JCPR Manual PDF

Greg Morris Japanese Candle
Pattern Recognition
MetaStock Add-on Manual
Printed in the USA

All Rights Reserved
Copyright 2011
MetaStock
90 South 400 West, Suite 620
Salt Lake City, UT 84101
http://www.metastock.com
Except as permitted by law, no part of this document may be

reproduced or transmitted by any process or means without the
prior written consent of Thomson Reuters, MetaStock, and
Gregory L. Morris. By publishing this document Thomson
Reuters, MetaStock, and Gregory L. Morris do not guarantee that
any information contained herein is or will remain accurate or
that use of the information will ensure correct and faultless
operation of the relevant product or service. MetaStock and
Gregory L. Morris provide products and services as tools to be
used by investors who are aware of the risk inherent in securities
trading, not as recommendations to buy or sell. Thomson
Reuters, its agents, affiliates, and employees shall not be held
liable to or through any user for any loss or damage whatsoever
resulting from reliance on the information contained within this
document or through the use of Thomson Reuters products or
services.
This product is not a recommendation to buy or sell, but rather a

guideline to interpreting the specified analysis methods. This
information should only be used by investors who are aware of
the risk inherent in securities trading. Thomson Reuters,
MetaStock, and Gregory L. Morris accept no liability whatsoever
for any loss arising from any use of this product or its contents.
Table of Contents
Chapter 1 - Introduction..................................................7
Welcome ................................................................................. 7
Benefits of this Add-on .......................................................... 7
Background ............................................................................8
How to Use this Manual .........................................................9
Chapter 2 - Getting Started ...........................................11

To Install the Add-on ............................................................ 11
Chapter 3 - Components Included ................................ 13

Indicators Included ...............................................................13
Explorations and System Tests Included .............................13
Expert Advisors Included ......................................................13
Templates Included ..............................................................13
Chapter 4 - Analyzing Candle Patterns......................... 15

Pattern Breakdown .............................................................. 15
Pattern Breakdown Example ...................................................... 15
Pattern Detail Information ................................................... 16

Price Based Support and Resistance ................................... 19
Candle Pattern Filtering ...................................................... 19
Ideal Acceptable Candle Patterns and Variations .............. 19
More reversal patterns than continuation patterns ................... 20
More bullish reversals than bearish reversals ........................... 20
A Pattern is Identified but Changes Color .......................... 20

A Clear Top/Bottom Was Made and There Was No Candle
Pattern ................................................................................. 21
Some Japanese Candle Patterns Do Not Appear ................ 21
Chapter 5 - Greg Morris Indicators ............................. 25

Personal Note from Greg Morris ..........................................25
JCPR Candle Trend ..............................................................25
JCPR Support & Resistance .................................................26
JCPR Filtering Binary ...........................................................26
Greg Morris Japanese Candle Pattern Recognition Manual
iii
Table of Contents
JCPR Filtering Binary Example ................................................... 27
Filtering Bearish Reversal Patterns ............................................ 27
Filtering Bullish Reversal Patterns ............................................. 27
Chapter 6 - Candle Patterns ........................................ 29

Included Candle Patterns ................................................... 29
Reversal Patterns ........................................................................29
Continuation Patterns .................................................................30
Candle Pattern Images ........................................................ 31

Engulfing + ...................................................................................31
Engulfing - ....................................................................................31
Harami + ...................................................................................... 32
Harami - ....................................................................................... 32
Harami Cross + ............................................................................ 32
Harami Cross - ............................................................................. 32
Piercing Line + ............................................................................. 32
Dark Cloud Cover - ...................................................................... 32
Doji Star + .................................................................................... 33
Doji Star - .................................................................................... 33
Meeting Line + ............................................................................. 33
Meeting Line - ............................................................................. 33
Three White Soldiers + ................................................................ 33
Three Black Crows - .................................................................... 33
Morning Star + ............................................................................ 34
Evening Star - .............................................................................. 34
Morning Doji Star - ...................................................................... 34
Evening Doji Star + ...................................................................... 34
Abandoned Baby + ...................................................................... 34
Abandoned Baby - ...................................................................... 34
Breakaway + ................................................................................ 35
Three Inside Up + ........................................................................ 35
Three Inside Down + .................................................................... 35
Three Outside Up + ..................................................................... 35
Three Outside Down - ................................................................. 35
Kicking + ...................................................................................... 36
Kicking - ....................................................................................... 36
Unique Three River + ................................................................... 36
Three Stars in the South + .......................................................... 36
Concealing Baby Swallow + ........................................................ 36
iv
Table of Contents
Stick Sandwich + .........................................................................36
Homing Pigeon + ......................................................................... 37
Ladder Bottom + ......................................................................... 37
Matching Low + ........................................................................... 37
Upside Gap Two Crows - ............................................................. 37
Identical Three Crows - ............................................................... 37
Deliberation - ............................................................................... 37
Advance Block - ...........................................................................38
Two Crows - .................................................................................38
Separating Lines + .......................................................................38
Separating Lines - .......................................................................38
Rising Three Methods + ..............................................................38
Falling Three Methods - ..............................................................39
Upside Tasuki Gap + ....................................................................39
Downside Tasuki Gap - ................................................................39
Side by Side White Lines + ..........................................................39
Side by Side White Lines - ...........................................................39
Three Line Strike + ...................................................................... 40
Three Line Strike - ...................................................................... 40
Upside Gap Three Methods + ..................................................... 40
Downside Gap Three Methods + ................................................ 40
Chapter 7 - Common Questions ................................... 43

Why are single-day candles not part of this product? .........43
Can you use candle patterns on intraday or weekly data? ..43
What mistakes do I see the most in the analysis of candle
patterns? ..............................................................................44
What do you use to determine the Trend? ..........................44
Chapter 8 - Understanding Explorations and System

Tests ........................................................................... 45
JCPR Reversal Patterns .......................................................45
JCPR Reversal Patterns Confirmed .....................................45
JPCR Filtered Reversal Patterns ..........................................45
JCPR Filtered Reversal Patterns Confirm ............................45
Table of Contents
Chapter 9 - Understanding Expert Advisors .................47

