The Step Candle Pattern by Sylvain Vervoort
Up And Down They Go
The Step Candle Pattern
In this third part of a seven-part series on indicator rules for
a swing trading strategy (IRSTS), we look at how to identify
a candlestick pattern that appears at turning points.
One of the rules for my swing trading strategy (IRSTS)
involves recognizing a candlestick pattern at pivot points.
There are several reversal patterns that could occur at
these turning points, but I have observed one pattern that I
could not find in the literature on candlestick patterns. In this
article, I will introduce you to this pattern.
When looking for chart patterns, try not to get into the habit
of looking for a specific pattern anywhere on a price chart
or combining it with price averages in an up or downtrend. Instead, make sure the pattern is visible at a price turning point,
preferably followed by some additional buy or sell signals.
In addition, the move that follows the pattern should be large
enough to make a profit.
In part 2 of this article series last month, I introduced my 1-2-3
wave count using a high-low zigzag pattern on the price chart.
This zigzag is a tool that identifies price turning points, and at
these points you can look for candlestick patterns. When you
bring up a daily chart, look for prices to move at least 10%
between highs and lows. Only then can you make worthwhile
profits. There should also be several such moves so you can
continue to make higher profits. The chart in Figure 1 shows
an example of a zigzag between the lowest low and highest high levels at pivot points triggered by a minimum low-tohigh
and high-to-low price change of 10%.
Lets take a look at the pattern I have discovered. I will start with
the up reversal pattern, which I named the upstep pattern.
The upstep pattern is one I found appearing frequently at
turning points. The pattern consists of a white (green) candle
after or at a pivot low point that opens inside or equal to the
low side of the previous candle body, and closes above the
upper side of the previous body. The first candle of this upstep
pattern can be black (red) or white (green).
There are four possible ways this pattern can appear