1991issue C091-11
Candlestick labels as stacked construction tests
A candlestick is built from the open, high, low and close of one cycle. A named label is allowed only after polarity, relative range and multi-bar containment each reject constructions that fail the intended tests.
- The real body spans open to close and the shadows mark the high and low. Fill is a polarity rule: filled when the close is below the open, empty when the close is above the open.
- A doji forms when open and close are equal or nearly equal, and a bullish or bearish reading depends on where that candle sits in the existing trend.
- Testing only whether the close is greater than the open will tag every rising candle as a long white line, including candles that fail range and shadow checks.
- A white harami cross needs a current doji whose close sits inside the prior white real body, and multi-candle tests must run from most critical to least critical or the engine returns false matches.
Named open-high-low-close constructions turn a repeatable chart condition into a falsifiable signal hypothesis. Pattern recognition is the rule-based isolation of those ordered price structures against an explicit baseline of class assignments.
How a single candle is built
A candlestick is constructed from the open, high, low and close of a cycle. The real body is the thick open-to-close segment. The shadows are the thin high or low extensions beyond that body.
Real-body fill is a polarity rule. The body is filled when the close is below the open and left empty when the close is above the open.
Doji rules depend on the surrounding trend
A doji is formed when the open and close are equal or nearly equal. Whether that construction is read as bullish or bearish depends on where it appears in the existing trend. It is a possible turning point only in that surrounding context.
A doji star is specified as a small doji that gaps above or below the prior real body. That construction is treated as a possible halt in the current direction.
Why a close-above-open test is not a long white line
A recognition rule that only tests whether the close is greater than the open will label every rising candle as a long white line, including formations that fail the intended construction.
A complete long-white-line assignment also requires the candle range to exceed the average candle range, the close to remain below the high, and the open to remain above the low. Those checks keep the open and close inside the high-low extremes.
Polarity classes come before named subtypes
The recognition engine first partitions candles into three polarity classes: open equals close, open greater than close, and open less than close. Named subtypes are assigned only after that first-layer sort.
Near-doji cases can be stored as separate black or white doji classes by allowing open and close to differ by as much as 2 percent around equality.
Multi-candle names need ordered tests
Advanced candlestick patterns can span as many as 30 to 60 single candles. A recognition system has to assign pattern classes and extra data variables before it can isolate a named formation. Those extra variables serve as logic variables, ordered control flags that decide which pattern assignment is allowed to fire.
A white harami-cross assignment requires a current doji whose close sits inside the prior white real body. That harami cross is an inside-day construction. Multi-candle tests must be ordered from most critical to least critical or the engine returns false matches.
All readings on this track · 25 readings
- 1986Construct a decision procedure that revises itself
- 1989Finish the volume checklist before scoring the breakout
- 1989Constructing supervised forecasts on moving averages
- 1991Candlestick labels as stacked construction tests
- 1992Walk-forward evaluation of weekly price-change patterns
- 1993RSI price pattern templates and open interest
- 1994Constructing a dual-net day-ahead index direction forecast
- 1994A clocked stochastic second crest with a window-high stop
- 1996Volatility-ratio, inside-day and narrow-range-4 entry construction
- 1998Sliding-window correlation for cup-and-handle construction
- 2000Constructing rectangles for breakout hypotheses
- 2001Turning one candle into a ranked numeric object
- 2002Fuzzy-scored chart patterns as testable rules
- 2002From hot-zones to an open-close-matrix
- 2003Volume pressure and a band-clearing breakout case
- 2004Evaluating chart patterns against price objectives
- 2004Cobweb turning points from price structure
- 2005Hybrid decision trees and pattern recognition for trend rules
- 2005Two-bar zone codes for testable pattern systems
- 2005Price bar pattern construction and next-bar frequency
- 2008Observe markets before following pattern or system rules
- 2012Treat a four-leg Fibonacci completion as an unpaid hypothesis
- 2014Hidden three-channel regression signals for stock and call option entries
- 2014A shared daily-chart-level framework for session trades and swing holds
- 2015Condensed candlestick signatures