Tradingview Candle Pattern Recognition with EMA 200 Filter using Pinescript

Candlestick patterns are a cornerstone of technical analysis, providing critical insights into market sentiment and potential price reversals. However, identifying these patterns manually can be time-consuming, especially in fast-moving markets. What if you could automate this process while filtering out irrelevant patterns in sideways markets? Introducing the Candle Pattern Recognition with EMA 200 Filter—an advanced trading indicator designed to help traders focus on high-probability setups. In this article, we will explore what this indicator does, how it works, and how it can improve your trading game by refining your decision-making process.

What is the Candle Pattern Recognition with EMA 200 Filter Indicator?

The Candle Pattern Recognition with EMA 200 Filter is a custom-built trading indicator that automates the identification of key candlestick patterns, including Doji, Hammer, and Engulfing, directly on your trading chart. These patterns are well-known in the trading community for their ability to signal potential market reversals or trend continuations. However, not all patterns are created equal, and some can appear during periods of low volatility or consolidation, which makes them less reliable.

This is where the Exponential Moving Average (EMA) 200 comes into play. The EMA 200 is a widely-used technical indicator that helps traders determine the overall trend of the market. By incorporating the EMA 200 as a trend filter, this indicator highlights only those candlestick patterns that occur within the context of strong uptrends or downtrends. This means that traders can focus on setups with higher success probabilities, rather than being distracted by patterns that form in choppy or sideways markets.

This combination of automated pattern recognition and EMA 200 filtering streamlines your trading workflow, allowing you to quickly spot important patterns and make more informed decisions. It’s a powerful tool for both novice and experienced traders alike, especially those who prefer trading in trending markets.

Key Candlestick Patterns Detected by the Indicator

Before diving into how the indicator works in TradingView, let’s briefly explain the key candlestick patterns it detects and how they can influence your trading strategy:

1. Doji
   A Doji is a candlestick pattern that shows indecision in the market. It forms when the open and close prices are nearly identical, creating a candle with a very small body. The long upper and lower shadows indicate that both buyers and sellers are active, but neither side has gained control. A Doji can signal a potential reversal, especially when it forms after a strong trend. In this indicator, the Doji pattern is automatically labeled, making it easier to spot these moments of indecision.
2. Hammer
   The Hammer is a bullish reversal pattern that forms after a downtrend. It consists of a small real body at the upper end of the trading range and a long lower shadow. The long shadow suggests that sellers pushed the price lower during the session, but buyers regained control and drove the price back up. The Hammer pattern is often used by traders to identify the potential bottom of a trend, signaling an opportunity to go long.
3. Engulfing
   The Engulfing pattern is a two-candle pattern that signals a strong shift in market sentiment. In a bullish Engulfing pattern, a small bearish candle is followed by a larger bullish candle that fully engulfs the previous candle’s body. This indicates a reversal from a bearish to a bullish trend. Conversely, a bearish Engulfing pattern occurs when a small bullish candle is followed by a larger bearish candle, signaling a potential bearish reversal.

How Does the Candle Pattern Recognition with EMA 200 Filter Work?

Now that you understand the patterns detected by the indicator, let’s break down how it works within a TradingView chart:

1. Automated Pattern Detection
   The indicator automatically scans the chart for the Doji, Hammer, and Engulfing candlestick patterns. Once identified, these patterns are labeled directly on your chart, saving you the effort of manually searching for them. The real-time recognition ensures you’re always in the loop, even in fast-moving markets.
2. EMA 200 Trend Filter
   The Exponential Moving Average (EMA) 200 acts as a trend filter, allowing the indicator to highlight only those patterns that occur during strong uptrends or downtrends. If the price is above the EMA 200, it indicates an uptrend, and if it is below, it suggests a downtrend. This filter helps you ignore patterns forming in choppy or sideways markets, where trading signals are often less reliable.
3. Focus on High-Probability Setups
   By filtering candlestick patterns using the EMA 200, the indicator ensures that you focus only on high-probability trading setups. This feature increases your chances of success by concentrating on patterns that are more likely to result in a significant price move. For instance, a Hammer pattern identified during an uptrend filtered by the EMA 200 is more likely to result in a bullish continuation.
4. Real-Time Alerts
   The indicator also provides real-time alerts when a new pattern is detected, allowing you to act quickly. Whether you are scalping or swing trading, timely alerts can make a significant difference in capitalizing on trading opportunities.
5. Customization Options
   Many versions of this indicator allow you to customize which candlestick patterns you want to track. For example, if you are only interested in Engulfing patterns, you can filter out the Doji and Hammer patterns to simplify your chart and focus on what matters most to your strategy.

