Candlesticks analysis - Scoring points for each candlestick?

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babymush

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Hi guys,

Just wondering for those who use Candlesticks analysis - There are some candlesticks that are more important than others like hammers, Marubozus etc etc

and also if I am not wrong ( I am no expert in candlesticks just learning) volume also plays a big role when these candlesticks form.

Was just wondering if there can be a scoring system for candlesticks where perhaps every candlestick will contribute to the total BULLISH or BEARISH score and also volume

Say if a Hammer is formed on a downtrend with high volume - That could be a extremely bullish reversal signal - +10 points

And there will be a way to use these points - Any one thinks this will work and has anyone done this before?

I am not looking for any free systems to use or any free things but just a good discussion on whether these things May or MAY NOT work
 
Pattrens alone won't work no matter how highly they are ranked. A reversal point involves time and price level as well.
 
There is something called Q Stick indicator by Chande....goes some way to quanify the numbers and types of black and white candles etc.....Not exactly what you were looking for but a small part towards it....

From Metastock explanation.......
.......The Qstick indicator was developed by Tushar Chande. Qstick provides a way to quantify candlesticks. The distance between the open and close prices lies at the heart of candlestick charting. For those unfamiliar with candlestick charting, the body of a candlestick is black if today's close is less than the open; it is white if today's close is greater than the open. A majority of white candlesticks over a specified range is considered bullish. Whereas a majority of black candlesticks over a specified range is considered bearish.

The Qstick indicator is simply a moving average of the difference between open and close prices.
 
I have known people to make money using a lot of interesting methods but I have yet to find anybody who makes money from candlesticks alone. I have always looked at candlestick charts and would not change it but my advice would be to only let the candlesticks confirm your view, not form it.
 
Other considerations

A scoring system sounds like a good idea. I would recommend that any candlestick system include 2 or 3 candlesticks at a minimum. Another factor that would have to be considered is whether the general market trend is up, down, or sideways. Research for stocks has shown that 90% of a stock's movement is determined by the general market and the industry a company is in.
 
I am a lazy guy, traderkay. I always used commercially available softwares rather than create my own, First, I tried Pattern Forecaster (originally Candlestick Forecaster) then got too lazy to read thru all that explanations and ran into a fabulous no-brainer software, nothing to read but, believe me---it's profitable if used properly, The name is MARKET DETECTIVE and costs less than $150

http://www.market-detective.com/about.html

By the way, George Damusis is one of the nicest people you can meet in this business.
 
I want to incorporate candlestick analysis into my personal day trading Visual Basic program. Does anyone know of analysis software that would permit me to do a VB function call with Open Price, Close Price, High Price, Low Price arguments every 60 second time frame and receive some form of return analysis back ?
I would prefer to purchase a reasonably priced package rather than reinvent the wheel if possible.....
 
damstutz -- Have you looked at AmiBroker at all? I don't use it myself, but I believe it does have a Candlestick recognition module and I think it can use live data feeds...
 
I had an idea like this, actually created a program in excel to do this kind of "Scoring". I had things like ranking the current trend, certain indicators, etc.. While good in theory, it was cumbersome to do in an intra-day fashion. Worked well in swing trading though. I felt that the this type of scoring was good to do in the beginning to get yourself using candles properly, but as you use candlesticks and your other indicators more and more, the scoring system will become more of a sixth sense and be internal. So my advice would be to do some sort of scoring and keep track of what scores you came up with and wether or not the trade would have worked. Doing this will develop your sense of what candle patterns work the way they do.

Just my 2 cents.
-Nick
 
I prefer to use heikin-ashi candlestick The heikin-ashi technique modifies the traditional candlestick chart.heikin means "average In my opinion it offers a better picture of trends and consolidations

The heikin-ashi candlestick technique uses modified open-high-low-close (OHLC) values and displays them as candlesticks. The modified values are computed using these definitions:

haClose = (O+H+L+C)/4
haOpen = (haOpen (previous bar) + haClose (previous bar))/2
haHigh = Maximum(H, haOpen, haClose)
haLow = Minimum(L, haOpen, haClose

BT
 
BT,
Those types of candles that you use, are they included in your charting package or do you do them some other way? I use esignal and I dont see that option there. Just curious to take a look at the "modified" candles. Also, do all the candle patterns still apply?

Thanks for the input
-Nick
 
lynx

i think you have a good idea

research into it with past data to draw viable conclusions.

dont just look at the entry and exit, i think you will need to take everything in between into consideration also.

this could get complicated very easily, try and keep it simple.

good luck and kind regards
 
BT,
Those types of candles that you use, are they included in your charting package or do you do them some other way? I use esignal and I dont see that option there. Just curious to take a look at the "modified" candles. Also, do all the candle patterns still apply?

Thanks for the input
-Nick
Click to expand...

It is available for free on Medved Quote Tracker
 
babymush said:
Hi guys,

Just wondering for those who use Candlesticks analysis - There are some candlesticks that are more important than others like hammers, Marubozus etc etc

and also if I am not wrong ( I am no expert in candlesticks just learning) volume also plays a big role when these candlesticks form.

Was just wondering if there can be a scoring system for candlesticks where perhaps every candlestick will contribute to the total BULLISH or BEARISH score and also volume

Say if a Hammer is formed on a downtrend with high volume - That could be a extremely bullish reversal signal - +10 points

And there will be a way to use these points - Any one thinks this will work and has anyone done this before?

I am not looking for any free systems to use or any free things but just a good discussion on whether these things May or MAY NOT work
Click to expand...

Babymush

You could certainly produce some sort of scoring system based on candlestick recognitiion, although as others have said you need to look at more than one candlestick and also volume to perform a proper analysis.

I use Amibroker and it does indeed have candlestick recognition. Their dcoumentation is freely available on the internet. This link http://www.amibroker.com/library/list.php provides the link to their formulae library. If you search for candlestick you will find one formulae called Candlestick Analysis that has about 41 different pattern recognitions. This also shows the actual formulae in their programming language, which you could adapt and add to.

Lots of other documentation is available on their site, so you can judge for yourself.

Charlton
 
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