JCPR:Japanese Candle Pattern Recognition .......................47
Expert Commentary .................................................................... 47
JCPR Expert Commentary Example ...........................................48
Chapter 10 - Understanding Templates........................53

JCPR Clean Chart .................................................................53
Descriptions of JCPR Clean Chart ............................................... 53
JCPR Clean Chart Example ......................................................... 53
JCPR Filtering Indicators ..................................................... 54

Descriptions of JCPR Filtering Indicators ...................................54
JCPR Filtering Indicators Example .............................................54
Chapter 11 - Using Indicators ....................................... 55

To Plot an Indicator ............................................................. 55
Chapter 12 - Using Explorations ...................................57

To Run an Exploration .........................................................57
The Exploration Report ........................................................ 61
Chapter 13 - Using System Tests...................................63

Changing the System Tests .................................................63
Personal Note from Greg Morris ..........................................63
To Run a System Test .......................................................... 64
The System Test Report .......................................................67
Chapter 14 - Using Expert Advisors ............................. 69

To Attach Experts to Your Charts ....................................... 69
To View the Expert Commentary .........................................70
Chapter 15 - Using Templates ...................................... 71

To Apply a Template to an Open Chart ................................71
Chapter 16 - Sources.....................................................73
vi
C HAPTER 1
I N TR O DUC TI O N
Welcome
Congratulations on your purchase of Greg Morris Japanese
Candle Pattern Recognition MetaStock Add-on. This product was
designed to help you quickly identify real Japanese candle
patterns and offer a number of different ways to use them in your
trading.
Benefits of this Add-on

So what does Greg Morris Japanese Candle Pattern Recognition
do for you? Below are several key things this MetaStock add-on
provides.
1.
2.
Accurate identification of real Japanese candle patterns.

A number of explorations to help you find candle patterns
and filtered candle patterns.
3. An expert that gives you details on each pattern.
4. A new trend measure that is used by the software to find patterns that you can use outside of this software for your other
analysis.
5. An automatic identification of price based support and resistance levels used by the software to help identify the best
patterns, which can also be used outside of this product for
your other analysis.
6. Filtered candle patterns based upon classic technical indicators and volume.
7. And much more.
Chapter 1: Introduction
Background
I attended a Market Technician Association seminar in Phoenix, AZ in
1988. There was a large contingent of Japanese traders present and
they presented their charting techniques. It was the first time I had
ever heard of "Hi Ashi," which is what the Japanese call their
candlestick chart. I was working with N-Squared Computing then
and we decided to create a charting product using Japanese patterns
with automatic recognition capability. I traveled to Japan and stayed
with Takehiro Hikita who was an active red bean and rice trader in
Yokohama. He was intent on teaching me the art and also helping in
translating many of the books that are listed at the end of this
manual (see Sources).
There are many books out now on candle patterns and most software
programs have candlestick charting capability. However, very few
have the correct methodology (original Japanese). This product uses
ONLY the candle patterns that came from original Japanese
literature, with two exceptions. The Three Outside and Three Inside
patterns were created when I was at N-Squared Computing to
enhance the Engulfing and Harami patterns. They do that quite well,
but please realize they are NOT real Japanese candle patterns.
Note: I find it amusing that in new books on candlesticks, the Three
Outside and Three Inside patterns are generally included as if
they are actual Japanese candle patterns. I think only Steve
Nison and I did any original research, the rest obtained their
knowledge from us.
For additional study I humbly recommend you refer to the 3rd edition
of my book, Candlestick Charting Explained, published by
McGraw-Hill. I cover all of the patterns included in this product, the
single day patterns, and many others that were created to fill holes in
the Japanese literature. This product follows closely the details laid
out in the book. The book was first published in 1992 and on its 3rd
edition with a vast amount of statistics.
- Greg Morris
How to Use this Manual

If you are comfortable with basic tasks in MetaStock, this manual
is all you need to learn to use Greg Morris Japanese Candle
Pattern Recognition. If you are a beginning user, read the
MetaStock Getting Started manual before using this add-on.
Below is a summary of the content contained in each chapter.
Chapter
Number
Chapter Title
Contents
Two
Getting Started
Instructions on how to install and

run Greg Morris Japanese Candle
Pattern Recognition MetaStock
Add-on
Three
Components
Included
Overview of the components

included in Greg Morris Japanese
Candle Pattern Recognition
MetaStock Add-on
Four
Analyzing Candle Basic information about

interpreting candle patterns
Patterns
Five
Greg Morris
Indicators
Descriptions of the included

indicators
Six
Candle Patterns
Images of the candle patterns

used with this add-on
Seven
Common
Questions
Answers to common questions

you might have about this add-on
Eight
Understanding
Explorations and
System Tests

Explorations and System Tests
Chapter
Number
Chapter Title
Contents
Nine
Understanding
Expert Advisors
Descriptions of the information

contained within the Expert
Advisor Commentary
Ten
Understanding
Templates

templates
Eleven
Using Indicators
Instructions on how to add the

Pattern Recognition indicators to
a chart
Twelve
Using
Explorations
Instructions on how to run an

Exploration on the Greg Morris
Japanese Candle Pattern
Recognition MetaStock Add-On
pattern scans
Thirteen Using System

Tests
Instructions on how to run a

System Test on the Greg Morris
pattern scans
Fourteen Using Expert

Advisors
Instructions on how to run an

Expert on the Greg Morris
pattern scans
Fifteen
Instructions on how to apply the

Pattern Recognition templates to
a chart
10
Using Templates
Chapter
Number
Chapter Title
Contents
Sixteen
Sources
Sources used in the creation of

this add-on
11
12
C HAPTER 2
G ETTING S T A R T E D
Included in this chapter are instructions on installing Greg Morris

Japanese Candle Pattern Recognition MetaStock Add-on.
To Install the Add-on

Step Action
1
Insert the Program CD into your CD/DVD drive.
The setup starts automatically.

