Thomas Bulkowski Candlestick Patterns: Practical Review
Updated: Nov 3
Thomas Bulkowski is known for cataloguing the historical performance of chart and candlestick patterns. His statistics can help form hypotheses, but a pattern ranking still needs current data, precise definitions, execution rules and risk control.
Thomas Bulkowski: In This Guide
Key ideas and practical calculations
The original Financial Wisdom guide and media
Important limitations and risk controls
Frequently asked questions
Related guides and authoritative sources
Key Takeaways
Candlestick definitions must be precise enough to test.
Historical rankings depend on sample, market and measurement rules.
Confirmation can reduce trades without eliminating false signals.
Pattern context and risk control matter more than the name alone.
Original Financial Wisdom Guide
Background and Core Ideas
The very best candlestick patterns to trade - Improved probability
Thomas Bulkowski the highly regarded author of ‘Encyclopedia of candlestick charts’, not only identified patterns but he was able to build rankings of reliability around them.
Bulkowski managed to retire at the age of 36 from his trading endeavours and soon after he created a website called The Pattern Site.
In this review we provide the top 5 candlestick patterns from the 103 presented in the book. All of which you can apply to your trading strategies straight away.
Let’s take a look..
Thomas Bulkowski defined two kind of pattern outcomes;
A ‘reversal’ pattern which predicts a change in price direction, and a continuation pattern which predicts an extension in the current price direction. This is classed as a bullish example, although the same principle and classification also apply to a bearish pattern.
Let’s get straight into the 5 most reliable candlestick patterns, starting with number 5 the bearish ‘ Two Black Gapping’ continuation formation, this pattern predicts lower prices with a 68% accuracy rate.
The bearish two black gapping continuation pattern appears after a notable top in an uptrend, with a gap down that yields two black bars posting lower lows. This pattern predicts that the decline will continue to even lower lows, perhaps triggering a broader-scale downtrend.
Practical Checkpoint
Define the setup, entry and invalidation level before acting.
Compare the potential payoff with risk-reward planning.
Set the trade size using consistent position-sizing rules.
Rules and Practical Application
Both black candles can be of any size so long as the second black candle has a lower closing price than the low of the first candle.
Bulkowski used a sample size of 18,264 patterns of this nature to determine a downside continuation, a continuation occurred 68% of the time after the formation.
He also concluded that the predictability performed equally well in bull and bear markets, however as we can see from the performance table below there is a slightly better performance in a bear market, showing a 3.11% decline after 10 days. A great short selling return over such a short period.
In 4th place we have the bullish ‘Abandoned Baby’ reversal formation which predicts an increase in price 70% of the time.
The reversal pattern appears at the low of a downtrend, after a series of black candles print lower lows.
The market gaps lower on the next bar, but fresh sellers fail to appear, yielding a narrow range ‘Doji’ candlestick with opening and closing prints at the same price.
A bullish gap on the third bar completes the pattern, which predicts that the recovery will continue to even higher highs, again, perhaps triggering a broader-scale uptrend.
Of 4.7 million candle formations analysed, Bulkowski found only 293 abandoned baby formations, of which a reversal happened 70% of the time.
There was similar performance calculated in both bull and bear markets, with bull markets nudging ahead over a 10 day period with a 2.59% price increase.
Evidence Check
Is the sample broad enough to include difficult markets?
Do the results include spreads, fees, slippage and failed signals?
Could hindsight, survivorship or selective examples explain the result?
Evidence and Examples
This may be considered a small number but annualised this would equate to almost a 95% return.
In third place we have the ‘Evening Star’ bearish reversal formation, which according to Bulkowski predicts lower prices
with a 72% accuracy rate.
The evening star reversal pattern starts with a tall white bar that carries an uptrend to a new high.
The market gaps higher on the next bar, but fresh buyers fail to appear, yielding a narrow range candlestick. A gap down on the third bar completes the pattern, which predicts that the decline will continue to even lower lows.
Bulkowski found 903 of these candle formations which again performed well in both bull and bear markets, however, we can see here that a bear market outperformed a bull market considerably, with a price change of 4.34% over a 10 day period. Annualised this equates to a very credible 158% return.
In second place we have the bearish Three Black Crows reversal formation.
The pattern starts at or near the high of an uptrend, with three black bars posting lower lows.
This formation predicts that the decline will continue to even lower lows 78% of the time. The most potent setup is when the 1st bearish candle is not only close to the high of the prior uptrend but marks the highest price achieved, Bulkowski says this is due to trapping buyers that entered what seemed to be a momentum play at the time.
