Study and Backtest Of All 75 Candlesticks – Which One Actually Works And Which One Is Best?

Last Updated on July 7, 2022 by Oddmund Groette

We have yet to see much quantified backtest of candlestick patterns. Practically all candlestick “analysis” is based on anecdotal evidence and some random charts showing successful trades (and ignoring the bad ones). Do candlesticks really work?

We decided to find out and we sat down to quantify ALL the candlestick patterns that exist. Over the last weeks, we tracked down ALL candlestick patterns and backtested them. The results are summarized in the table below and additionally, we have compiled all the patterns into easy-to-test Amibroker code.

The result is a complete backtest of all 75 candlestick patterns that exist!

We have made two products based on our research:

  • Product one: Backtests of all the patterns with graphs, performance metrics, and explanations.
  • Product two: A second product that includes the Amibroker code for all patterns.

All backtests are based on S&P 500 (SPY) from its inception until today.

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75 candlestick patterns backtested

If you do a search on the internet and make a table of all the candlestick patterns out there, you might count a higher number than 75. However, many patterns are more or less the same with just minor differences, and some are even the same but with a different name.

How do you get access to our research?

The research is accessible via two products in our shop: one product with all the reports, and one product that additionally has all the Amibroker code.

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10 best candlestick patterns – Performance Sample

To give you an idea if it works or not, we compiled a backtest (S&P 500) with the ten best candlestick patterns that have more than 50 trades since 1993 (ranked on profit factor). The equity curve below summarizes how 100 000 invested in 1993 would have grown until today (compounded and taking just one position at a time):

The performance of the ten best candlestick patterns.

The strategy performance metrics read like this (slippage and commissions not included):

  • #trades: 705
  • CAGR: 10.6 (buy and hold 7.9%) – dividends not included in the backtest
  • Win rate: 72%
  • Exposure (time in the market): 35%
  • Avg bars held: 4.7 (average holding time is almost 5 trading days)
  • Max consecutive winners: 18
  • Max consecutive losers: 4
  • Max drawdown: 28%
  • Risk-adjusted returns: 30.4%
  • Profit factor: 2.5
  • Sharpe Ratio: 1.35

The annual returns of the ten best candlestick patterns look like this:

The performance of the ten best candlestick patterns. Annual returns.

We would say this is pretty good! You would have managed a better return than owning the S&P 500 and at the same time being invested only 35% of the time and thus avoiding the worst drawdowns. The risk-adjusted return is 30%! (Please read more about risk-adjusted returns)

Is it any guarantee that the future will be just as good? Of course not.

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The results are summarized in this sortable table:

Pattern#TradesAvg P\LMax DDWin RatioProfit FactorAnnual ReturnExposureRank
154.15-2.43100N/A0.680.181
221.370100N/A0.090.032
3101.3-4.41905.850.440.523
4471.04-4.9682.985.361.642.584
5200.98-3.968070.661.115
61060.73-14.3480.192.922.594.946
7550.72-9.6874.552.681.322.737
8150.7-8.9473.332.480.340.88
9250.67-18.63881.910.531.219
1010.66-0.48100N/A0.020.0410
1190.65-2.9888.897.930.20.3811
12580.62-9.2779.313.271.212.5812
13140.62-2.6678.578.930.290.4312
14510.61-7.1768.632.511.043.3814
15460.6-10.1969.572.490.913.0515
16130.58-9.2853.851.630.230.9816
17130.58-9.2853.851.630.230.9816
181220.57-15.780.333.862.384.8118
19160.56-3.68754.430.30.6219
202760.55-16.671.742.635.1613.7920
211920.5-18.269.272.143.199.921
221150.44-15.3476.522.311.694.7622
23450.43-12.5962.221.930.641.9923
24670.43-1379.12.330.962.7723
251140.42-23.7573.681.631.556.1725
26500.42-3.88723.190.72.9225
27250.41-9.93601.710.331.1727
28690.41-18.0169.571.540.883.9527
29800.37-25.1168.751.550.944.5629
30520.37-8.51752.110.642.2929
31530.37-17.7879.251.710.632.5629
32540.37-8.9672.221.980.672.1329
331200.36-22.6270.831.591.376.4333
342850.36-25.6176.491.753.3411.3133
351120.34-14.3473.211.921.267.0835
36620.34-12.3774.191.890.72.7935
37100.34-4.11802.030.110.3535
382080.32-18.6967.791.682.211.5738
39450.3-16.7968.891.390.412.5939
40190.29-7.9663.161.760.180.8440
41320.27-5.1671.882.110.291.1941
4290.26-4.1177.781.720.080.3342
4350.25-1.15602.990.040.1843
44400.25-9.2672.51.680.331.9443
455000.24-24.79701.483.7724.3345
462340.23-24.5377.351.41.6811.3646
472340.23-24.5377.351.41.6811.3646
48570.23-8.4964.911.630.432.9346
49390.22-6.2376.921.610.281.8649
50130.16-5.8453.851.390.070.6650
51400.15-10.7877.51.340.192.0751
521590.15-25.8663.521.240.7210.6651
53150.15-13.0873.331.140.060.651
5410.130100N/A00.0154
55420.09-22.9461.91.050.062.455
56420.08-6.4369.051.260.121.7956
57580.07-6.8958.621.140.122.9857
582500.05-34.6166.41.020.1412.858
5990.03-5.2155.561.040.010.5859
60740.03-14.5372.971.030.044.0159
61110.03-3.7763.641.120.010.659
6220.02-3.34501.0100.1462
63340.02-14.7167.650.97-0.031.6762
64120.01-12.33750.98-0.010.7964
6535-0.01-5.9151.430.97-0.021.8265
6697-0.02-27.8763.920.93-0.166.9666
6788-0.03-11.6460.230.93-0.114.5467
6833-0.17-13.3569.70.75-0.211.5768
6931-0.2-24.2467.740.76-0.282.1669
7070-0.32-34.0561.430.68-0.95.2770
712-0.39-1.8900-0.030.1571
7219-0.47-16.8347.370.59-0.331.5272
7316-0.78-17.01500.35-0.441.0473
7413-0.94-15.6953.850.35-0.430.9974
757-1.57-19.7557.140.34-0.420.6475

 

 

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