How to Use This Indicator in TradingView

To add the Candle Pattern Recognition with EMA 200 Filter to your TradingView chart, follow these simple steps:

1. Install the Indicator
   Search for the “Candle Pattern Recognition with EMA 200 Filter” in the TradingView Public Library or your custom scripts. Once found, click “Add to Chart.”
2. Set Up the EMA 200
   If the EMA 200 is not already part of your chart setup, you can add it by going to the indicators tab, searching for “EMA,” and selecting the Exponential Moving Average. Set the length to 200 to display the EMA 200 on your chart.
3. Monitor the Chart for Signals
   Once the indicator is live, monitor your chart for patterns like Doji, Hammer, or Engulfing. The indicator will label them as soon as they appear and filter them according to the EMA 200 trend.
4. Use Alerts for Timely Trades
   Set alerts to notify you when a new candlestick pattern is identified in real-time. This helps you react quickly to emerging opportunities, ensuring that you don’t miss critical market moves.

Pinescript code for Candle Pattern Recognition with EMA 200 Filter

//@version=5
indicator("Candle Pattern Recognition with EMA 200 Filter", overlay=true)

// EMA 200 Filter
ema_length = 200
ema200 = ta.ema(close, ema_length)
plot(ema200, color=color.blue, linewidth=2, title="EMA 200")

// Bullish Hammer Pattern Detection
isBullishHammer = (close > open and ((high - low) > 3 * (close - open)) and ((close - low) / (.001 + high - low) > 0.6))
plotshape(series=isBullishHammer and close > ema200, title="Bullish Hammer", location=location.belowbar, color=color.green, style=shape.labelup, text="Hammer",textcolor = color.white)

// Bearish Engulfing Pattern Detection
isBearishEngulfing = (close[1] > open[1] and close < open and close < open[1] and open > close[1])
plotshape(series=isBearishEngulfing and close < ema200, title="Bearish Engulfing", location=location.abovebar, color=color.red, style=shape.labeldown, text="Engulfing",textcolor = color.white)

// Bullish Engulfing Pattern Detection
isBullishEngulfing = (close[1] < open[1] and close > open and close > open[1] and open < close[1])
plotshape(series=isBullishEngulfing and close > ema200, title="Bullish Engulfing", location=location.belowbar, color=color.green, style=shape.labelup, text="Engulfing",textcolor = color.white)

// Doji Pattern Detection
isDoji = math.abs(close - open) <= ((high - low) * 0.1)
plotshape(series=isDoji and close > ema200, title="Doji", location=location.belowbar, color=color.yellow, style=shape.triangledown, text="Doji",textcolor = color.blue)

// Alerts
alertcondition(isBullishHammer and close > ema200, title="Bullish Hammer", message="Bullish Hammer Pattern Detected")
alertcondition(isBearishEngulfing and close < ema200, title="Bearish Engulfing", message="Bearish Engulfing Pattern Detected")
alertcondition(isBullishEngulfing and close > ema200, title="Bullish Engulfing", message="Bullish Engulfing Pattern Detected")
alertcondition(isDoji and close > ema200, title="Doji", message="Doji Pattern Detected")

Conclusion

The Candle Pattern Recognition with EMA 200 Filter is a powerful tool that helps traders identify key candlestick patterns while filtering out noise in non-trending markets. By combining automatic pattern detection with a reliable trend filter like the EMA 200, this indicator simplifies your trading decisions and enhances the accuracy of your signals. Whether you’re new to trading or a seasoned professional, this tool can significantly improve your trading efficiency and increase your chances of success in the markets.

Disclaimer:

The information provided in this post is for educational and informational purposes only and should not be considered as financial advice. Trading financial instruments such as stocks, cryptocurrencies, and forex involves significant risk, and it is important to do your own research and consult with a professional financial advisor before making any investment decisions. Past performance of any trading strategy or indicator does not guarantee future results. Always understand the risks involved before engaging in any trading activity, and never invest money you cannot afford to lose.