★ My

Encyclopedia › Chart and candlestick patterns ›

Do chart patterns work? What the research says

Not tested by us Not tested by us yet. No verdict stamp.

In one line: Short version: the evidence is mixed, and patterns are hard to define objectively.
Evidence
Strength: mixed. Lo, Mamaysky and Wang (2000) looked at US stocks from 1962 to 1996. They found that several patterns, for example head-and-shoulders and double bottoms, "provide incremental information and may have some practical value". They give no success-rate percentages, and they did not test profits after costs. Popular "pattern X works 7x% of the time" figures are not peer-reviewed, so we do not publish them.
Watch: Breakout? Wait for the Retest, Sweep, and Dead-Cat Bounce · open on YouTube · 1-minute Short
More videos on this (1)

Chart patterns are shapes traders spot in price charts. The claim: the shape tells you what comes next. The problem: two people often see two different shapes. Lo, Mamaysky and Wang (2000) wrote that patterns are 'often in the eyes of the beholder'.

Lo, Mamaysky and Wang (2000) ran an automatic pattern detector on US stocks from 1962 to 1996. They concluded that 'several technical indicators do provide incremental information and may have some practical value'. They tested return patterns, not trading profits after costs.

Park and Irwin (2007) reviewed 95 modern studies of technical analysis. 56 were positive, 20 negative and 19 mixed. But they warned that many studies suffer from data snoopingTrying many tests and showing only the lucky one. (testing many ideas until one looks good). Many also handle costs and risk poorly.

For candlesticksOne "candle" shows where price started, ended, and how far it went in a period.: Marshall, Young and Rose (2006) tested candlestick strategies on Dow Jones stocks (1992–2002). They did not beat simply buying and holding.

Win-rate tables for patterns that float around online are mostly not peer-reviewed. We don't repeat their percentages. If you want to know whether a pattern works for you, test it: How to test a trading claim.

More from T-WYS

Location Beats Pattern: Where a Setup Matters More Than How It Looks
T-WYS · 5:40 · open on YouTube

Related

Sources & studies

  1. Lo, Mamaysky & Wang (2000), Journal of Finance (author PDF)
  2. Park & Irwin (2007), Journal of Economic Surveys
  3. Marshall, Young & Rose (2006), Journal of Banking & Finance

Chart and candlestick patternsHead and shouldersDouble top and double bottom

Last checked: 2026-11-04 · Educational, not financial advice.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.