow of 1.89 of the real body. But since you put this constraints on, your program couldn't find them. These strict rules, and trying to find a program that can find them, is the lazy mans way of trading. One needs to spend hundreds upon hundreds of hours of screen time to be able to use candles effectively. Having a program point some out here and there, while might help a little, will do little in the long run. You will spend more time tinkering with the code then studying what you should be. Believe me, I know! I tried to do this.
I do not get why people do not understand that the shape of the candle, while important, is not the end all and be all. The overall technical picture is what is important. If price comes down to what you have defined as a support level, and there is a hammer or a spinning top, one should think about going long. There is no need to put these constraints on. What should be defined rigorously is your support/resistance levels or whatever a trader is using on conjunction with candles. The key word is conjunction. Candles are not a trading system.
Candles were never meant to be used as a part of some black-box or gray box system. They are a tool of the discretionary trader. One must come to realize that. To be able to program candles and do it effectively and profitably is a pipe dream. If you want to use candles, get in front of the screen and study. And when you think you got it, study some more.