Bullish Side By Side Candlestick Pattern (Backtest)

Last Updated on January 27, 2023

The Japanese candlestick chart is not only easy to visualize but also makes technical analysis better, as the candlesticks can form shapes and patterns that can give a clue about how the price might move in the future. One such pattern is the bullish side-by-side pattern. What is it?

The bullish side-by-side pattern is a 3-candlestick pattern that forms in an uptrend and is characterized by two bullish candlesticks occurring next to each other after the price gaps above the first candlestick, which is also bullish. It is considered a bullish continuation pattern as the uptrend tends to continue after it is formed.

In this post, we answer some questions about the bullish Side-By-Side pattern.

What Is Bullish Side By Side?

The bullish side-by-side pattern is a 3-candlestick pattern that forms in an uptrend and is characterized by two bullish candlesticks occurring next to each other after the price gaps above the first candlestick, which is also bullish. It is considered a bullish continuation pattern as the price is likely to continue to rise after it is formed.

The pattern can be seen in any timeframe and consists of three candlesticks:

  • The first candle in the pattern is typically a small bullish candle
  • The second candle, which is bigger and also bullish, gaps above the first candle
  • The third candle is also a bullish candle and has a similar form, length, and closing price as the second candle
Bullish Side By Side candlestick pattern backtest
Bullish Side By Side candlestick pattern
Source: Candlescanner.com

Bullish Side By Side Candlestick pattern example

This pattern indicates that buyers are becoming increasingly confident in the market and are willing to pay higher prices to acquire the asset. Traders may use this pattern as a signal to enter a long position in the asset, with the expectation that the price will continue to rise.

Bullish Side By Side Candlestick Pattern Backtest

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Benefits of Bullish Side-By-Side Candlestick

The bullish side-by-side candlestick pattern can provide several benefits for traders:

  • Confirmation of bullish sentiment: The pattern indicates that buyers are becoming increasingly confident in the market and are willing to pay higher prices to acquire the asset.
  • Provides a potential entry point: Traders may use this pattern as a signal to enter a long position in the asset, with the expectation that the price will continue to rise.
  • Can be applied to different timeframes: The pattern can be seen in any time frame, providing flexibility for traders who use different time frames for their analysis.
  • Low risk and high reward: Since the pattern is bullish, the risk of loss is lower compared to other patterns.

A Look at the History of Bullish Side By Side

The bullish side-by-side candlestick pattern is a technical analysis tool that has been used for centuries to identify potential buying opportunities in financial markets. The origins of candlestick charting can be traced back to Japan in the 18th century, where it was used by rice traders to analyze price trends. The candlestick charting method was later adopted by stock traders in the West and has been used in various financial markets ever since.

Candlestick charts are widely used by traders and investors to analyze price movements in financial markets. The bullish side-by-side pattern is one of many candlestick patterns that traders use to identify potential buying opportunities.

Analyzing a Bullish Side-By-Side Candlestick

To analyze a bullish side-by-side candlestick pattern, you should follow these steps:

  • Identify the trend: The price must be in an uptrend for there to be a bullish side-by-side pattern.
  • Identify the pattern: Look for two consecutive bullish candlesticks of the same size that gap above a smaller bullish candlestick in an upswing.
  • Check for confirmation: Look for other technical indicators, such as moving averages and MACD to confirm the bullish signal.
  • Take note of potential resistance levels: Look for areas on the chart where the price has previously struggled to break through, as these areas may act as resistance levels.
  • Evaluate the volume: Look at the volume of trading during the formation of the pattern. High volume is considered to be a stronger indication of a trend change.
  • Consider the overall market: Take into account the overall market conditions and any fundamental factors that may be affecting the asset’s price.
  • Use it as a trigger to take a position: If the pattern is confirmed by other indicators and in alignment with the overall trend of the market, traders may use it as a trigger to enter a long position.

Using Bullish Side By Side in a Backtest

Backtesting can help traders evaluate the reliability of the pattern and determine if it is a useful tool. Here are the steps to backtest the bullish side-by-side pattern:

  • Collect historical data: Gather historical data for the asset you want to test. This should include the open, high, low, and close prices, as well as the volume of trading.
  • Create a chart: Use the historical data to create a candlestick chart for the asset.
  • Identify the pattern: Look for instances of the bullish side-by-side pattern on the chart.
  • Simulate trades: Use the historical price data and the bullish side-by-side pattern to simulate the trades that would have been made in the past based on your strategy. Keep track of the results of each trade, including profit or loss and the number of winning and losing trades.
  • Evaluate the pattern’s performance: Compare the performance of the asset after the pattern occurred to its performance before the pattern. This will give you an idea of how reliable the pattern is at predicting future price movements.