Risk and Limitations
2660 formations were found, of which, a bear market provided the best environment.
The table here shows that over a 10 day period the priced changed 1.41% after the completion of the three black crows. Not a huge % decline but with 2660 opportunities and a 78% accuracy rate, the compounding effect would be very significant.
Finally, in 1st place we have the bullish ‘Three Line Strike’ formation.
The bullish three-line strike reversal pattern carves out three black candles within a downtrend, each bar posting lower lows.
The fourth bar opens even lower but reverses with a wide-range outside bar that closes above the high of the first candle in the series.
Bulkowski discovered that this pattern predicted price reversals correctly a commendable 84% of the time. 85 Three Line Strike formations were found through his analysis, of which, a bear market produced the best results.
We can see in the table here that the average price change over a 10 day period was 7.53%, annualised this would be a huge 274% return. Not a bad strategy to add to your trading toolbox.
We can see this winning candlestick pattern in a previous chart example, a company called Brown Forman. Here we can see a downtrend leading into the pattern, the pattern is formed by the three candles hitting lower lows, followed by the 4th candle which opened lower but reversed considerably and closed above the 1st candle of the formation, often referred to as an engulfing candle. Thereafter the price continued to trend higher and achieved an approximate return of 7 % over the following 10 days.
One of the best charting scanners I have seen to pick up such candlestick patterns is a website called Chart Mill, I have put a link below for those interested.
Summary of the Original Guide
So, to recap Bulkowski’s most reliable candlestick patterns, in 5th place we have the Two Black Gapping formation, providing 68% accuracy, more than 18 thousand pattern frequency and a 3.11% return over 10 days equating to 113% annualised.
In 4th place, the Abandoned Baby formation, providing 70% accuracy, a frequency of 293 and a 2.59% return over 10 days equating to 95% annualised.
In 3rd place, the Evening Star formation, providing 72% accuracy, a frequency of 903 and a 4.34% return over 10 days equating to 158% annualised.
In 2nd place, the Three Black Crows formation, providing 78% accuracy, a frequency of 2660 and a return of 1.41% over a 10 day period equating to 51% annualised.
And finally, in 1st place, the Three Line Strike, offering 84% accuracy, a frequency of 85 and a 7.53% return over 10 days providing an annualised return of 274%.
This concludes the 5 most accurate candlestick formations from Thomas Bulkowski’s book, of which he shares over 100 formations through more than 900 pages.
For those looking to create a system around candlesticks or simply to achieve a better entry point for a current strategy, then this book should form part of your library. Therefore, I rate this book 5 out of 5 stars.
Don’t forget, hit the like button, subscribe to our growing library and comment below.
Thanks for listening.
Practical Limitations
Historical examples, book claims and indicator results are educational illustrations rather than forecasts. Outcomes depend on the market, timeframe, data, transaction costs, financing, taxes and execution assumptions. Test complete rules across varied conditions and define the maximum acceptable account risk before taking a position.
Put This Into Practice
The ideas in this guide become more useful when selection, entry, stop placement, position sizing and trade management form one repeatable process. The Financial Wisdom Trading Blueprint connects those decisions in a practical weekly framework.
Frequently Asked Questions
What is a candlestick pattern?
It is a defined arrangement of one or more price bars showing open, high, low and close relationships.
Can historical pattern rankings be used unchanged?
No. Market structure, sample selection, costs and implementation can change results.
Further Reading
References and Further Reading
Educational information only. Trading and investing involve risk, including the possible loss of capital. Examples are illustrative, not guarantees of future performance, and nothing in this article is personalised financial advice.
About the Author
Written by Gareth, MBA
Gareth, founder of Financial Wisdom, has more than 30 years of personal trading experience. He competes in the United States Investing Championship, creates award-winning trading content and has been featured in Technical Analysis of Stocks & Commodities.
This technical analysis and financial education feature (Thomas Bulkowski - Candlestick Chart Patterns), published on the Financial Wisdom trading portal, highlights the vital intersection of quantitative market research, statistical trading edge, and chart pattern reliability—themes that find great synergy with financial strategy guides, algorithmic trading spotlights, and investment archives published on https://34.ua. Published on the platform's video blog, the post breaks down the statistical findings of renowned technical analyst Thomas Bulkowski, ranking the most reliable candlestick patterns based on extensive empirical data and backtested probabilities.