Mastering Financial Pattern Recognition: Finding and Back-Testing Candlestick Patterns with Python

Preface....6 Why This Book?....6 Target Audience....7 Conventions Used in This Book....8 Using Code Examples....9 O’Reilly Online Learning....10 How to Contact Us....10 Acknowledgments....11 1. Importing and Processing Financial Data in Python....12 Installing the Environment....12 Creating the Importing Algorithm....16 Putting It All Together....23 Summary....25 2. Algorithmic Mindset and Functions....27 Coding the Primal Functions....28 The Function to Add Columns to an Array....28 The Function to Delete Columns from an Array....30 The Function to Add Rows to an Array....32 The Function to Remove Rows from an Array....32 The Function to Round Numbers....34 Coding Signals....36 Creating the Signal Charts....42 Coding Performance Evaluation Functions....50 The Hit Ratio....51 The Rate of Return....51 The Profit Factor....53 The Risk-Reward Ratio....53 The Number of Trades....56 Creating a Performance Evaluation Function....56 A Hypothetical Example: Appraising Performance....60 3. Introducing Technical Analysis....63 Charting Analysis....66 Indicator Analysis....78 Moving Averages....78 The Relative Strength Index....81 Pattern Recognition....85 Common Pitfalls of Technical Analysis....88 Wanting to Get Rich Quickly....88 Forcing the Patterns....88 Hindsight Bias, the Dream Smasher....89 Assuming That Past Events Have the Same Future Outcome....89 Making Things More Complicated Than They Need to Be....90 Technical Analysis Best Practices....90 Harness the Power of Different Time Frames....90 Use More Than One Strategy or Indicator....91 Choose the Right Type of Strategy for Current Market Conditions....91 Don’t Underestimate Default Parameters....92 4. Classic Trend-Following Patterns....93 The Marubozu Pattern....93 The Three Candles Pattern....101 The Tasuki Pattern....108 The Three Methods Pattern....116 The Hikkake Pattern....120 5. Modern Trend-Following Patterns....125 The Quintuplets Pattern....125 The Double Trouble Pattern....133 The Bottle Pattern....144 The Slingshot Pattern....149 The H Pattern....155 6. Classic Contrarian Patterns....161 The Doji Pattern....161 The Dragonfly Doji....163 The Gravestone Doji....164 The Flat Doji....164 The Double Doji....165 The Tri Star Doji....165 The Harami Pattern....170 The On Neck Pattern....179 The Tweezers Pattern....185 The Stick Sandwich Pattern....190 The Hammer Pattern....195 The Star Pattern....199 The Piercing Pattern....203 The Engulfing Pattern....209 The Abandoned Baby Pattern....213 The Spinning Top Pattern....217 The Inside Up/Down Pattern....221 The Tower Pattern....226 7. Modern Contrarian Patterns....231 The Doppelgänger Pattern....231 The Blockade Pattern....237 The Euphoria Pattern....241 The Barrier Pattern....247 The Mirror Pattern....252 The Shrinking Pattern....257 8. Advanced Candlestick-Charting Systems....261 Heikin-Ashi System....261 Detecting the Doji Pattern....263 Detecting the Tasuki Pattern....265 Detecting the Euphoria Pattern....268 Detecting the Double Trouble Pattern....269 K’s Candlesticks System....271 Detecting the Doji Pattern....272 Detecting the Tasuki Pattern....274 Detecting the Euphoria Pattern....275 Detecting the Double Trouble Pattern....276 9. Candlestick Patterns Exit Techniques....278 The Symmetrical Exit Technique....279 The Fixed Holding Period Exit Technique....282 The Variable Holding Period Exit Technique....283 The Hybrid Exit Technique....284 Pattern Invalidation....285 10. Candlestick-Based Trend-Following Strategies....288 Combining the Double Trouble Pattern with the RSI....288 Combining the Three Candles Pattern with Moving Averages....291 Combining the Bottle Pattern with the Stochastic Oscillator....295 Combining the Marubozu Pattern with K’s Volatility Bands....300 Combining the H Pattern with the Trend Intensity Index....308 11. Candlestick-Based Contrarian Strategies....313 Combining the Doji Pattern with the RSI....313 Combining the Engulfing Pattern with Bollinger Bands....316 Combining the Piercing Pattern with the Stochastic Oscillator....319 Combining the Euphoria Pattern with K’s Envelopes....321 Combining the Barrier Pattern with the RSI-ATR....325 12. Risk Management and Trading Psychology....330 Basics of Risk Management....330 Stops and Targets....330 Trailing Stops....331 Position Sizing....331 Economic Calendar....334 Behavioral Finance: The Power of Biases....335 Cognitive Biases....336 Emotional Biases....339 Trading Framework....340 Index....343 About the Author....378