Candlesticks

Firstly I realise maybe this should've been placed in the technical analysis section but I thought maybe the answer would be a bit biased from there, so...

I joined trade2win nearly 2 years ago, since then I've blown up a spreadbet account, sat on 10k of lloyds I'd had from a child while they tanked without even realising, told my mum to buy northern rock, and watched spanish89 come and go and god knows what.

Anyway, getting to the point, candlesticks; how can you give significance to the 'body' of a candlestick, distinct to the shadows, when the differences between them depend on the timeframe and the 'points' where your taking the open/close. I can imagine how it might scale with the timeframe, but I don't get the importance of body/shadow when it could all change if I start 30min candles at 8:45 instead of 8:30? I mean, going 8.30 to 9.00 you may have a spinning top signalling a reversal, but going form 8.45 to 9.15 you may have a full body signifying massive selling pressure. I know it's not an exact science in any way shape or form, but I'm puzzled how something so basic in candlesticks could be so dependent on the way you decide to order the time.

Why does an open/close over 13:00/13:30 carry anymore importance than an open/close across 13:17/13:47?

Cheers in advance,

I`m not the best person to say something but I`ll try, let`s see if makes sense.

One thing I have realised is that is not about time frame, it price itself. If you look at the daily T/F and you a strong level of support at this level, the price is going to test this level and either break or bounce, if it bounces back, at the end of the day you see just the shadow.

So is not just about what time it is, but the reaction the price has not at this level and how deep it is.

bypath3 said:

but I don't get the importance of body/shadow when it could all change if I start 30min candles at 8:45 instead of 8:30? I mean, going 8.30 to 9.00 you may have a spinning top signalling a reversal, but going form 8.45 to 9.15 you may have a full body signifying massive selling pressure.

Click to expand...

Think of it this way...
At 8:30 you are moving up.
At 8:45 you stop moving up and start moving down.
At 9:00 you are moving down with gusto.

Starting your candle at 8:30 will tell you that in the block of time from 8:30 to 9:00 you have a reversal within that time.
If you start your candle at 8:45 you have a strong move down in the block of time from 8:45 to 9:15.
All a candle can do is tell you whats going on in that block of time.
Had you started looking at the candle before (8:15) you would most likely see a full bodied candle going up. The next on is a full bodied candle going down.
If you move to the hour time frame those to candles make a pin.
Fact is there are multiple ways to show the same thing. That's why you should learn multiple candle signals instead of just one or two.

bypath3 said:

Why does an open/close over 13:00/13:30 carry anymore importance than an open/close across 13:17/13:47?

Cheers in advance,

Click to expand...

None is more important than the other. All they do is tell whats happening at that time.



I hope this makes some kind of sense to you.

Jason

Cheers both for answering, much appreciated..

First for Vinicius, I can see on a daily time frame how open/close might have more of a meaning than usual, but when we're looking at parts of the trading day a big top shadow might mean a test and fail of a resistance in one 'partition' but you might just be hitting that first test of resistance at the close of another partition, and it would in this instance look like a big body big buy sentiment?

Secondly to hsteele, i understand that it's part of the parcel to have a look at different candle quote lengths eg 5 15 30 1hr etc. to have a better grasp of what's going on, but are you able to decide at which time you start these periods? like 8:37 instead of 8:30, maybe you can on the better platforms?

Also pardon my ignorance on this one, i'm probably wrong or don't get the point, but if as you said you had an 8.30 moving up, 8.45 starting to move down, 9 tanking through, you'd have a reversal signal 8.30 to 9 and a heavy selling 8.45 to 9.15. but if you had an 8.30 moving up, 8.45 starting to move down, 9.15 tanking through BUT a reversal at 9.15ish and heavy buying until 9.30 you'd have the same signal as before for 8.30 to 9, but a heavy buy for 8.45 to 9.15. So you can't infer anything from the initial signal, but you can from the two in tandem.

Is this just me simplifying things and expecting too much from candlesticks? Does candlestick trading come down to probability as much as any style and everything is conditional?

Cheers again,

it doesnt really matter,

you are trading price and not candles, candles are just a representation of price during a specific period of time.

you have to look beyond the candle and see what the price has done to deduce what it can probably do. i think you are confusing yourself and my post may confuse you even more but lets say for illustration purposes.

you have a 'hammer', a long wick/shadow and a small body at the top, theoretically speaking this is a bullish sign, if it is in 'new' low ground or after a decline outside of congestion, it may indicate a reversal if it is at a support level.. however there may be instances where a hammer would not be representative on a chart, it may not print, because it may have happened over several time frames (candles). so it is better to view price and what it has done over time as you may have this 'hammer' via proxy (several candles, therefor none to immediately deduce it as such)

does that make sense?

Nine (who is also called Kiwi Trader at FF) posted something interesting on this on another forum.
The subject came up with respect to trading daily charts and when different brokers close at different times then the charts looked different as in different shaped candles for each one.
The illustration is here:
Forex Factory - View Single Post - Silent Service Method

What he illustrated was that all the candles, although they have different shapes and open and close at different times all show the same thing, support and resistance, and price rejecting the same levels.

I have been trying for ages to get my daily candles to close at 5PM NY time. Why? Because I want to trade with the big boys, the big money, and the interbank information with open and closing prices is packaged using the Asian session as the start of the day and the closing price is the price at the close of the NY session.
Anyway that was a distraction.

The most important thing is that you trade what YOU see on YOUR chart and you interpret what it means to YOU.

Good trading
Nicola

elitejets said:

The most important thing is that you trade what YOU see on YOUR chart and you interpret what it means to YOU.

Good trading
Nicola

Click to expand...

That is the whole thing in a nutshell.

I switched to candles about 3 months ago as I just found it easier to see what was going on with the price.

Ultimately for me, all the candles do is represent whats going on between the buyers and sellers and where that moves the price. The shorter the timeframe for the candle, the less accuracy and significance I place on it. So I use daily candles to figure out whether I should doing something, somewhere and then 5 mins for entry and exits.

The shadow just tells me how volatile the fight is, the body how real the pressure is averaged over the time period. It's just price action at the end of the day.

The other guys have clearly explained why candlesticks can give a clearer picture. ill just add a quick thought, just look at a standars two bar reversal in a bar chart and then a candle chart.In the bar chart youd have to look closely to see the action,whereas in canles youd see I white bar followed by one black bar giving an instant picture of the price action.

If you look at a range of say 3, 1 hourly candles, keep that chart up. Now open another chart for the same 3 hour period but this time in a 5 min time frame, re-size this chart so that it sits directly below and to scale of the hourly candle chart (or which ever two time frames you choose). Directly compare these.

In addition to quickly shifting back along the smaller time frame with your eyes,therefore instantly visually altering the start and finish of the larger time frame, you can also quickly see the S and R levels.

This may or may not help you. I know when I was asking this same questions and in addition, how this related to international time zones, doing the above really helped my understanding, but in a deeper way, that I would not be able to verbalise now. Anyway doing this gave me all the answers I thought I needed.

I think my conclusion was as; jiggly (great name btw), elite jets, and splitlink post's.

ie: It does not really matter, trade what you see.

(If you are like me) Other kind T2W members tried to tell me this. But I can not accept some things until I work it out for myself, and doing the above exercise a couple of times helped me.

Kind Regards
Jason