OR
If the auto-run feature of Windows is not enabled on
your system, then click Start > Run.
2
In the Open box, type D:\SETUP.EXE.
OR
For Vista and Windows 7 users, Type D: in the Run box
and Click OK. Right click on the Setup.exe file and
choose Run as Administrator.
Note: "D" represents the letter assigned to your CD-ROM
drive. If your drive has a different letter assigned, use that
letter instead of "D.
3
Click OK.
Follow the on-screen instructions to complete the

installation.
11
C HAPTER 3
C OMPONENTS I N C L U D E D
Below is a summary of the indicators, explorations, system tests,

expert advisors, and templates included with Greg Morris
Indicators Included
JCPR Candle Trend

JCPR Support & Resistance
JCPR Filtering Binary
Explorations and System Tests Included
JCPR Reversal Patterns

JCPR Reversal Patterns Confirmed
JPCR Filtered Reversal Patterns
JCPR Filtered Reversal Patterns Confirm
Expert Advisors Included
JCPR:Japanese Candle Pattern Recognition
Templates Included
JCPR Clean Chart

JCPR Filtering Indicators
13
C HAPTER 4
A N ALYZI NG C ANDLE P AT T ER NS
Below you will find basic information on analyzing candle

patterns.
Pattern Breakdown
The concept behind Pattern Breakdown is fairly simple, basically,
if you combined all the days of the pattern into a single
candlestick, would the interpretation support the pattern or not?
For example, below is the Evening Star pattern (bearish reversal)
with the breakdown to the right of the arrow. The single
candlestick line is known as a shooting star which is also bearish.
Therefore, the Evening Star breakdown is fully supportive and
adds to the quality of the pattern. A number of patterns have
breakdowns that are not supportive. This concept is dealt with in
the Expert (see To View the Expert Commentary) and the scoring
system (see JCPR Expert Commentary Example).
Pattern
Breakdown
Example
Evening Star Pattern (Bearish Reversal)
15
Chapter 4: Analyzing Candle Patterns
Pattern Detail Information

Below is an example of the pattern information box which is
located in Greg Morris book Candlestick Charting Explained.
Pattern Name:
MTL+
Japanese Name:
Trend Required:
Frequency (MDaysBP)
Matching Low +
niten zoko/kenuki
Yes
Confirmation:
590
Frequent
Type: R+
No
Pattern Statistics from 7275 Common Stocks with over 14.6 Million Days of Data
Interval (Days):
% Winners:
Avg. % Gain:
% Losers:
Avg. % Loss:
Net Profit/Net Loss:
2
3
4
5
6
7
69
64
62
61
60
59
59
3.63 4.71 5.42 5.98 6.64 6.98 7.37
31
36
38
39
40
41
41
-2.06 -3.42 -3.92 -4.39 -4.75 -5.13 -5.48
1.23 1.43 1.55 1.65 1.77 1.79 1.82
Each pattern (bullish + and bearish -) has a box with the

following information.
Section
Displayed Information
Pattern Name
+ for bullish
- for bearish
Symbol
MTL+ is the symbol used in MetaStock
Type
R = reversal
C = Continuation
Japanese Name
The Romanized name
Trend Required
Yes
No
16

Section
Confirmation
Required
Suggested
No
Note: Confirmation was an attempt to
identify candle patterns that universally fell
into two categories, one that seemed to never
work well, and one that seemed to always
work well. Those that never seemed to work
well need confirmation (Required). Those that
seemed to work well all of the time do not
need confirmation (No). A third category was
derived because some of those that were
originally in the "worked well" category still
had a few statistics that were not good,
therefore they were placed in the Suggested
category, meaning that confirmation is
suggested.
Frequency
(MDaysBP)
The number of mean (average) days

between patterns with a classification of
Quite Frequent, Frequent, Average, Rare,
and Extremely Rare.
Interval (Days)
The 7 different days of performance.
17

Section
Net Profit / Net

Loss per Trade
The Net Profit/Loss per Trade value is the

average percent gain (or loss) for all
trades.
Because the New Profit/Loss per Trade is the
average result for all trades (winning,
breakeven, and losing trades), it can be a
positive or negative number, or even zero. If
the Net Profit/Loss per Trade value is positive,
it means the average trade produced a net
profit. If the Net Profit/Loss per Trade value is
negative, it means the average trade
produced a net loss.
The Net Profit/Loss per Trade value is the sum
of all individual trade results divided by the
number of trades. If all trades produced either
a gain or a loss (i.e., there were no 0.00 trade
results), then the Net Profit/Loss per Trade
value can also be calculated as follows:
Net Profit/Loss per Trade = (% Winners x Avg
Win) + (% Losers x Avg Loss)
(Net Profit / Net Loss)
IMPORTANT:
A good candlestick pattern will have positive

Net Profit/Loss per Trade values across
many time frames. And among those
patterns producing a net profit per trade, the
better patterns will be those with smaller Avg
Loss (100 - % Wins) values (i.e., a -3.00%
Avg Loss value is better than a -6.00% Avg
Loss value). Candlestick patterns are not
perfect, so when a trade doesn't work out,
you want a pattern whose losing trades
produce on average limited losses.
Note: These statistics are automatically
incorporated into the candle pattern
scoring system in this product.
18
Price Based Support and Resistance

You will find that when candle patterns occur near support or
resistance levels that are price based they will generally work
better than when they are not. Price based means the support
and resistance lines are horizontal. This software has an
automatic support and resistance calculator built in and is also
part of the expert scoring technique. In fact, this unique tool can
be used for all of your other technical analysis.
Candle Pattern Filtering

Candle pattern filtering was developed by Greg Morris in the very
early 1990s as an attempt to enhance the quality of signals
generated from candle patterns. The concept is really quite
simple. If you consider a common technical indicator such as
Stochastics %D, we know that whenever %D rises above 80, it is
just a matter of time before it will drop back below 80 for a sell
signal. I call this period of time when %D is above 80 the bearish
pre-signal area. So now if you also can find a bearish reversal
candle pattern that occurs while %D is above 80, you are getting
an emotionally driven sell signal prior to getting a technically
based price sell signal. Of course the inverse is to find bullish
reversal patterns when %D is in its bullish pre-signal area below
20.
Ideal Acceptable Candle Patterns and Variations

