Context is everything

Same shape, opposite value

You now know the shapes. The professional skill is knowing when to ignore them. A hammer that prints at a tested support, after a clean downtrend, is a high-value signal. The identical hammer printed in the middle of a choppy range is noise — there is no level for it to react against, and no exhausted move for it to reverse. Most patterns you see on a chart should be ignored for exactly this reason.

The four filters

Before you trade any candlestick pattern, run it through four filters. Location: is it at a real support, resistance or zone? Trend context: is it reversing an extended, tired move (not appearing mid-trend)? Confirmation: did the next candle follow through in the pattern’s direction? Risk: is there a sensible stop just beyond the pattern’s extreme? If any answer is no, pass. A pattern that fails all four is a coin flip.

• A pattern’s value depends entirely on its location and context.
• Filter every pattern: Location, Trend context, Confirmation, Risk.
• Most patterns mid-range should be ignored.
• A failed pattern at a level is itself a signal — in the opposite direction.