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Railway tracks and other reversal and continuation patterns

  • Post #1
  • Quote
  • First Post: Mar 8, 2019 10:31am Mar 8, 2019 10:31am
Hi, I have been looking for a good railway tracks pattern indicator and I have not found one. If anyone can make one or have link please post.

So I have visually looked at this pattern, its nothing new, but I am gonna trade it with confirmation.
The chart below has 2 rec. Boxes. The one on top shows the railway pattern, the one at bottom shows confirmation. So if today the daily candle closes bearish sunday we take a short, sl is the size of the pattern the tp is same
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When I made my first post I didnt have time to elaborate.

I will add more patterns, these are not new patterns, I will not claim like some people that I invented the patterns

Anyway, with the railway pattern ideally the candles should have a big body and both candles should be as close to each other in size as possible.

So if the market is going up we are looking for a reversal going down. We can also look at continuation but the best setups are when the market is going one way and the pattern signals a reversal.

Also ideally if the market is going up we want first candle to be green and second candle to be red. Than we wait for the next 1 or to candles to close as a bearish candle. And the signal is best when that bearish candle(the signal candle) to be a healthy size candle like the railway candles.

Also things to watch for, I really dont like huge signal candles but if you look at the chart the ninth box from left, after the railway track pattern(the green box) the signal candle is huge. I dont like taking these trades but as you can see it worked out.

Again another thing to look for is that the railway track candles should be almost same size(this is up to individual person). Look at the 10th box from left(the pink box) the red candle is alot bigger than the green candle but this trade worked out as well.


So in this chart I marked with boxes the possible trades and how they would have worked out. The pink boxes represent sell trades, the green boxes represent buy trades. The one yellow box represent continuation trade.

The X represent a losing trade and the O represent a win.
Attached Image (click to enlarge)
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Ok looking at it again, I made a mistake,

the 9th box(trade) with the huge red candle didnt work out. the tp was 164 pips it only went 100 pips.

But the good news is all the other trades that worked out also made 1:2 RR.

So you can either tp at 1:1 rr or bring your sl to break even +? than tp at 1:2 RR and it would still have worked.

cant beat that.
It's the first time i see this pattern. As automatic trader i'm interested, and i can make an indicator on it.... but we first need to define very clear rules in order to recognize the pattern. Then eventually some parameters may be added in order to select different configurations
  • Post #5
  • Quote
  • Edited 4:16pm Mar 8, 2019 4:06pm | Edited 4:16pm
Quoting FoxTrade85
It's the first time i see this pattern. As automatic trader i'm interested, and i can make an indicator on it.... but we first need to define very clear rules in order to recognize the pattern. Then eventually some parameters may be added in order to select different configurations
If you search google or FFactory you will see mention of it.

But I was not able to find anything serious on it. No indicators or such.

I did check this pattern out before but it didnt seem interesting as it was kinda like the pinbar. It worked sometimes and it didnt work at other times. And with 1:1 rr that does not seem interesting to us forex traders that want to be rich quick

When I decided to look at it again I decide to add confirmation. This seems to work a lot better.

For now I am only looking at the daily because it is less time consuming. But this could be applied to 4 hr etc.

As far as rules, here is a few things to consider;

1-Candle size. i.e. we could have a minimum size for the 2 candles per timeframe. For daily it could be daily atrx2 or something.

2- The diffrence in size of the 2 candles. We could have a tolerance level represented in percentage.

3- The size of the signal candle. i.e. If the size of the signal candle is x% larger than the the railway candles than its a no trade. I am concerned about the size of the signal candle because I am worried about huge candles they sometimes represent exhaustion.

4- The Stop Loss is the body size of the 2 railway candles combined. So from the highest open to lowest close between the 2 candles.
The Take profit could be 1:1 RR or breakeven at 1:1 RR + than take profit at 1:2 RR.

