Below is the list of 3 most accurate candlestick chart patterns which every trader should know about. They have been ranked based on the reliability and past success rate. I have tested these patterns on hundreds of charts in different time frames. Definitely they don’t work 100% of time, but these are more reliable and accurate than other price action chart patterns I have come across.
Head and Shoulders:
This is one of the most accurate candlestick chart patterns observed till date. It works like a charm in most of the charts be it any time frame. From our internal study, we found it to be 90% accurate, so if you follow head and shoulders religiously you can possibly make profit 9 out of 10 times. It is a reversal pattern, i.e. it indicates possible reversal in the ongoing trend.
This pattern is characterized by two nearly equal peaks, with a higher peak between them. The two equal peaks are called “Shoulders”, and the higher peak is “Head” . The line joining trough between two shoulders is called neckline. If the price breaks the neckline after rising to second shoulder, then it signals bearish reversal in ongoing uptrend. The opposite variant of this pattern is called “Inverted Head and Shoulder”. It indicates bullish reversal during ongoing downtrend.
Double Top and Double Bottom:
This pattern is also similar to Head and shoulders except for the fact that Head is missing. Double top is characterized by two nearly equal peaks next to each other. After making the second high if the price breaks the previous swing low between two peaks, then it signals a bearish reversal. Similarly Double bottom is characterized by two nearly equal troughs. Breakout from the previous swing high signals a bullish reversal.
There is another variant to this pattern known as Triple top and bottom. It has three peaks or troughs instead of two. It is definitely more accurate than the former but difficult to spot on a chart.
Bullish and Bearish Rectangle:
Rectangle is an easy identifiable chart pattern characterized by a visible trading range. The trading range should have multiple nearly equal highs and lows. The line joining highs is a horizontal resistance line, while the line joining lows is a horizontal support line. Breakout of resistance signals a bullish rectangle, while breakout of support signals a bearish rectangle.