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Combining the Extreme Euphoria Pattern With Graphical Analysis

This article revisits a candlestick pattern called the Extreme Euphoria pattern, a contrarian configuration. The aim of the article is to filter the bad signals given by the pattern and to optimize them so that the expected reaction has a better probability of occurrence.

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Candlestick charts are among the most famous ways to analyze the time series visually. They contain more information than a simple line chart and have more visual interpretability than bar charts.

The Extreme Euphoria pattern is the extension of the Euphoria pattern, a configuration discussed in previous articles which is composed three candlesticks. The general shape of the Euphoria pattern is three candlesticks with the same color and have increasing body ranges. Meanwhile, the general shape of the Extreme Euphoria pattern is five candlesticks with the same color and having increasing body ranges with the exception of the second candlestick where it is only preferable to have a bigger body range.

This is because the frequency of signals is greatly reduced if the conditions were strict (even though, theoretically, the conditions are strict but in real life, I have found the hit ratio to be quite acceptable with the flexible condition).

The bullish Extreme Euphoria is composed of five bearish candlesticks with each candlestick having a body range (difference between close and open) bigger than the previous one except for the second one where it is only preferable. The…

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