Chapter 6, Candle Patterns illustrates the candle patterns
included in this product. This is to show you the "ideal" pattern.
One rarely finds the ideal pattern in real life and trading, but you
must have some feel for what it should look like. You can then see
how the pattern identified by the software can vary from the
ideal. I have kept the parameters fairly tight on the identification
engine, as the closer they are to ideal, the better then generally
are. However, you cannot have the identification parameters too
19

tight or there would be very few candle patterns appear. The
three vertical lines that precede the patterns are to show where
the preceding trend was from. If they are descending, then the
trend is down, if they are rising, then the preceding trend is up.
Note: The code to identify candle patterns has been set to show the
absolute minimum requirements for a pattern. Because of
this you may see patterns being identified that are not picture
perfect. I felt it was better to keep the pattern identification
code as flexible as possible.
More
reversal
patterns
than
continuation
patterns
I think it should be obvious that identifying the

beginning and end of a trend is more important for
trading than the identification of a trend that is
continuing. While the continuation patterns
should not be ignored, they rarely offer a trading
opportunity. Continuation patterns are more a
sign of confirmation that the trend is still in place.
However, if you did not take a position in the early
stage of the trend, the continuation would be a
second opportunity to place a trade. In this
product there are 38 reversal patterns and 15
continuation patterns.
More bullish
reversals
than bearish
reversals
If you have ever studied long term charts of the

markets or stocks, you can quickly see that when
they are developing tops, they are usually long
drawn out affairs (distribution), the decision
making of selling is more difficult for most
investors. However, at bottoms, the emotions are
quicker and bottoms tend to be more sharp and
defined. This is why there are more bullish reversal
patterns than bearish reversal ones. In this
product there are 21 bullish reversal patterns and
17 bearish reversal patterns.
A Pattern is Identified but Changes Color

The pattern identification process begins with the oldest data
loaded and moves forward from there. Many times a pattern such
20

as a bullish engulfing pattern is identified, then followed by a day
where the close is higher, which would be a Three Outside Up
pattern. Both patterns are identified. Sometimes you might see a
blue continuation pattern turn into a green bullish pattern. Both
are still identified, just the coloring changes - it is the later
pattern that you should consider. The other instance of change is
when the trend measure changes from bullish to bearish in the
middle of a developing pattern, then only the first part of the
pattern will show.
A Clear Top/Bottom Was Made and There Was No

Candle Pattern
Candle patterns are not to be traded solely by themselves. One
cannot expect a candle pattern to identify each top or bottom, it
just won't happen. However, after you study a number of charts
you will see that they still do a good job of identifying most tops
and most bottoms.
Some Japanese Candle Patterns Do Not Appear

My goal with this product was to include all of the real Japanese
candle patterns. When I was translating the Japanese literature
many of the patterns, in fact, most of the patterns were discussed
in general terms. Remember, there were no computers and it was
strictly a visual process. I had to interpret the discussion and
convert it into computer code for identification. There are a
handful of patterns that are extremely rare (detailed discussion in
my book "Candlestick Charting Explained") that do not appear
unless searching through vast amounts of data. For example, the
pattern "3 Stars in the South+" appears so infrequently that I
deem it as almost useless. There were only 35 occurrences in over
14.6 Million days of data. "Unique 3 River Bottom" only occurred
36 times. However, it was included because it was a pattern that
was discussed in one of the Japanese books. The experimental
data was accomplished on a list of 7275 common U.S. stocks,
21

which included large data histories that totaled over 14.6 Million
days of data. Remember this: These are just statistics and all
based upon past data - their frequency could improve over time
or get worse. You just need to be aware of the fact that they are
rare and not be concerned if you don't see them often, if ever.
So, when you see one of these extremely rare patterns, what
should you do? I suggest that you make a note of it but do not act
upon it. For reference purposes I have also included a list of rare
patterns first.
Here is a list of the rare patterns:
Pattern Name
Frequency
(mean days between patterns)
Concealing Baby Swallow+
59,109
Side by Side White Lines+
16,295
Side by Side White Lines-
47,557
Three Line Strike-
17,402
Upside Gap 3 Methods+
21,598
Downside Gap 3 Methods-
18,365
Upside Tasuki Gap+
18,839
Downside Tasuki Gap-
20,278
Stick Sandwich+
19,338
3 Line Strike+
20,506
Ladder Bottom+
25,260
Two Crows-
34,679
Advance Block-
60,833
Abandoned Baby+
87,952
Abandoned Baby-
89,571
Breakaway+
97,333
22

Here is a list of extremely rare patterns:
Pattern Name
Frequency
(mean days between patterns)
In Neck Line-
239,344
Upside Gap 2 Crows-
317,391
Unique 3 River Bottom+
405,556
3 Stars in the South+
417,143
23
C HAPTER 5
G RE G M O R R I S I NDICATORS
This MetaStock add-on comes with three powerful indicators that

you can use outside of the add-on. In other words, you have
access to these indicators from the usual indicator selection
process in MetaStock.
Personal Note from Greg Morris

The JCPR Candle Trend is a new indicator I created that is a
powerful trend measure of the market. While it is used within this
product to identify trends, you have complete access to it and can
change the number of periods if you wish to identify longer trends
of data.
Likewise, the JCPR Support and Resistance Indicator can be used
outside of this add-on. I think you will find that horizontal
support and resistance lines are much better than slanted ones.
JCPR Candle Trend

The JCPR Candle Trend is a new method of identifying short term
trends and is used in Greg Morris' Candle Pattern Recognition
automatically. However, it is also provided so that you can use it
anywhere in MetaStock for any other trend analysis you would
like to do. You can change the input value to increase or decrease
the trend measure. The default value of 15 is used in the product.
If you wanted to look at longer term trends, just increase the
input value as appropriate. For example, you can set it at 50, to
see longer trends similar to a 50 day average.
The JCPR Candle Trend indicator takes into consideration the
true range of prices and expands or contracts based upon those
ranges to follow the trend adaptively.
25
Chapter 5: Greg Morris Indicators

The JCPR Candle Support and Resistance indicator is the one
used in this product to automatically calculate the support and
resistance lines. The input value is set at 126 and is the number of
periods (days) that it looks back in the data to calculate the lines.
You can increase the look back periods to expand the concept.
Sometimes it will encompass more data and widen the support
and resistance lines but not always.

