Candlestick Structure

The Candlestick Structure indicator is a powerful tool designed to help traders identify major market trends and leverage various candlestick patterns. By aligning detected patterns with the predominant trend, it effectively filters out less relevant signals, offering traders clearer insights for strategic decision-making. This indicator provides multiple methods for trend detection, allowing users to select their preferred approach.

In addition to pattern detection, a comprehensive dashboard indicates the alignment percentage of each pattern, enhancing traders' ability to analyze trend congruence.

How to Trade Using the Candlestick Structure Indicator

This tool distinguishes between major and minor trends, allowing traders to focus on patterns that align with significant market movements. By concentrating on candlestick formations that match a major trend, traders can identify potential retracement endpoints, offering valuable entry points in ongoing trends.

Traders can monitor each pattern's congruity through the alignment dashboard, clarifying which formations align consistently with overall trends and which do not.

Note: The alignment percentage solely indicates if the pattern's direction matches the current trend, providing basic readings, not a confidence assessment.

Candlestick Patterns Overview

This indicator tracks 16 distinct candlestick formations to enhance the trader's market interpretation capabilities.

Understanding Bullish Patterns

• Hammer: This pattern features a small upper wick and a robust lower wick, at least twice the length of the body.
• Inverted Hammer: Characterized by a small lower wick and an elongated upper wick.
• Bullish Engulfing: A dominant bullish candle enveloping a smaller previous bearish candle.
• Rising 3: Begins with a solid bullish candle, transitions through three minor bearish candles, and concludes with another bullish candle surpassing the initial high.
• 3 White Soldiers: Three consecutive robust bullish candles, each rising from within the previous candle's range.
• Morning Star: A sequence beginning with a dominant bearish candle, followed by a minor bearish, and concluding with a dominant bullish candle surpassing the midpoint of the first candle.
• Bullish Harami: A minor bullish candle contained within the body of the preceding bearish candle.
• Tweezer Bottom: Pair of candles with matching lows transitioning from bearish to bullish.

Understanding Bearish Patterns

• Hanging Man: Features a small upper wick and an elongated lower wick, indicative of bearish reversal.
• Shooting Star: Involves a small body and a long upper wick.
• Bearish Engulfing: Large bearish candle brick-walling a smaller preceding bullish candle.
• Falling 3: A strong bearish candle, followed by three minor bullish candles, finishing with another bearish candle that breaks prior lows.
• 3 Black Crows: Consists of three sequential bearish candles, each closing below the last.
• Evening Star: Starts with a strong bullish candle, moves to a small bullish candle, and ends with a bearish candle falling below the initial midpoint.
• Bearish Harami: A smaller bearish candle confined within a preceding bullish candle.
• Tweezer Top: Comprised of candles with identical highs, shifting from bullish to bearish.

Different Types of Trend Detection

The indicator continually displays the major trend, adapting its display based on the chosen detection method. Traders can also visualize the minor trend, and this option can be toggled for clarity using candle colors.

• Supertrend: Defines uptrends and downtrends based on the breaking of upper and lower bands.
• EMAs: Determines trends with the crossover of fast and slow exponential moving averages.
• ChoCh: Uses character change lines and labels to signify trend changes.
• Donchian Channel: Identifies trends by the breaking of highest and lowest value levels.

An example of the Change of Character method highlights its utility in trend detection:

Note: Each illustrated screenshot utilizes a different trend detection method. Browse through to identify the most suitable method for your strategy.

Optimizing Your Settings

• Candlestick Patterns: Opt for specific patterns to tailor your strategy.
• Minor Trend Length: Adjust the Donchian Channel length for minor trend monitoring.
• Major Trend Method: Choose your preferred method for major trend identification.
• Major Trend Parameters: Customize inputs for the selected trend method.
• Color Candles: Enhance clarity by coloring candles based on minor trends.
• Dashboard: Modify the alignment dashboard’s size and position for optimal visibility.

FAQ

1. How can I access the Candlestick Structure indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

2. What makes the Candlestick Structure indicator a valuable tool for trading?

The indicator's ability to align candlestick patterns with major market trends and the customizable options for trend detection methods make it an invaluable tool for traders aiming to enhance their market analysis.