Profits from identifying and trading candlestick patterns at key levels
| Strategy Type | Candlestick Pattern Recognition / Short-Term Reversal and Continuation |
| Market Outlook | Profits from identifying and trading candlestick patterns at key levels |
| Risk Profile | Low to Moderate - patterns provide quick entry signals with defined risk |
| Reward Profile | Consistent returns from pattern-based entries (15-35%+) |
| Time Horizon | Short-term (hours to days) |
| Iv Environment | N/A - pure price-based strategy |
| Breakeven | Depends on pattern accuracy and risk management |
| Primary Instruments | US stocks via CFDs, S&P 500 E-mini, NASDAQ 100 E-mini, Forex, Commodities |
| Mas Compliance | MAS regulated brokers required for CFD/futures trading |
| Trading Hours | Multiple sessions - US 9:30 PM - 4 AM SGT, Asia 8 AM - 4 PM SGT, Europe 3 PM - 11 PM SGT |
| Contract Size | E-mini S&P: USD50 per point; Forex: varies by pair |
| Settlement | Cash settled for CFDs and futures |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Standard CFD/futures margin |
| Cdp Account | Not required for CFD/futures |
| Singapore Relevance | Candlestick patterns originated in Japan and work universally - Singapore traders can apply across all sessions and markets |
A candlestick shows open, high, low, close for a time period. Body is between open and close. Wicks extend to high and low. Green/white = bullish, Red/black = bearish.
A hammer has a long lower wick (2-3x body), small body at top, minimal upper wick. It's bullish at support in a downtrend, showing buyers rejected lower prices.
A doji has open and close at the same level (tiny or no body). It signals indecision. Alone it's not a signal - need next candle for direction confirmation.
Two-candle pattern where second candle body completely engulfs first. Bullish engulfing: bearish then larger bullish at support. Bearish engulfing: bullish then larger bearish at resistance.
Patterns work best at key levels. Hammer at support is bullish. Same shape at resistance (hanging man) is bearish warning. Location determines meaning.
Three-candle bullish reversal: bearish candle, small body/doji, bullish candle closing into first. Shows sentiment shift from bearish to bullish. Best at support.
Higher volume on pattern candle confirms conviction. High volume hammer = strong buying absorption. Low volume patterns are less reliable. Volume adds 5-10% to win rate.
A-Grade: Pattern at confluence (S/R + trend aligned). B-Grade: Pattern at single key level with trend. C-Grade: Pattern at level against trend. Trade only A and B.
HTF sets direction. Trading TF identifies patterns. LTF times entries. Example: Daily uptrend, 4H at support, 1H hammer = strong long setup.
Second candle completely within first candle's range. Shows consolidation. Trade breakout of range. Mother bar defines the zone.
Calculate candle metrics (body ratio, wick ratios, close position). Check against pattern criteria. Validate context (trend, level). Score and rank patterns.
Optimize on training period (2 years), test on subsequent out-of-sample (6 months), roll forward. Validates parameters work on unseen data, prevents overfitting.
Absorption: high volume, small body. Displacement: large body, minimal wicks. Order block: last opposing candle before move. Stop hunt: wick beyond obvious level.
Patterns at S/R: +10-15% win rate. With trend: +10-15%. With volume: +5-10%. Combined context can take 55% pattern to 70%+ win rate.
Stream price data. Wait for candle close. Run pattern detection. Check context (pre-calculated S/R). Score patterns. Alert on qualified signals. Monitor for entry.
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