How to use statistics and Pine Script to find a real edge.

Are patterns really profitable, or are we just connecting random candles with a story?

Most of us started trading by seeing patterns on the chart: double bottoms, pin bars, three green candles, “smart money” footprints… but do we have any evidence they actually works ?
In this idea, I want to talk about the statistical significance of chart patterns, and how you can use simple statistics + Pine Script to move from “I think this works” to “I measured this edge.”

◼ Patterns are opinions until you define them

“Strong bullish candle”, “nice rejection”, “liquidity grab” – these are subjective words.
Statistics don’t work with feelings, they work with clear rules. Before testing anything, a pattern must be converted into something like:

Candle 1: bullish, body size > X% of price

Candle 2: low does not break previous low

Close of Candle 3 > high of Candle 1

Once you can write your pattern as strict conditions (true/false), you can: Count how many times it appeared, measure what happens after it appears, and decide if it’s worth trading or not. That’s where Pine Script becomes a powerful research tool.

◼ What does “statistical edge” actually mean?

A pattern is interesting if, when you look at many occurrences, you see a consistent tendency. For example, choose a simple question like: “When this pattern appears, where is the price on average after 10 bars?”

If you track that over hundreds or thousands of samples, you’ll get:

How often price is higher vs lower (win rate).

The average move (for example, +0.8% after 10 bars).

How volatile or noisy the results are.

This doesn’t magically make a holy grail, but it tells you: Is this pattern better than random? Is it worth building a full strategy around it? Without this step, you’re basically trading based on screenshots and memories.

◼ Using Pine Script as your statistics magic tool.

Even without going deep into code, the logic in Pine Script is simple, here is a simple example that you can do.

A. Detect the pattern Whenever your conditions are true on a bar, mark that bar as a “pattern bar”.

B. Look forward in time For each pattern bar, check the price after N bars (for example 5, 10, or 20 bars later). Calculate the % change between the pattern close and the future close.

C. Aggregate the results Keep a running count: How many patterns triggered (sample size), How many ended positive (wins), The average % move after N bars.

D. Interpret the numbers If you find that your pattern appeared 800 times, and after 10 bars: 62% of the time price was higher, Average move was +0.6%... then you have something much more concrete than “this looks good on the chart.” You don’t need to turn this into a full strategy immediately. Even a simple statistical study like this already filters out a lot of illusions.

◼ Common mistakes when testing patterns

When you start doing this, it’s easy to fool yourself. A few traps to avoid:

Tiny sample size : If your pattern only occurred 15 times and 11 of them were winners, that 73% win rate is probably not reliable. Statistics start to mean something with large samples (hundreds or thousands of events).

Obsession with win rate : A 70% win rate means nothing if your winners are tiny and your losers are huge. You must look at: Average move, Distribution of outcomes (are there huge negative outliers?), How a realistic stop-loss / take-profit would behave. Sometimes a pattern with 52–55% win rate can be excellent if the average reward is larger than the average risk.

Overfitting the past : If you keep changing rules until the backtest looks perfect, you are no longer discovering a pattern – you’re forcing the past to agree with you. A healthier flow is: Start with a simple, logical idea. Define it clearly in rules. Test it on one market / timeframe. Check it on other symbols and timeframes without changing the rules.

If the edge survives in different environments, that’s much more interesting.

Using this approach will save you a lot of time and money in losses, do your research before taking a trade, make sure you have the statistical evidence if you want to trade a pattern.

i will be sharing more ideas on the use of Pinescript to improve your trading in the next days. make sure you follow me.