Testing The Engulfing Bullish Pattern by Pawel Kosinski
Identifying chart patterns is often subjective. Is there a way to objectively backtest chart patterns? It can be a challenge but here’s one way to do it.
A necessary component of backtesting trading strategies is to have well-defined entries and exits. For Japanese candlesticks like the engulfing bullish pattern, exits aren’t really specified—traders define them in different ways. As an example, you could look for a resistance well above a potential entry price or sell the position if a bearish price action occurs. This is what makes backtesting a challenge ...