Creating a Trading Strategy with Bullish Side By Side

Creating a trading strategy with the bullish side-by-side candlestick pattern involves using the pattern as a signal to enter a long position in an asset with the expectation that the price will continue to rise. Here are the steps to create a trading strategy with the bullish side-by-side pattern:

  • Specify how to identify the pattern: This could be done manually or with the help of some software.
  • State your trade entry and exit rules: You must state when to buy and when to sell. If you need other indicators for confirmation of the signal, you should specify them.
  • Implement a risk management plan: It’s important to have a proper risk management plan in place, such as setting stop-loss orders or using position sizing to control risk exposure.
  • Backtest the strategy: Test the strategy with historical data to know how well it would have performed.
  • Optimize the strategy: If the strategy is not performing well, consider adjusting the entry and exit rules or other parameters of the strategy to improve its performance. Repeat the backtesting process with the new parameters to see if they improve the results.

Risk Management with Bullish Side By Side

Risk management is an essential part of any trading strategy, including one that uses the bullish side-by-side pattern as a signal to enter a long position. One of the key ways to manage risk when using this pattern is to set stop-loss orders at a level below the entry point. This will limit the potential loss if the price moves in the opposite direction of the expected trend.

Also, you can use position sizing to control your risk exposure, by adjusting the size of your position according to your risk tolerance and the overall market conditions. It’s also important to keep monitoring the performance of the strategy over time, adjusting as necessary.

Common Mistakes to Avoid with Bullish Side By Side

When using the bullish side-by-side pattern as a signal to enter a long position, you should avoid the following common mistakes:

  • Not confirming the pattern: The pattern should be confirmed by other technical indicators and fundamentals analysis before making a trading decision.
  • Not considering the overall market trend: The pattern should be considered in the context of the overall market trend.
  • Not managing risk: Risk exposure should be managed by adjusting the size of the position according to your risk tolerance and the overall market conditions. You may also stop-loss orders to limit potential losses.
  • Not monitoring the performance of the strategy: The performance of the strategy should be monitored over time and adjusted as necessary.
  • Overreliance on the pattern: The pattern should not be the only indicator used to make trading decisions, rather it should be used in conjunction with other technical and fundamental analysis.
  • Not backtesting the pattern: Backtesting the pattern with historical data can be a useful tool for evaluating the reliability of the pattern and adjusting the strategy as needed.

Crafting the Optimal Bullish Side-By-Side Strategy

Crafting an optimal bullish side-by-side strategy involves combining several elements to increase the chances of success. Here are some steps to craft an optimal strategy:

  • Specify how to identify the trend and the pattern: Have a clear way to identify the pattern in a setting of an uptrend.
  • Use other techniques and indicators to confirm the signal: You can use moving averages and momentum indicators like the MACD to confirm the signal
  • Manage risk: Use position sizing to control risk exposure by adjusting the size of the position according to your risk tolerance and the overall market conditions. Stop loss should also be used to limit potential losses.
  • Use multiple timeframes: Use multiple timeframes to get a better understanding of the market trend and the pattern’s reliability.
  • Backtest the strategy: Use historical data to evaluate the reliability of the pattern, and adjust the strategy as needed.
  • Continually monitor the performance: Continually monitor the performance of the strategy and adjust as necessary.

Closing Thoughts on Bullish Side By Side

Bullish side by side is an impressive bullish candlestick pattern. As a bullish continuation pattern, you can use it to formulate long strategies and trade in the direction of an existing uptrend. The pattern works well when combined with other forms of analysis that show the overall market conditions and sentiment. As with other strategies, you must backtest it before putting your money on the line.

What are the benefits of using this pattern?

Here are some of the benefits:

  • It can be used to confirm bullish sentiment; it indicates that buyers are becoming increasingly confident in the market and are willing to pay higher prices to acquire the asset.
  • It can provide a potential entry point
  • It can be applied to different timeframes
  • It has low risk and high reward
  • It can be confirmed by other technical indicators
  • Traders may use this pattern as a signal to enter a long position in the asset, with the expectation that the price will continue to rise

How has the pattern performed historically?

