Searching for (and testing) candlestick patterns

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    By using the CandlestickPattern function it’s possible to scan for – and quantitatively test – any of the candlestick patterns we have built in to the system (see here for a list of patterns).

    So to test for bullish engulfing candles in the Signal Tester for the Nasdaq 100 stocks use the following daily setup over the last 5 years. The results show the returns 22 days after each signal (and also the lead-up 10 days before each one).



    Over 4500 results in less than 2 seconds show that there was a 58% probability of gain, with a mean return of 1.68%:


    On a ticker level, the results show that ADBE had the highest probability of gain (82% on 39 signals) with an average of 4.76% 22 days after each signal. AMD had an average 8% return on 35 signals, but with a much higher standard deviation:


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