Bullish Short Line Explained & Backtested (2024)

The bullish short line is a frequently occurring one-bar Japanese candlestick pattern that most technical analysts believe represents indecision.

But what if I told you that our 21-year backtest shows that most technical analysts are wrong?

Imagine if history told you that this frequently occurring pattern could be traded profitably.

Would you be interested?

If so, let’s learn how to trade these bullish short line patterns using a data-driven trading strategy.

What Is a Bullish Short Line Candlestick Pattern?

The bullish short line is a frequently occurring one-bar pattern commonly considered an indecision candlestick.

The name “bullish short line” comes from the pattern resembling a short line on the candlestick chart.

And, as usual, conventional trading wisdom is wrong. This pattern doesn’t represent indecision.

But before we dive into the history of these short candlesticks and how to trade them, let’s understand how to identify them on our candlestick charts.

How to Identify the Bullish Short Line Candlestick Pattern

The following are the requirements for a valid bullish short line pattern:

• The candle must have a small real body with short upper and lower wicks.

This is one of the most straightforward patterns to identify since it is a single bar that doesn’t require a trend. 

We see the bullish short line on the Nvidia chart above.

There’s a small green candle with short upper and lower shadows. 

Now that we know how to identify this supposed indecision pattern, let’s learn the best bullish short line trading strategy.

How to Trade the Bullish Short Line Pattern

The bullish short line candlestick pattern is best traded bearishly, according to our 21-year backtest.

Let’s jump right to the optimal trading strategy for the short line, as traditional technical analysis considers this pattern to represent indecision and does not recommend an approach.

Bullish Short Line Bearish Candlestick Reversal Trade Setup

We see the bullish short line on the Markel candlestick chart above –  a shorter green candle with small upper and lower wicks. With the pattern identified, data-driven traders enter short when prices move below the $1,214.63 close with a stop loss above the candlestick’s $1,218.88 high.

This trade produced profits for the data-driven trader that knows that these bullish short lines portend a future bearish move.

But speaking of profits, what do the backtest results tell us about the best bullish short line trading strategy?

Does the Bullish Short Line Pattern Work? (Backtest Results)

I backtested the bullish short line candlestick pattern on the daily timeframe in the crypto, forex, and stock markets using the following rules:

• A close above the 50-day SMA constitutes an uptrend.
• I tested risk-reward ranges from 1 to 5. 
• The optimal risk-reward ratio is selected using profit per bar.
• Entry and exits are discussed in the how-to trade section above.
• Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Many candlestick patterns are similar to bullish short line patterns.

Bearish Short Line vs. Bullish Short Line

The bearish short line candlestick pattern and the bullish long line pattern are mirror opposites. Their color is the only difference between the bearish and bullish short lines.

Bullish Long Line vs. Bullish Short Line

The bullish long line candlestick pattern and the bullish short line pattern are similar siblings. Neither requires a trend. The only difference between the bullish long line and the bullish short line is the size of their real bodies.

The Bottom Line

The bullish short line candlestick pattern frequently occurs in all markets. The pattern supposedly represents indecision, but our 21-year backtest shows that it likely means future bearish selling.

The best trading strategy for the bullish short line is a bearish reversal going short as prices move below the close with a stop loss above the candlestick’s high.

Check out my backtest results for more bear candlestick patterns.