This binary uses a combination of 3 indicators, 9 day Stochastic
%D, 14 day Stochastic %D, and DI (Directional Movement).
Each indicator carries the following weight:
9%D
14%D
DI
20
10
10
The binary oscillates between +40 and -40.
26
Chapter 5: Greg Morris Indicators

JCPR Filtering Binary Example
Filtering
Bearish
Reversal
Patterns
To utilize this as a bearish pattern filter,

whenever the indicator is above 20 and the
prices are in an uptrend, any bearish reversal
pattern will be considered filtered. In other
words, that pattern has a better chance at being
right than if the Filtering Binary were below 20.
Note: You can use values other than +20 as the
bearish reversal filter, such as +30, or even
+40. If you use +40, then you are requiring
all 3 indicators to be in their signal areas
(see above chart).
Filtering
Bullish
Reversal
Patterns
To utilize this as a bullish pattern filter,

whenever the indicator is below -20 and the
prices are in an downtrend, any bearish reversal
pattern will be considered filtered. In other
words, that pattern has a better chance at being
right than if the Filtering Binary were above -20.
27
C HAPTER 6
C A N D LE P AT T E RN S
Included Candle Patterns

The following candle patterns are included in Greg Morris
Reversal
Patterns
Abbrevi Pattern Name

ation
E+
EH+
HHC+
HCPL+
DCDS+
DSML+
ML3WS+
3BCMS+
ESMDSEDS+
AB+
ABB+
Engulfing +
Engulfing Harami +
Harami Harami Cross +
Harami Cross Piercing Line +
Dark Cloud Cover Doji Star +
Doji Star Meeting Line +
Meeting Line Three White Soldiers +
Three Black Crows Morning Star +
Evening Star Morning Doji Star Evening Doji Star +
Abandoned Baby +
Abandoned Baby Breakaway +
29
Chapter 6: Candle Patterns

ation
3IU+
3ID+
3OU+
3ODK+
KU3R+
3SS+
SKS+
CBS+
HP+
LB+
MTL+
G2CITCDAVB2CContinuation
Patterns

ation
SL+
SLR3M+
F3MTG+
TGSS+
30
Three Inside Up +
Three Inside Down +
Three Outside Up +
Three Outside Down Kicking +
Kicking Unique Three River +
Three Stars in the South +
Stick Sandwich +
Concealing Baby Swallow +
Homing Pigeon +
Ladder Bottom +
Matching Low +
Upside Gap Two Crows Identical Three Crows Deliberation Advance Block Two Crows -
Separating Lines +
Separating Lines Rising Three Methods +
Falling Three Methods Upside Tasuki Gap +
Downside Tasuki Gap Side by Side White Lines +

ation
SS3LS+
3LSG3M+
G3M+
ONIN-
Side by Side White Lines Three Line Strike +

Three Line Strike Upside Gap Three Methods +
Downside Gap Three Methods +
On Neck Line In Neck Line -
Candle Pattern Images

Below are images of the candle patterns used in Greg Morris
Japanese Candle Pattern Recognition.
Candle
Pattern
Name
Engulfing
+
Image
Candle
Pattern
Name
Image
Engulfing
-
31

Candle
Pattern
Name
Image
Candle
Pattern
Name
Harami +
Harami -
Harami
Cross +
Harami
Cross -
Piercing
Line +
Dark
Cloud
Cover -
32
Image

Candle
Pattern
Name
Image
Candle
Pattern
Name
Doji Star
+
Doji Star -
Meeting
Line +
Meeting
Line -
Three
White
Soldiers
+
Three
Black
Crows -
Image
33

Candle
Pattern
Name
Image
Candle
Pattern
Name
Morning
Star +
Evening
Star -
Morning
Doji Star -
Evening
Doji Star
+
Abandoned
Baby +
Abandoned
Baby -
34
Image

Candle
Pattern
Name
Image
Candle
Pattern
Name
Image
Breakaway
+
Three
Inside Up
+
Three
Inside
Down +
Three
Outside
Up +
Three
Outside
Down -
35

Candle
Pattern
Name
Image
Candle
Pattern
Name
Kicking +
Kicking -
Unique
Three
River +
Three
Stars in
the South
+
Concealing
Baby
Swallow +
Stick
Sandwich
+
36
Image

Candle
Pattern
Name
Image
Candle
Pattern
Name
Homing
Pigeon +
Ladder
Bottom +
Matching
Low +
Upside
Gap Two
Crows -
Identical
Three
Crows -
Deliberation
-
Image
37

Candle
Pattern
Name
Image
Candle
Pattern
Name
Advance
Block -
Two
Crows -
Separating
Lines +
Separating
Lines -
Image
Rising
Three
Methods
+
38

Candle
Pattern
Name
Image
Candle
Pattern
Name
Image
Falling
Three
Methods
-
Upside
Tasuki
Gap +
Downside
Tasuki
Gap -
Side by
Side
White
Lines +
Side by
Side
White
Lines -
39

Candle
Pattern
Name
Image
Candle
Pattern
Name
Three
Line
Strike +
Three
Line
Strike -
Upside
Gap
Three
Methods
+
Downside
Gap Three
Methods
40
Image

Candle
Pattern
Name
Image
On Neck
Line -
Candle
Pattern
Name
Image
In Neck
Line -
Note: The second days

opening is below
the first days low.
Also, the close of
the second day is at
the low of the first
day.
Note: The second days

opening is below
the first days low.
Also, the close of
the second day is
just barely into the
body of the first
day.
41
C HAPTER 7
C OMMON Q UE STIONS
Below you will find answers to commonly asked questions.
Why are single-day candles not part of this product?

