Mastering Financial Pattern Recognition

Chapter 5. Modern Trend-Following Patterns

Continuing with the trend-following concept, this chapter reveals new patterns that are not part of the classic ones. I refer to these new patterns as modern since they are personal discoveries that I use in my analyses.

The aim remains the same, which is to create objective conditions and back-test them so that you form an opinion about their frequency and predictability. The important thing to remember is that a pattern’s predictability is quite random from one market to the other, meaning that what works on GBPUSD may not work on EURGBP as every market has different statistical and technical properties.

Therefore, the main assumption I am making is that modern patterns are neither better nor worse than classic patterns; they are simply a diversification tool that  allows you to get more confirmation in the analyses. This means that if you see at least two or three patterns (classic or modern) emerging around the same time, you should have a better conviction to take the trade. Let’s now get started with these new patterns and explore their intuition and code.

The Quintuplets Pattern

The Quintuplets pattern is a multicandlestick configuration that confirms the underlying trend. This pattern was born out of the psychology of herding as well as the failure of reaction,¹ which gives it the extra push to continue in the same direction. It is characterized by having five successive small candles of the same type. The pattern relies ...