Candlestick Pattern Failure Rates
Most candlestick patterns fail more often than they succeed. This index shows why: patterns don't fail because of the pattern itself, but because traders ignore Market Regime, Location, and Order Flow.
Understanding Failure Rates
A 67% failure rate doesn't mean the pattern is useless. It means the pattern fails when context is ignored. The same pattern can have 60-70% success when all three factors align.
| Primary Failure Factor | |||
|---|---|---|---|
| Hammer | reversal | 67% | Location(detailed) |
| Engulfing | reversal | 67% | Market Regime(detailed) |
| Doji | reversal | 61% | Location(detailed) |
| Shooting Star | reversal | 60% | Location(detailed) |
| Morning Star | reversal | 52% | Location(detailed) |
Key Insights
Market Regime
Patterns fail when traded against the prevailing trend. Bullish reversal patterns in strong downtrends typically fail 60-70% of the time.
Location
Context matters. A hammer at support has 61% win rate. The same hammer at resistance? Only 28%. Location is often the primary failure factor.
Order Flow
Volume confirms conviction. Patterns with below-average volume fail significantly more. Volume increase can swing win rates by 20-30%.
Frequently Asked Questions
Why do most patterns have 50-70% failure rates?
These rates represent patterns traded without context. When traders see a pattern and trade it regardless of market regime, location, or volume, the pattern typically fails. With proper context, success rates increase significantly.
Which factor matters most?
It varies by pattern. For reversal patterns, Location (support/resistance) is usually most critical. For continuation patterns, Market Regime (trend strength) matters more. All three must align for highest probability.
Are patterns worth trading at all?
Yes, but only with context. Patterns are not standalone signals. They are price action structures that work when combined with proper market analysis. The goal is not to memorize patterns, but to understand when context makes them valid.
How were these rates calculated?
Based on analysis of 250,000+ historical trades across multiple markets and timeframes. Patterns were tested both in isolation (failure rate) and with proper context (success rate with all factors aligned).