Requiring the bar after a pattern to close in the expected direction before acting, trading hit rate against entry price.
Almost every classical candlestick pattern has a confirmation rule attached: a hammer confirms on a close above its high, a shooting-star on a close below its low.
Confirmation exists because single candles are noisy. Waiting one bar filters out a good share of patterns that immediately fail, which raises the proportion of winners.
The cost is exact and measurable: a worse entry, a wider stop, and some trades missed entirely because price ran away. Whether confirmation helps your strategy depends on your target size. For a target of 3R, one extra bar of entry slippage may be irrelevant. For a scalp targeting half an average bar, it can erase the edge. Test both versions on the same data rather than assuming.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Risk and reward on one trade. One trade on a price scale: the entry sits 2.00 points above the stop and 6.00 points below the target, so the shaded reward band is three times the risk band. The ratio compares what is lost if the stop is hit with what is gained if the target is reached.
Educational only, not advice. Spotted an error? Post in Site Feedback.