Many popular technical trading strategies are based on bar patterns (also known as candlestick patterns). These patterns help traders identify specific bar behaviors that signal the right moment to enter or exit a trading position.
While candlestick patterns are widely used by technical traders, both beginners and experienced traders often find it challenging to monitor charts and wait for the right pattern to appear. Some patterns might take hours, days, or even weeks to form, making it difficult to stick to a trading plan.
This is exactly why our new Candlestick Pattern Strategies feature has been so highly requested by Capitalise.ai traders. It provides a way to automatically recognize and act on candlestick patterns, making it easier to implement trading strategies and reduce the burden of manual monitoring.
How to Refer to Historical Bars?
In the past, traders could only work with the most recent bar, but now, with the new feature, you can refer to historical bars within your strategy conditions.
The latest bar in the chart is the open bar and can be addressed as “the current bar”.
The first closed bar can now be referred to as “the previous bar”.
You can also refer to bars before the previous one by using offsets. For instance:
“With an offset of 1” refers to the previous bar.
“With an offset of 2” refers to the bar before the previous one, and so on.
This allows you to use specific bars in your strategy and trigger actions based on their behavior, making your trading strategy much more dynamic and adaptable.
For example, if you would like to monitor the closing price of a 15-minute bar that closed 2 bars before the current bar, you can write:
“If AAPL bar(1, 15m, Close) with an offset of 1…”
This new capability enables you to create endless strategy scenarios to meet your specific trading method.
In this article, we will demonstrate how to use this powerful new feature by creating a Candlestick Pattern Strategy example.
Defining candlesticks patterns
For this example, let’s focus on a simple 3-bar candlestick pattern and how you can set up a strategy to trigger trades when this pattern appears.
The 3-bar pattern is designed to capture opportunities in fast-moving markets. Here’s an example of what a long play based on a 3-bar pattern might look like:
This pattern begins with a long bullish bar, followed by a smaller bearish bar contained within the first, and finishes with the current bar breaking above the high of the first bullish bar.
To capture this pattern, we need to set multiple conditions:
The first bar must be a strong bullish bar: For instance, we can define this bar to have at least a 5% price movement, signaling strong upward momentum.
The second bar should have a small range, for example, less than 0.5%.
The second bar should also have its high price below the first bar's high.
Finally, the current bar should cross above the first bar’s (the one with an offset of 1) high.
Creating a full entry strategy
After incorporating all of these conditions, we can finalize the strategy by specifying an action to buy or sell a certain number of shares. Here’s how the complete entry strategy will appear:
This is just one example of the many trading strategies you can create, automate, and execute without any coding using Capitalise.ai. Explore the strategy wizard to build your own strategy, or use pre-built templates from the Live Examples library.
Note: All screenshots and examples are for technical demonstration purposes only. They should not be considered as recommendations for any specific trading strategy, nor do they constitute any form of advice. Please click here for further explanation