Pattern Recognition Indicator

What is the Pattern Recognition Indicator

The pattern recognition indicator is an advanced tool that displays what candlestick patterns have formed on your charts in real-time. This indicator is also commonly known as the Forex Pattern Recognition Master Indicator. The indicator identifies both bullish and bearish patterns.

The pattern recognition indicator is not pre-built onto the MT4 platform. However, the platform allows you to download any third-party indicators onto it for free. It is important to note that this indicator only recognizes a select few chart patterns that are most commonly used by traders.

How to Trade the Pattern Recognition Indicator

The pattern recognition indicator will display initials under some candlesticks to reveal that these candlesticks have formed a chart pattern. The initials are of the candlestick chart pattern that has formed. On the top-left of the chart, you will be able to see what the initials represent.

For instance, the initials SE stands for bullish engulfing. If SE forms under some candlesticks, you will be able to know that those candlesticks formed the bullish engulfing pattern. To know what SE stands for, you would look at the top-left of the chart to find out what it means.

Buy Signal

In a pattern recognition indicator, the formation of a bullish chart pattern is an indicator of a buy signal. In the chart below, you can see the formation of a few different bullish chart patterns. HMR stands for the Bullish Hammer pattern, while PL stands for the Piercing Line pattern. The blue color of the initials is an indicator that the pattern is a bullish one.

Pattern Recognition Indicator Sell Signal
Pattern Recognition Indicator Sell Signal

Sell Signal

In a pattern recognition indicator, the formation of a bearish chart pattern is an indicator of a sell signal. In the chart below, you can see the formation of a few different bearish chart patterns. SS stands for the Shooting Star pattern, SE stands for the Bearish Engulfing pattern, and DCC stands for the Dark Cloud pattern. The red color of the initials is an indicator that the pattern is a bearish one.

Pattern Recognition Indicator Buy Signal
Pattern Recognition Indicator Buy Signal

Pattern Recognition Indicator Pros & Cons

The pattern recognition indicator is one of the most popular charting tools in forex trading. However, it is important to understand its pros and cons before incorporating it into your trading:

Pros

  • Easy to understand for beginners
  • Simple formation on the chart
  • Determines the right time to buy and sell

Cons

  • Only recognizes certain chart patterns
  • Only forms after the pattern is complete
  • Only recognizes short-term trends

Conclusion

The pattern recognition indicator is a useful tool in forex trading that enables you to determine the right time to buy or sell your trading pairs. However, this tool is only useful for those traders who know the meaning of different candlestick chart patterns. Even though this indicator is not built-in on the MT4 platform, it is still free to download. It is important to incorporate one or more additional indicators to your chart as this tool is best used with others. Remember to always test it out on a demo account first to see if it works for you.