Every day the market sends a message. Here is what I say about
single day candlesticks: They are not candle patterns in that you
cannot see the evolution of trader psychology through multiple
days like you can on candle patterns that are more than one day. I
also say single candlesticks still send a message that should
neither be traded, nor ignored.
Can you use candle patterns on intraday or weekly

data?
Of course you can, however, I don't recommend it. The Japanese
were adamant about the period of time between the close of one
day and the open of the next day as being critically important to
the psychological evolution of traders in developing the pattern.
With intraday charts, that time period is just the next data tick,
not a lot of time to develop a thought. Weekly truly voids the
concept as the open is Monday's open, the close is Friday's close,
the high is the high for the week (could occur on any day), and the
low is the low for the week (again, it could occur on any day of the
week). In fact, the open, high, and low could all occur on Monday,
with the close on Friday. The trading activity for the last 4 days of
the week would not be seen in a candlestick. However, as with
any art form, if it works for you, use it.
43
Chapter 7: Common Questions
What mistakes do I see the most in the analysis of

candle patterns?
Let's begin with a question! If you find a bullish reversal candle
pattern, what does the mean? First it is supposedly reversing
something, right? What is it reversing? It is reversing the
preceding trend. Second, if it is bullish reversal, wouldn't the
preceding trend have to be down? Yes, and many tend to ignore
this critical element in pattern identification. Pattern analysis in
isolation is poor analysis.
What do you use to determine the Trend?

Originally, and in my book, I used a 10 period exponential average
to determine the trend. If the midpoint of the body of the first day
was above the 10 period average, then the trend was up. In an
uptrend you can only have bearish reversal and bullish
continuation patterns and in a down trend you can only have
bullish reversal and bearish continuation patterns. In this
software product I created a much more sophisticated method of
determining trend. It reacts to price changes and price ranges
with greater accuracy than the previously used average. And
remember, it can be used as a trend measure for your other
technical analysis.
44
C HAPTER 8
U NDERSTANDIN G E XPLORATIONS
AND S Y ST E M TE ST S
The following explorations and system tests are included in Greg

Morris Japanese Candle Pattern Recognition MetaStock Add-on.

The exploration and system test identify only reversal patterns.

The exploration and system test identify reversal patterns that
also have the next day close in the appropriate direction the
pattern was calling for.
JPCR Filtered Reversal Patterns

The exploration and system test identify reversal patterns that
are filtered with 14 day Stochastics %D.
JCPR Filtered Reversal Patterns Confirm

The exploration and system test identify filtered reversal patterns
(using 14 day %D) that also have a following day in the
appropriate direction.
45
C HAPTER 9
U NDERSTANDIN G E XPER T
A D VI S O R S
JCPR:Japanese Candle Pattern Recognition

Expert
Commentary
Besides the automatic identification of candle

patterns, the Expert Commentary is loaded with
additional information to help you surmise the
quality of the current candle pattern. An
example of the Expert Commentary is shown
below with a corresponding explanation of each
section.
47
Chapter 9: Understanding Expert Advisors

JCPR Expert Commentary Example
Item
Description of the Information in the Commentary

Available on each day in your data and is always part of the
Expert Commentary.
In this example, the stock being analyzed is BK.
The current close of the selected date is shown.
The Trend analysis for this stock is Bullish or Bearish; in this
case it is Bullish.
48

Item

The support and resistance levels are always shown based
upon the last part of the loaded data. If selecting a day other
than the last day (default), these will not change, they remain
for your reference only.
If the last day of a candle pattern is selected, it will identified
here.
The Pattern Scoring will ONLY appear when there is a reversal
candle pattern that has been completed on the last day of the
data loaded. This section of the Expert Commentary will not
appear on any other selected date in the data, even if a
previously identified pattern is selected. This is because the
support and resistance calculations are ONLY accomplished
on the last part of the loaded data.
Caution: If you are viewing the Expert Commentary on any
data other than the last day loaded, the support and
resistance lines are still only associated with the last day of
data, not the day selected.There are four columns of
information in the Pattern Score data:
Pattern Score: lists the five different components that make
up the Pattern Score
Score: is the percentage that is awarded when it meets the
various components' criteria
Maximum Possible: shows the fixed maximum that a
component can contribute to the Pattern Score
Qualifiers: is a list of the various sub-components that
contributed to the Score
Support / Resistance
If a pattern falls on the appropriate support (bullish reversal)
or resistance (bearish reversal) line and any part of the data
(within the high low range of the entire pattern) is touching the
line, then it receives 15% in the scoring. If the body of the
pattern falls over the line, it receives the full 25% in the
scoring.
49

Item

Filtered
A filtered pattern is one that is supported by at least one to
three technical indicators.
9%D
9 period %D Stochastic (> 80 or < 20)
20%
14%D
14 period %D Stochastic (> 80 or < 20)
10%
DI
+DI > or < - DI (DI = Directional Indicator)
10%
Please note that these indicators are used for both bullish and
bearish reversal patterns. Therefore the filtering component
could be 0%, 10%, 20%, 30%,or 40% depending upon which
measures are met.
Statistics
The determination of the statistical computation was based
upon a weighted average of the Net Profit / Net Loss and Avg.
% Loss using a combination of performance periods. Obviously
the performance based upon the next day after the pattern is
most important and hence carried most of the weight. Candle
patterns only make short term predictions about trend reversal
and continuation, so if the prices move in that direction
initially, the pattern did its job.
The various codes are assigned from A to H based upon the
weighted score of the two categories used.
A = 15%
B = 12%
C = 9%
D = 6%
E = 3%
F - H = 0%
50
Top 25% of all statistics in both categories.

Top 25% in the Net Profit / Net Loss category.
Top 25% in the Avg. % Loss category.
Top 25% in Net Profit / Net Loss, but bottom 25% in Avg. % Loss.
Not in the top 25% or bottom 25% in either category
Bottom 25% in one or both categories.

