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2013issue C1144-48

Two-bar step-candle construction

A step-candle is built from ordinary open, high, low, and close values. The two-bar body sequence is labelled as an up-down-step, an opening gap can recode it to a gap-adjusted-step, and later highs or lows can set a peak-marker or valley-marker.

  • A two-bar step-candle can be built from ordinary open, high, low, and close values instead of a packaged pattern system.
  • The up-down-step labels the body sequence as +2 for up then up, +1 for down then up, -2 for down then down, -1 for up then down, and 0 when no step is identified.
  • A same-direction opening gap recodes those labels to a stronger gap-adjusted-step.
  • After a non-rising low while the gap-adjusted-step is negative, the peak-marker is the higher of the current and prior-bar highs. After a non-falling high while the gap-adjusted-step is positive, the valley-marker is the lower of the current and prior-bar lows.
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Read two bars as a step-candle

A two-bar step-candle reading can be built from ordinary open, high, low, and close values instead of a packaged pattern system.

A step-candle is a two-bar open-high-low-close sequence classified by whether each candle-body advances or retreats relative to the prior-bar.

The prior-bar is the immediately preceding open-high-low-close bar used as the first half of the two-bar test.

The candle-body is the open-to-close range of one bar. An up body closes above its open and a down body closes below it.

Assign the up-down-step

The up-down-step is an integer label for that two-bar body sequence, including a zero state when no step qualifies.

The base step states are +2 for up then up, +1 for down then up, -2 for down then down, -1 for up then down, and 0 when no step is identified.

An up-up step requires both bars to close above their opens, the latest close above the prior-bar close, and the latest open above the prior-bar open.

A down-up step requires a prior-bar down body, a current up body, the latest close above the prior-bar open, and the latest open above the prior-bar open.

A down-down step requires both bars to close below their opens, the latest close below the prior-bar close, and the latest open below the prior-bar open.

Upgrade to a gap-adjusted-step

The gap-adjusted-step is a stronger label assigned when the latest open gaps in the same direction as the step.

A gap upgrade recodes +2 to +4 when the latest open is above the prior-bar close, and +1 to +3 when the latest open is above the prior-bar open.

A gap upgrade recodes -2 to -4 when the latest open is below the prior-bar close, and -1 to -3 when the latest open is below the prior-bar open.

Set a peak-marker or valley-marker

After a lower or equal low while the gap-adjusted-step is negative, the peak-marker is set to the higher of the current and prior-bar highs. That peak-marker is the higher high recorded after a non-rising low while the gap-adjusted-step is negative.

After a higher or equal high while the gap-adjusted-step is positive, the valley-marker is set to the lower of the current and prior-bar lows. That valley-marker is the lower low recorded after a non-falling high while the gap-adjusted-step is positive.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
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  10. 1997Weekly reversal as a three-part hypothesis
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  14. 2000Intraday candlestick volume confirmation for daytrading
  15. 2001Count the key reversal up before coding a mechanical exit
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  17. 2002Treat a moving average as a contested fence
  18. 2003Candlestick signals need support and a risk-reward screen
  19. 2003Constructing one-day reversal tops and bottoms
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  28. 2007Three black crows become a trade hypothesis only after regime, trend and nearby levels
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  38. 2013Step candle construction at price turning points
  39. 2013Two-bar step-candle construction
  40. 2014Small-range bars as a timed volume-climax hypothesis
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  42. 2015Weekly range midpoints as support and resistance
  43. 2015Constructing weekly body-midpoint pattern codes
  44. 2015Evaluating encoded candlestick sequence hypotheses
  45. 2015Constructing a breakout relative-strength index from two-day range candles
  46. 2016A three-gate classroom on hourly sterling
  47. 2016Fibonacci retracement as a pre-commitment stop map
  48. 2017Nine-zone filter for decade-level breakouts
  49. 2017Constructing pin-bar and inside-bar setups
  50. 2017Two-bar soldier and crow rules become a system only after filters and exits
  51. 2017Confirm a one-white-soldier or one-black-crow before entry
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