Rickshaw Man Candlestick Pattern Explained & Backtested (2024)

The rickshaw man is a one-bar indecision Japanese candlestick pattern that is best traded using mean reverting trading strategies, according to extensive backtesting of multiple markets.

If you’re a candlestick trader, you might be surprised to learn that you can make money from this indecision candle.

Keep reading to learn how data-driven traders make money from the rickshaw man.

What Is a Rickshaw Man Candlestick Pattern?

The rickshaw man is a one-bar indecision candle.

The rickshaw man pattern gets its name from the Japanese rikisha (力車), where a runner draws a two-wheeled cart carrying one or two people with handles near the middle of the runner’s torso. A picture is worth a thousand words.

Before using the rickshaw man to pull our profits in the right direction, let’s learn how to identify this one-bar rickshaw pattern.

How to Identify the Rickshaw Man Candlestick Pattern

The following are the requirements for a valid rickshaw man candlestick pattern:

• A doji body near the midpoint of the candle.

We saw the rickshaw man pattern on the Amazon (AMZN) daily chart on November 23rd, 2021.

There’s a single doji candle with a real body in the middle of the range. We don’t need to consider the trend.

Now that we can identify the rickshaw man, let’s take a ride and learn how to best trade it.

How to Trade the Rickshaw Man Pattern

History tells us to capture the short-term volatility using a bullish mean reversion strategy in the crypto and stock markets and a bearish mean reversion strategy in the forex markets.

Let’s run right to the best rickshaw man trading strategy, as traditional analysts don’t recommend any setups for this indecision candle.

Rickshaw Man Bullish Mean Reversion Trade Setup

We see a single red doji whose open and close is near the midpoint. With the rickshaw pattern identified, data-driven stock and crypto traders enter long when the price moves below and back above the low, with a stop loss of one ATR.

Let’s use the rickshaw man appearing on Bitcoin’s (BTCUSD) August 29th, 2021, daily chart to clarify.

The rickshaw man’s low is $47,801. The price moves below the low the next day, signaling a trader to be looking for a long entry. The price moves above the low the following day, triggering an entry. The price moves up and to the right side of the chart providing these crypto traders with substantial satoshis.

Data-driven forex traders capture the rickshaw man’s impending volatility in the other direction.

Rickshaw Man Bearish Mean Reversion Trade Setup

Intelligent forex traders go short when the price goes above and back below the rickshaw’s high, setting a stop loss of one ATR.

We see this example on the Euro (EURUSD) February 11th, 2020, daily chart. The candle’s high is 1.09249. The price moves above this high and back below it the next day. The euro drops precipitously, generating significant gains for this data-driven trader.

Speaking of profits, what can history tell us about the best rickshaw man trading strategies?

Does the Rickshaw Man Candlestick Pattern Work? (Backtest Results)

Using the following rules, I backtested the rickshaw man pattern on the daily timeframe in the crypto, forex, and stock markets.

• 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

One pattern is particularly tricky to differentiate from the rickshaw man candle.

Long-legged Doji vs. Rickshaw Man

The long-legged doji is a one-bar indecision candlestick with at least one long shadow. A long-legged doji with two shadows often gets confused with a rickshaw man. It’s a rickshaw man if the real body closes near the midpoint; anything else is a long-legged doji.

The Bottom Line

The rickshaw man is a one-bar candlestick pattern that traditionally represents indecision. Smart traders that listen to history can profitably capture this candlestick pattern’s volatility. Some of the most profitable trades are indecision candlestick patterns.