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2005issue C071-5

Two-bar zone codes for testable pattern systems

Each open, high, low, and close of a two-bar candlestick is mapped to a zone and joined into a four-digit code. That code can be scanned, counted, and used as one mechanical entry-or-abstain input.

  • Map each open, high, low, and close to one of six numbered zones, then concatenate those numbers into one four-digit code.
  • Identical two-bar structures share that code across charts and time frames, so a scan can mark and count the same Candlestick patterns condition.
  • The primary forecast after a recognized code is whether the next bar closes above or below its own open.
  • Prior-bar zone location is a Mechanical trading system input for breakout entries, support-and-resistance positioning, and long or short abstention.
Entries in this reading3 entries
Current trackPattern recognition48 readingsCandlestick patterns100 readingsMechanical trading system158 readings

Map open, high, low, and close to zones

Each open, high, low, and close is mapped to one of six numbered zones relative to the prior bar's high, low, midpoint, and a 10-bar average true range band. Zone 0 is assigned when a bar component sits more than one 10-bar average true range below the prior low. Zone 5 is assigned when it sits at least one 10-bar average true range above the prior high.

Join the zones into one four-digit code

The four zone numbers are concatenated into a single four-digit code so identical two-bar structures share one unambiguous identifier across charts and time frames. Inside-bar examples are coded 3434, 3424, and 3322. Outside-bar examples are coded 2414, 2514, and 3502.

Count the next-bar close

The primary forecast counted after a recognized code is whether the next bar closes above or below its own open. A chart study marks matching bars and exposes the code, prior-bar zone description, and next-bar close counts only on those marked bars. The same scan can be applied at the end of each session across a portfolio to collect recurring two-bar codes and compare their next-bar outcomes by market and time frame.

Use prior-bar location in one procedure

Prior-bar zone location is intended as a rule input for breakout entries, support-and-resistance positioning, and long or short abstention once a chosen code appears.

Next-bar close after two-bar code 3434 on S&P 500 daily

After the default 3434 scan printed on this S&P 500 daily chart, the next session closed above its own open in 68.75 percent of the 16 finished hits and below its open in 31.25 percent, with no unchanged closes. A trader treating that split as an entry-or-abstain input would have seen a long-side lean, not a coin flip. The counts and percentages are the Expert Commentary statistics on the TradeStation screenshot, not a redrawn price path.
After the default 3434 scan printed on this S&P 500 daily chart, the next session closed above its own open in 68.75 percent of the 16 finished hits and below its open in 31.25 percent, with no unchanged closes. A trader treating that split as an entry-or-abstain input would have seen a long-side lean, not a coin flip. The counts and percentages are the Expert Commentary statistics on the TradeStation screenshot, not a redrawn price path.S&P 500 · Daily · 2004-12-17T00:00:00.000Z

The 16-case tally excludes the bar under the cursor and equals 8.42 percent of the bars loaded on that chart. Zone membership uses a 10-bar ATR. The ShowMe default code is 3434; the author suggested a Diff of 5 for the S&P 500.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
19 of 25 in the Pattern recognition track
20051-17 pp.Next on Pattern recognitionPrice bar pattern construction and next-bar frequencyOpen, high, low, and close are each mapped into six zones around the prior bar, then packed into one numeric pattern identity.
All readings on this track · 25 readings
  1. 1986Construct a decision procedure that revises itself
  2. 1989Finish the volume checklist before scoring the breakout
  3. 1989Constructing supervised forecasts on moving averages
  4. 1991Candlestick labels as stacked construction tests
  5. 1992Walk-forward evaluation of weekly price-change patterns
  6. 1993RSI price pattern templates and open interest
  7. 1994Constructing a dual-net day-ahead index direction forecast
  8. 1994A clocked stochastic second crest with a window-high stop
  9. 1996Volatility-ratio, inside-day and narrow-range-4 entry construction
  10. 1998Sliding-window correlation for cup-and-handle construction
  11. 2000Constructing rectangles for breakout hypotheses
  12. 2001Turning one candle into a ranked numeric object
  13. 2002Fuzzy-scored chart patterns as testable rules
  14. 2002From hot-zones to an open-close-matrix
  15. 2003Volume pressure and a band-clearing breakout case
  16. 2004Evaluating chart patterns against price objectives
  17. 2004Cobweb turning points from price structure
  18. 2005Hybrid decision trees and pattern recognition for trend rules
  19. 2005Two-bar zone codes for testable pattern systems
  20. 2005Price bar pattern construction and next-bar frequency
  21. 2008Observe markets before following pattern or system rules
  22. 2012Treat a four-leg Fibonacci completion as an unpaid hypothesis
  23. 2014Hidden three-channel regression signals for stock and call option entries
  24. 2014A shared daily-chart-level framework for session trades and swing holds
  25. 2015Condensed candlestick signatures
By fieldSystem design117 readingsBy year2005104 readings
All 48 readings tagged Pattern recognition
Also on Pattern recognition5 readings
1991Candlestick labels as stacked construction tests2001Turning one candle into a ranked numeric object2015Condensed candlestick signatures1997A two-gate held-out test of hand-labeled pullback nets2002From hot-zones to an open-close-matrix