Candlestick triggers filtered by MACD divergence

Scan the candle first

A bounded set of nine Candlestick patterns is scanned first. Each formation is then accepted or rejected as a with-trend entry or exit rather than traded on pattern shape alone.

The catalog distinguishes indecision bars, single-bar reversal shapes, two-bar engulfing and dark-cloud structures, and three-bar morning-star and evening-star structures.

The study avoids countertrend trades. The candle-plus-indicator combination is used for both entries into and exits from the prevailing trend.

Keep only extreme territory

Candlestick setups are accepted only when accompanying Western indicators sit in extreme overbought or oversold territory. Signals outside those extremes are ignored.

Pair candles with MACD

MACD is paired with Candlestick patterns in both trending and sideways markets. A conventional buy is a fast moving-average cross above the slow average and a sell is the reverse. The histogram is preferred because it can lead price.

In the MACD-filtered examples, a rising histogram can keep a long hypothesis alive despite bearish candles, while a flat MACD with histogram divergence is used to stand aside or close exposure.

Read price-indicator divergence

Divergence between price and MACD histogram action is treated as a cue that a reversal or correction may be underway. Larger MACD histogram-cycle amplitude is interpreted as corresponding to larger price cycles.

Discard mismatched candle signals

Combining candlestick scans with Western indicator filters, including MACD, is presented as a way to discard mismatched candle signals and shrink the trade list versus candles used alone.