For now thats all I can come up with.


p.s. I will add more patterns
Well i actually don't care that much about R:R unless it gets boundary values, like more than 7/1.
If it is very close to the Pinbar Pattern, then it can represent pin bars on a major timeframe ( i.e. 2 hours if we apply it to a hourly chart when we have two candles ), which can be worth to make some study on it. Maybe, working with sets a nice job can be done.
The fact that we can have more than 2 candles means we can "study" those "sort of pinbars on unusual timeframes" in a deeper manner
Quoting FoxTrade85
Well i actually don't care that much about R:R unless it gets boundary values, like more than 7/1. If it is very close to the Pinbar Pattern, then it can represent pin bars on a major timeframe ( i.e. 2 hours if we apply it to a hourly chart when we have two candles ), which can be worth to make some study on it. Maybe, working with sets a nice job can be done. The fact that we can have more than 2 candles means we can "study" those "sort of pinbars on unusual timeframes" in a deeper manner
I honestly dont want to go too deep into analysis.

I just want to test this pattern for now anyway.

Is it profitable most of the time?
If it is that means we are at least getting 1:1 RR

From my example, looks like we get 1:2 RR almost all the time, But of course this is a very small sample.

The 1:2 RR is a very big edge in this game.

For the indicator though we shouldnt get too picky . Basically 2 candles with big bodies that are close in size. For bearish reversal ideal is first bar Bullish and second bar bearish. The signal bar' body should be similar to the railway bars. And that's it for now. You can change parameters later.
I don't believe in EA's that much. But an indicator is good as an alert so that we can take a look at the pattern our self and decide. Therefore the indicator at first shouldnt be to restrictive, after all we will make the ultimate trade decision.
Hi hibra

looks like a interesting pattern. On looking at the chart you posted you can see all the losing trades were ones where the price didn’t break above or below the first candle. For example first candle is a bear and the next candle is a bull but the price doesn’t close above the bear candle. All the losing trades could be avoided if you only trade the set ups where the next candle closes above or below the first candle. Hope that makes sense.

regards
Here are a few more examples
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Quoting optitrader
Hi hibra looks like a interesting pattern. On looking at the chart you posted you can see all the losing trades were ones where the price didn’t break above or below the first candle. For example first candle is a bear and the next candle is a bull but the price doesn’t close above the bear candle. All the losing trades could be avoided if you only trade the set ups where the next candle closes above or below the first candle. Hope that makes sense. regards
tnx but if you look close not all winning trades closed above/below previous bar.
I think this is Engulfing patterns strategy.
Buyer and Seller fighting at that time.
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Quoting fxpsas
I think this is Engulfing patterns strategy. Buyer and Seller fighting at that time. {image}
Why did you make those circles and why did you put x o them?
Here is one its not quite perfect but looks like it will reverse
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Here is one ready to go on sunday.
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this was my first example but

price has just passed a strong resistance,

So either it will go down hard or bounce back up and make this area the new support.
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With this one we should wait for a strong bullish bar confirmation
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This one is a good example ,

The bar after the railway pattern is bearish. So do we wait for another candle to be bullish or do we just scrap the trade.

What I mean is we can make it a rule where we only consider the first bar after the railway pattern to be a strong Bullish/Bearish bar otherwise we dont take the trade.

Its something to consider.

Also from my first post, I saw that if I had placed trades above/below the high/low of the signal candles I would have avoided 2 of the losing trades.
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Quoting hibra68
This one is a good example , The bar after the railway pattern is bearish. So do we wait for another candle to be bullish or do we just scrap the trade. What I mean is we can make it a rule where we only consider the first bar after the railway pattern to be a strong Bullish/Bearish bar otherwise we dont take the trade. Its something to consider. Also from my first post, I saw that if I had placed trades above/below the high/low of the signal candles I would have avoided 2 of the losing trades. {image}
I like this cause I trade pivots, and the candlestick pattern that you look for works well with them.
Quoting DatDudeDanny
{quote} I like this cause I trade pivots, and the candlestick pattern that you look for works well with them.
Cool, post possible trades.
I will use s/r and s/d levels for confluence.
You can see a similar pattern an all GBP pairs on the 1 hr.
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