Item

Volume
Volume support is important as the psychological evolution of
a pattern unfolds. The percentages used are as follows:
VL
VI
VC
Volume on the last day > than the 15 day average of volume
Volume increased on each day of the pattern
Volume on last day > volume on other days
5%
5%
5%
If all the volume conditions were met, the contribution to the

Pattern Score would be 15%. Possible scores would be 0%,
5%, 10%, or 15%.
Breakdown
The contribution to the Pattern Score is simply, if the
breakdown supports the pattern (Y), then 5% is awarded. If the
pattern breakdown does not support (N), then 0% is the score.
Links to separate html files are included. These html files have
additional information regarding the candle patterns.
51

If there is no pattern selected in the expert, this is what the
commentary will look like.
If a pattern is selected, but it is not the last day of the data

loaded, this is what the commentary will look like.
52
C HAPTER 1 0 U NDERSTANDIN G TEMPLAT E S

JCPR Clean Chart
Descriptions
of JCPR
Clean Chart
This template displays the following

components:
Candles
Support Lines
Resistance Lines
Trend
JCPR Clean Chart Example
53
Chapter 10: UnderstandingTemplates

Descriptions
of JCPR
Filtering
Indicators
This template contains the following

components:
Candles
Support Lines
Resistance Lines
Filtering Indicators
Stochastics %D 9 Day
Stochastics %D 14 Day
Directional Movement

Volume Data
JCPR Filtering Indicators Example
54
C HAPTER 1 1 U SING I NDICATORS

The following indicators are included in Greg Morris Japanese
Candle Pattern Recognition MetaStock Add-on.
JCPR Candle Trend

To Plot an Indicator
Step
Action
Select the chart.
Choose Insert>Indicators.
Select the indicator(s) in the Indicators list.
From the Inner Windows list, choose the inner window

to plot the indicator in.
Click OK.
55
C HAPTER 1 2 U SING E XP LO RATIONS

The following explorations are included in Greg Morris Japanese

JCPR Filtered Reversal Patterns
JCPR Filtered Reversal Patterns Confirmed
To Run an Exploration
Step
Action
1
Click
The Explorer dialog box opens.
57
Chapter 12: Using Explorations

Step
2
Action
Select the scan and click Explore.
The Select Securities dialog opens.
Click Add Securities.
The Add Securities dialog opens.
Note: It is recommended that you select Local Data to

reduce processing time.
58

Step
4
Action
Select the items to explore.
Note: To select all the items in a folder, choose Tools >
Select all.
Click Open.
59

Step
6
Action
Click OK.
The exploration will begin and the Exploration Status

dialog opens.
60
When the exploration is complete, click Reports.
The Exploration Report
Item Name
Description
Results tab
Displays all results generated during the scan
Rejects tab
Displays all stocks rejected during the scan
Exploration
tab
Displays the column formulas, filter rule,

periodicity and exploration information
Buy column Displays the stocks with a current buy opportunity

(listed with a 1 in the buy column). Rank the list by
clicking on the column header
Short
column
Displays he stocks with a short opportunity (listed

with a 1 in the short column). Rank the list by
clicking on the column header
Open Chart
Opens the chart in MetaStock (highlight a stock/

stocks and click Open Chart)
Save List
Saves this scan into your Favorites folder
Close
Closes the Exploration Report dialog
61
C HAPTER 1 3 U SING S Y ST E M TE ST S
The following system tests are included in Greg Morris Japanese

JCPR Filtered Reversal Patterns
JCPR Filtered Reversal Patterns Confirmed
Changing the System Tests

The system tests that are included in this product are not
password protected so that you can change the stop loss
function. Currently the stop loss function is set as follows:
Once in a trade, if the price moves more than 3% below the

highest high value set in the last 15 days, it is stopped and
awaiting the next candle pattern.
The opposite is for shorting. If the stops is not hit, then an
opposing candle pattern will trigger the next trade.
Personal Note from Greg Morris

System Tests serve many purposes, but I will adamantly state
here that trading solely on candle patterns is not wise. Use the
system tests with caution. I strongly suggest before you edit any
test, make a copy of the original code so that you can recover if
necessary.
63
Chapter 13: Using System Tests
To Run a System Test

Step Action
1
Click
The Select System Tester - System View opens.

2
Click New Simulation.
The Select Systems dialog opens.
64

Step Action
3
Select the test and click Next.
The Select Securities dialog opens.
Click Add Securities.
The Add Securities dialog opens.
Select the items to explore.
Click Open.
65

Step Action
7
Click Next.
The System Testing Options dialog opens.
Select the options for the system test and click Start.
The Begin Trading Simulation dialog opens.
Click Start.
10
After the simulation is completed, click View Results.
66
The System Test Report
Item
Name
Description
Profitable Displays profitable trades produced with the

stocks
system in green
NonDisplays non-profitable trades produced with
profitable the system in red
stocks
Report
columns
Sorts data in the column(s) in ascending or

descending order. Click on any of the columns
in the report to sort. Click once to sort
ascending, twice to sort descending
View
Opens the Result Details dialog
67
68
C HAPTER 1 4 U SING E XP ER T A D VI S O R S
The following expert advisor is included in Greg Morris Japanese
JCPR Japanesse Candle Pattern Recog.
To Attach Experts to Your Charts

Step
1
Action
Open a chart.
2
Click
The Expert Advisor dialog opens.
Select the Expert and click Attach.
Click Close.
Buy and sell signals will appear on the chart. The

signals will update as new data is added to the chart.
69
Chapter 14: Using Expert Advisors
To View the Expert Commentary

Step
Action
Open a chart with an Expert Advisor attached.
Right-click on an open area of the chart.
Choose Expert Advisor > Commentary.
The Commentary Window will open.
70
C HAPTER 1 5 U SING TEMPLAT E S

The following template is included in Greg Morris Japanese
JCPR Clean Chart

To Apply a Template to an Open Chart

Step
Action
Open the chart.
Right-click on the chart.
From the shortcut menu, choose Apply Template.
The Apply Template dialog opens.
Choose the template from the Apply Template dialog.
71
Chapter 15: Using Templates