According to Tom Bulkowski’s candlestick pattern assessment, the bullish sided-by-side pattern has been followed by bullish continuation 66% of the time. But being a rare pattern, it ranked 73rd in their rank of candlestick pattern frequency — out of 4.7 million candles, only 984 bullish side-by-side patterns were found. So, don’t expect to see this pattern that often.

How can investors analyze a Bullish Side-By-Side candle?

Investors can analyze a bullish side-by-side candle by following these steps:

  • Identify the pattern: Look for two consecutive bullish cand sticks on the chart, where the second candle opens above the close of the first candle and closes above the open of the first candle.
  • Confirm the trend: Check to see if the pattern is occurring in an uptrend and the momentum of the uptrend. You can use moving averages for this.
  • Check for confirmation: Look for other technical indicators, such as MACD, to confirm the bullish signal.
  • Evaluate the volume: Look at the volume of trading during the formation of the pattern. High volume is considered to be a stronger indication of a trend change.
  • Consider the overall market: Take into account the overall market conditions and any fundamental factors that may be affecting the asset’s price.

How can investors use Bullish Side By Side in a backtest?

Backtesting the bullish side-by-side pattern can help traders evaluate its reliability and usefulness. The process involves:

  • Gathering historical data for the asset, including open, high, low, and close prices and volume of trading.
  • Creating a candlestick chart using historical data.
  • Identifying instances of the pattern on the chart.
  • Simulating past trades based on the strategy and tracking the results, including profit/loss and the number of winning/losing trades.
  • Evaluating the pattern’s performance by comparing the asset’s performance before and after the pattern.
  • Improving the strategy by refining entry and exit rules or adjusting other parameters if necessary, then repeating the backtesting process with new parameters to see if they improve results.

What strategies can be developed using this pattern?

Traders can develop several strategies using the bullish side-by-side pattern as a signal to enter a long position. These include:

  • A trend-following strategy that uses the pattern as a confirmation of the current uptrend.
  • A breakout strategy that uses the pattern as a signal to enter a long position when the price breaks above a key resistance level.
  • A swing trading strategy that uses the pattern as a signal to enter a long position and then exit the position when the price reaches a key resistance level.
  • A combination strategy that uses the pattern in conjunction with other technical indicators and fundamental analysis to make more informed trading decisions.

What are the best risk management practices for Bullish Side By Side?

Some of the best risk management practices for bullish side by side include:

  • Setting stop-loss orders at a level below the entry point to limit potential losses if the price moves in the opposite direction of the expected trend
  • Using position sizing to control risk exposure
  • Diversifying your portfolio can help to spread risk across different assets and markets
  • Not using too much leverage, as leverage can increase potential losses

What mistakes should investors avoid when trading with this pattern?

Avoiding mistakes when using the bullish side-by-side pattern can help increase the chances of success. Common mistakes to avoid include:

  • Not confirming the pattern with other indicators and fundamentals analysis
  • Not considering the overall market trend
  • Not managing risk through position sizing and stop-loss orders
  • Not monitoring and adjusting the strategy over time
  • Overreliance on the pattern and not using other analysis
  • Not backtesting the pattern with historical data for evaluation

What is the best Bullish Side-By-Side strategy?

There is no single “best” strategy when it comes to using the bullish side-by-side pattern, as it can vary depending on the asset, timeframe, and market conditions. However, an optimal strategy would involve combining several elements to increase the chances of success. This includes:

  • Backtesting the pattern with historical data to evaluate its reliability
  • Confirming the pattern with other technical indicators and fundamentals analysis
  • Considering the overall market conditions
  • Using stop-loss orders to limit potential losses
  • Position sizing to control risk exposure
  • Continual monitoring and adjustment of the strategy
  • Using a comprehensive approach by combining different indicators, candlestick patterns, and technical analysis to make more informed trading decisions.

What are the final thoughts on Bullish Side By Side?

Bullish side by side is a powerful bullish candlestick pattern that can be used to identify potential buying opportunities. As a continuation pattern, it works best when used in conjunction with an existing uptrend. To maximize its effectiveness, it’s important to combine it with other forms of analysis that provide insight into market conditions and sentiment. Before implementing any strategy that involves this pattern, it is important to backtest it using historical data.

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