Takuri Line Explained & Backtested (2024)

The takuri candlestick pattern, also known as the takuri line, is a one-bar bullish reversal Japanese doji candlestick pattern that’s best traded using bearish continuation strategies, according to decades of backtest data.

If you practice candlestick charting, you might be surprised that you should go in the other direction.

Keep reading if you’re interested in what history says about this one-bar pattern.

What Is a Takuri Candlestick Pattern?

The takuri line is a frequently occurring one-bar bullish reversal pattern.

The takuri gets its name from the Japanese bottom fishing technique used to catch fish near the sea floor.

Before we learn how to fish for profits, let’s learn how to identify this single-candle pattern.

How to Identify the Takuri Candlestick Pattern

The following are the requirements for a valid takuri candlestick pattern:

• A doji candle with little to no upper wick and a very long lower shadow.
• The takuri line must occur in a downtrend.

A doji is a candlestick where the open and close are equal or almost equal.

The takuri line appeared on Google’s (GOOG) daily chart on July 11th, 2017. There’s a single candle below the fifty-day simple moving average with a doji body, little to no upper wick, and a long lower wick, fulfilling the takuri pattern requirements. 

With pattern identification out of the way, let’s learn the best takuri line trading strategies.

How to Trade the Takuri Candlestick Pattern

Professional traders should use a bearish continuation strategy in all markets, expecting a short-term retracement.

Before we learn how to capture the takuri line’s volatility, let’s learn how traditional traders get caught on the wrong side of history with this fishy pattern.

Takuri Line Bullish Reversal Trade Setup

There’s a downward price trend as the price is significantly below the fifty-day moving average. We see a red doji candle closing near the high with a sizable lower wick.

With the pattern identified, traditional traders enter long at a break of the takuri line’s high and set a stop loss below the low.

We can see traditional traders using this strategy on Amazon’s (AMZN) daily chart on August 20th, 2021, caught a good trade.

The problem is that these traders are on the wrong side of the data.

Takuri Line Bearish Continuation Trade Setup

The price is below the fifty-day moving average, giving us a bear market with a doji candle closing near the high and having a long lower wick.

Savvy stock traders enter short when the price moves below the takuri line’s close, setting a stop loss above the high.

Traders using this strategy on the Tesla (TSLA) daily chart on March 11th, 2021, captured quick profits taking advantage of the takuri line’s mean reverting tendencies.

Speaking of profits, what can history tell us about the best takuri line trading strategies?

Does the Takuri Candlestick Pattern Work? (Backtest Results)

Using the following rules, I backtested the takuri line candlestick 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

Traders confuse the takuri line pattern with other candlestick patterns.

Dragonfly Doji vs. Takuri Line

The dragonfly doji is an indecision doji candlestick that opens and closes at the top of the range. The only difference between the dragonfly doji and the takuri line is the dragonfly doji has a shorter lower tail, and the trend doesn’t matter. In contrast, the takuri line has a very long tail and is only valid in a downtrend.

Long-legged Doji vs. Takuri Line

The long-legged doji is an indecision doji candlestick with at least one long leg. But what happens if this long leg appears as a lower shadow during a downtrend? This meets the requirements to be a takuri line. This confuses many traders as they both meet the description. 

Here’s the key: If a long-legged doji meets the takuri line requirements, call it a takuri line; otherwise, it’s a long-legged doji.

The Bottom Line

The takuri, also known as the takuri line, is a frequently occurring one-bar bullish reversal pattern that’s best traded using a bearish continuation strategy in stall markets, according to a 21-year backtest. It works similarly in all markets, which is a trait of the strongest Japanese candlestick patterns.