October 2022
Beginner to intermediate
288 pages
7h 2m
English
Content preview from Mastering Financial Pattern Recognition
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
Chapter 10. Candlestick-Based Trend-Following Strategies
Pattern recognition is only one part of the equation. When you a find a pattern, you are most likely to use it within a wider trading framework, as trading systems relying purely on candlestick patterns are unlikely to yield consistent and stable positive returns.
This chapter discusses some examples of strategies you can use to filter the patterns using specific technical rules when dealing with trend following. Each market has its own characteristics and must have optimized strategy parameters, which is why I recommend you focus on understanding the main ideas and concepts rather than take away the exact parameters of the strategies presented in this chapter.
Ideally, the strategies should help you understand how to combine the different candlestick patterns (classic and modern) with some technical indicators. I also discuss the indicators in this chapter so that you understand their mechanisms and their weaknesses.
Note
Filtering refers to the concept of choosing the signals that have a better probability of providing a positive return.
Combining the Double Trouble Pattern with the RSI
As a reminder, the Double Trouble pattern is a modern trend-following candlestick configuration that incorporates volatility in its characteristics (calculated using the ATR indicator). The RSI is an indicator that, as discussed previously in the book, reinterprets the market’s momentum into values between 0 and 100 to better understand ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.