Algorithm assessing a pattern’s efficiency

Please note that scanner settings may have a great impact on the number of identified patterns and consequently on statistics.

For example changing the maximum acceptable deviation of the maximum body height for doji candles may cause a major impact on the number of found patterns. It may happen, for instance, that a Hammer pattern will be identified as a doji candle and will be rejected.
An even greater impact may have Statistics Calculation Settings.

Therefore, it is recommended that any changes to the settings of the scanner are performed with a full understanding of possible consequences during the scanning process.

 


The algorithm evaluating the efficiency of a bullish pattern occurrence works as follows:

  1. If Stop Loss price level is reached on the first candle following the pattern, the occurrence is marked as FALSE.
  2. If Stop Loss price level is reached within test period, the highest price reached prior to Stop Loss is used to assign the pattern occurrence to appropriate efficiency level (i.e. FALSE, LOW, MEDIUM or HIGH).
  3. If Stop Loss price level is not reached within test period, the highest price reached during the full period is used to assign the pattern occurrence to appropriate efficiency level (i.e. FALSE, LOW, MEDIUM or HIGH).

The algorithm for every pattern occurrence is run for the period of 5 and 10 candles, producing two separate results.

If there are not enough candles following pattern occurrence, the result is marked as NO DATA.

The algorithm works the same for bearish patterns, except that instead of using the highest price reached during the test period, the lowest one is used.

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