Step
Action
Activate the checkbox next to Use Templates

periodicity.
Click Open.
The layout appears.
72
C HAPTER 1 6 S O U R CE S
While in Japan in 1991, my friend Takehiro Hikita, helped me
translate most of the following books. They were rich with market
history, but my focus was on obtaining the various candle
patterns and the details of their construction. Many cases were
presented where the actual details were insufficient to
completely develop the concept - keep in mind that much of this
is long before computers and basic technology. We strived to
obtain patterns as close as possible with the information
provided. Hikita had written about this a decade before so his
experience was invaluable.
Hikita, Takehiro. Shin Shuu-Ashi Tohshi Hoh - Tohkel to Kakuritus de
Toraeru. New weekly chart method - based on statistics and
probability. IOM Research Publications, 1977.
Hikita, Takehiro. Daizu no Sekai - Yunyu Daizu no Semekata
Mohhekata. The world of Soybeans - attacking methods on imported
soybeans and how to profit from it. IOM research Publications,
1978.
Kaburagi, Shigeru. Sakimono Keisen - Sohba Okuno Hosomichi.
Futures charts - explained in a detailed way to be an expert in
trading. Tohshi Nipoh Sha, 1991.
Kisamori, Kichitaro. Kabushiki Keisen no Mikata Tsukaikata Tohshika no Tameno Senryakuzu. How to read and apply charts on
stocks - Strategies for the investor. Toyo Keizai Shinpoh Sha, 1978.
Morris, Gregory. Litchfield, Ryan. Candlestick Charting Explained:
Timeless Techniques for Trading Stocks and Futures. 3rd ed. New
York: McGraw-Hill, 2006.
73
Chapter 16: Sources

Nison, Steve. Japanese Candlesticks Charting Techniques. New
York: New York Institute of Finance, 1991.
Note: Steve was one of the first to write about Japanese
candlesticks and coined many of the translated names - I
have not changed that.
Ohyama, Kenji. Inn-Yoh Rohsoku-Ashi no Mikata - Jissenfu ni Yoru.
How to read black and white / negative and positive candlefoot - In
view of the actual record. Japan Chart Co., Ltd., 1986.
Analysis of Stock Price in Japan. Tokyo: Nippon Technical Analysis
Association, 1988.
Sakata Goho wa Fuurin Kazan - Sohba Keisen no Gokui. The
Sakata Rules are wind, forest, fire, and mountain. 2nd updated 3rd
ed. Nihon Shohken Shimbun Sha, 1991.
Note: The above reference was an excellent source for many of
the candle patterns. The name Fuurin Kazan may be
translated as Fu - the speed like wind, Rin - that quietness
like forest, Ku - that battle like fire, and Zan - that immobile
positions like mountains. This idiom originated from the
Chinese battle strategy the Honma was said to have read.
Shimizu, Seiki. The Japanese Chart of Charts. Tokyo: Tokyo Futures
Trading Publishing Co., 1986.
Yasui, Taichi. Kabushiki Keisen no Shinzui - Nichi Bei Keisen
Bunseki no Subete. A picture of the stock chart. Tokyo: Toyo Keizai
Shinpoh Sha, 1981.
Yatsu, Toshikazu. Tensai Shohbashi "Honma Shohkyu Hiden" Kabu Hisshoh Jyutsu. A genius trader Sohkyu Honma into his secret
- To be confident of victory on stock investments. Diamon Sha,
1990.
Yoshimi, Toshihihko. Toshihiko Yoshimi no Chato Kyoshitsu.
A classroom on charting. Japan Chart Co., Ltd., 1991.
74

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Greg Morris Japanese Candle

Printed in the USA

Except as permitted by law, no part of this document may be

This product is not a recommendation to buy or sell, but rather a

Chapter 2 - Getting Started ...........................................11

Chapter 3 - Components Included ................................ 13

Chapter 4 - Analyzing Candle Patterns......................... 15

Pattern Detail Information ................................................... 16

A Pattern is Identified but Changes Color .......................... 20

Chapter 5 - Greg Morris Indicators ............................. 25

Chapter 6 - Candle Patterns ........................................ 29

Candle Pattern Images ........................................................ 31

Greg Morris Japanese Candle Pattern Recognition Manual

Chapter 7 - Common Questions ................................... 43

Chapter 8 - Understanding Explorations and System

Greg Morris Japanese Candle Pattern Recognition Manual

Chapter 9 - Understanding Expert Advisors .................47

Chapter 10 - Understanding Templates........................53

JCPR Filtering Indicators ..................................................... 54

Chapter 11 - Using Indicators ....................................... 55

Chapter 12 - Using Explorations ...................................57

Chapter 13 - Using System Tests...................................63

Chapter 14 - Using Expert Advisors ............................. 69

Chapter 15 - Using Templates ...................................... 71

Greg Morris Japanese Candle Pattern Recognition Manual

Benefits of this Add-on

Accurate identification of real Japanese candle patterns.

Greg Morris Japanese Candle Pattern Recognition Manual

Greg Morris Japanese Candle Pattern Recognition Manual

How to Use this Manual

Instructions on how to install and

Overview of the components

Analyzing Candle Basic information about

Descriptions of the included

Images of the candle patterns

Answers to common questions

Descriptions of the included

Greg Morris Japanese Candle Pattern Recognition Manual

Descriptions of the information

Descriptions of the included

Instructions on how to add the

Instructions on how to run an

Thirteen Using System

Instructions on how to run a

Fourteen Using Expert

Instructions on how to run an

Instructions on how to apply the

Greg Morris Japanese Candle Pattern Recognition Manual

Sources used in the creation of

Greg Morris Japanese Candle Pattern Recognition Manual

Greg Morris Japanese Candle Pattern Recognition Manual

Included in this chapter are instructions on installing Greg Morris

To Install the Add-on

Insert the Program CD into your CD/DVD drive.

The setup starts automatically.

In the Open box, type D:\SETUP.EXE.

Follow the on-screen instructions to complete the

Greg Morris Japanese Candle Pattern Recognition Manual

Below is a summary of the indicators, explorations, system tests,

JCPR Candle Trend

Explorations and System Tests Included

JCPR Reversal Patterns