What Is The Best Time Frame For Candlesticks?

Candlesticks are popular. They are very useful for visual displays, but our previous backtests indicate candlesticks might be useful to make trading strategies as well. In this article, we look at what is the best time frame for candlesticks:

The best time frame for candlesticks is daily bars and relatively short holding periods from 1 to ten days. Thus, candlesticks are most useful for short-term trading. We backtested different time frames from 15-minute bars to monthly bars.

Table of contents:

Candlestick research (facts and statistics – backtested)

Before we continue looking into to find out what is the best time frame for candlestick patterns, we’d like to take the opportunity to remind you about the very thorough research we have done on candlesticks and returns.

We quantified all the candlestick patterns we could find (75 patterns) and put them all into trading rules that are 100% testable. Thus, you can know with certainty which patterns are working and which ones don’t work. This is facts and statistics, not anecdotal and random info.

We backtested the patterns on S&P 500, but you can (of course) test on other assets. You can order or read more by clicking on the banner below:

Most blogs and articles argue that candlestick patterns work well in all time frames. Is that really true? We don’t think so. Let’s do some backtests to find out what is working and what is not working.

In a previous article, we backtested 3 candlestick patterns that work. The patterns were tested one by one, but let’s test all 3 in one backtest (not 3 separate backtests). We recommend reading that article to better understand the background of this article.

The candlestick patterns in question are:

Bearish Engulfing Pattern (yes, it says bearish, but it is more bullish than bearish)
Three Outside Down Pattern
Bullish Harami

Why did we pick these candlestick patterns? We picked these patterns based on the article named Do Candlesticks Work? In that article, we tested 23 different candlestick patterns and the 3 above were among those that returned the best results.

In this article, we test the above 3 candlestick patterns on the ES futures contract (S&P 500) and the ETF with the ticker code SPY. We ente