I am in the process to write some scripts to identify some candle patterns and I would like to know if you guys know where to find some information about the tolerances on the most popular candle patters?
For instance the shooting start. Ideally shall not have lower shadow, and small body, and long upper shadow. Well that is very nice, but very ambiguous, since little, large does not mean nothing.
I would like to know
a) the body has to be +/-X % of the H - L
b) The upper shadow shall be +/-Y % of the H -L
c) lower shadow shall be +/- Z % of the H-L
You might find out more about these sorts of questions from Thomas Bulkowski’s work - see thepatternsite.com and his books on candlestick patterns.He did extensive research on candlestick patterns frequency and effectiveness across many thousands of charts. You might find somewhere the precise parameters he used.
The most basic pattern and the most powerful is trend. It does not have an entry signal as such so absolutely any pattern that gets you into a trend is worth using: it is the trend that pays you, not the entry pattern. Patterns which get you out of trends are high risk.
Patterns need to be easily recognisable, common, unambiguous and have features which suggest rational trading rules.
Be aware that many candlestick patterns depend on opens which are higher or lower than the previous close. This means that if they are used in forex, they are probably being adulterated a little (or a lot) and probably have lower performance and reliability as a result.
Also that nearly all chart patterns and candlestick patterns have their reputation and trading rules built on historical studies in the equities markets, not forex. Who knows if they have the exact same behaviour in forex?
There plenty of books and online trainings on candlestick patterns. But be prepared that it may take you quite a lot of time to go through all of them. Nevertheless I believe it’s worth it. The questions you mentioned are quite simple, that would be a difficult task to get a general idea of it.