What's Special About Trading the Flying Buddha Pattern in Forex? (Part 2)
In this follow-up article, Adam Lemon of DailyForex.com outlines methods the forex trader can use to enhance the profitability of this candlestick pattern and compares backtest results with those of another similar entry strategy to see what—if anything—is special about trading the Flying Buddha pattern.
In the first part of this series I explained the Flying Buddha candlestick pattern which can be used to trade forex profitably. In this second part I will explain methods you can use to enhance the profitability of this entry method. I will also compare backtest results with results of another similar entry strategy and we will see whether there is anything special about trading the Flying Buddha pattern.
Testing the Flying Buddha Pattern
Let’s start by taking a look at backtest results. A backtest was conducted from 2002 until the end of 2015, which is a total of 16 years covering many types of market conditions. The currency pairs examined were the seven major USD currency pairs. Hypothetical trades were taken following Flying Buddha candlesticks on the H4 London time chart only if the price was above its levels from three months and six months ago (for long trades) or below its levels from three months and six months ago (for short trades). Entries were placed 1 pip past the Flying Buddha candlestick, with stop losses placed just the other side of the candlestick—or if the previous candlestick extended beyond that—then just the other side of that previous candlestick.
When trading the Flying Buddha pattern, the entry candlestick was the final candlestick of the trading week, it was not taken and was excluded from the results.