Stocks & Commodities V. 31:7 (26–32): The Step Candle Pattern by Sylvain Vervoort

Stocks & Commodities V. 31:7 (26–32): The Step Candle Pattern by Sylvain Vervoort
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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.

High-low zigzag

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%.

The pattern

Let’s take a look at the pattern I have discovered. I will start with the up reversal pattern, which I named the upstep pattern.

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 (Figure 2):

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