Candlesticks, Fibonacci, and Chart Pattern Trading Tools : a synergistic Strategy to Enhance Profits and Reduce Risk

3-POINT CHART PATTERNS FOR TREND REVERSALS
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107
the failure rate. The best rank is 1. Bulkowski used bull market data
for the f ive years beginning in mid 1991.
Table 4.11 lists the relevant (in the context of this book) 3-point
chart patterns—and related candlestick patterns—in alphabetical
order.
The table indicates that some of the chart patterns we have
stressed do well and prove reliable in practical trading, at least ac-
cording to Bulkowski’s rank by score.
The greatest advantage of working with chart patterns is that
skilled traders can execute them without elaborate computer programs.
Although the 3-point chart patterns may look somewhat old-fashioned,
they are powerful trading tools.
Table 4.11
Summary of Statistics for 3-Point Chart
Patterns (and Candlestick Patterns)
Failure
Rev.
Rank
Rate
and /or
by
Formation
(%)
Cont.
Score
Broadening wedge, ascending
6
R
13
Broadening wedge, descending, down
41
R
25
Broadening wedge, descending, up
41
R
25
Double bottom
3
R
4
Double top
17
R
21
Hanging man, down breakout
22
C
27
Hanging man, up breakout
67
R
33
Head & shoulder, bottom
5
R
9
Head & shoulder, top
7
R
11
Key-reversal day, bottom
17
R
29
Key-reversal day, top
24
R
26
Rectangle bottom, down breakout
4
C
8
Rectangle bottom, up breakout
0
R
32
Rectangle top, down breakout
0
R
31
Rectangle top, up breakout
2
C
1
Triangle, ascending
2
C
3
Triangle, descending
4
C
6
Triangle, symmetrical, bottom, down
2
C
2
Triangle, symmetrical, bottom, up
3
R
5
Triangle, symmetrical, top, down
6
R
10
Triangle, symmetrical, top, up
5
C
11
Source: Trading Classic Chart Patterns, 
by Thomas N. Bulkowski (New York: Wiley,
2002), pp. 655– 657. Reprinted by permission of the author.
c04.qxd 6/16/03 4:18 PM Page 107

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