Identifying Two Crows Candlestick Patterns with Python and TA-Lib
A Step-by-Step Guide to Recognizing Bearish Reversals in Financial Markets
In the world of financial markets, price movements often follow patterns that reflect the collective sentiments of traders. In this guide, we’ll harness the power of Python and TA-Lib to automatically identify a bearish reversal pattern known as the “Two Crows” candlestick pattern. We’ll walk through the process of detecting and visualizing this pattern on a price chart.
Understanding the Two Crows Candlestick Pattern
The “Two Crows” pattern is a bearish reversal pattern that consists of three candles. It is characterized by the following:
- First Candle: The pattern begins with a bullish (up) candle, indicating an ongoing uptrend.
- Second Candle: The second candle opens higher than the previous day’s close but fails to maintain these gains. It closes below the midpoint of the first candle’s body, signaling indecision and a potential reversal.
- Third Candle: The final candle is a strong bearish (down) candle that closes well below the second candle’s close, confirming the bearish reversal.
The “Two Crows” pattern is considered a reliable signal of a potential trend change.
Setting Up Python for Pattern Detection
To identify “Two Crows” patterns, we’ll use Python with the TA-Lib library. Before we start, make sure you have TA-Lib…
