Stocks & Commodities V. 26:6 (52-53): Top-Performing Reversal Candles by Thomas Bulkowski

Stocks & Commodities V. 26:6 (52-53): Top-Performing Reversal Candles by Thomas Bulkowski
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Top-Performing Reversal Candles by Thomas Bulkowski

Three candle patterns outperform all others. Can you guess which ones?

During research for my latest book, Encyclopedia Of Candlestick Charts, I explored the world of candlesticks and found which ones worked and which ones didn’t. In this article, I take a closer look at the methodology I used and discuss three candle patterns that work exceptionally well.


I spent a lot of time trying to figure out how to test short-term price patterns and found a method I believe works best. For a candlestick that acts as a reversal, price should enter the candle from one direction and exit it in the opposite direction. For example, a bearish harami has price rising into the candlestick pattern, by definition. In order for the candle to act as a reversal, price must exit downward.

What is meant by exit? I used a close either above the top (highest high) or below the bottom (lowest low) of the candle pattern to determine the exit trend. The logic behind this designation is that a candle that is supposed to act as a reversal should cause price to reverse immediately, not next week or next month, and have a lasting effect. It does no good if price reverses by dropping a penny the next day before rising again thereafter. This breakout definition shows both force of the move and the direction.


What are the best reversal candles of the 103 types I looked at? In a bull market, “three stars in the south” wins the prize by working best as a reversal 86% of the time. I’ll bet you’ve never heard of that one, have you?

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