candlesticks not that important

[Christiaan]

Hey guys

I watched a webinar done by one of those guys from the online trading academy and he basically said that candlesticks is not that usefull he also made a remark that if you have a doji for example and you change the timeframe,what happens to it,it vanishes.

But then a lot of things changes when you switch the timeframe does'nt it.My point that I want to make or rather the question I want to pose it does anybody make practical use
of candlesticks,because i'm planning to buy nisons' book when I have the money but I want to make sure that a intensive study is really worth a R 1000 south-african rand.

So please post your remarks and thoughts I don't nessasarily agree with this guy but hell i'm still a rookie

what do you think?

 

[Shakone]

Yes people make practical use of candlesticks. Yes a candlestick on its own might not mean that much. Yes it changes depending on the time, but what matters is their meaning to the time frame you're trading in. You could say the DOW is in a massive uptrend if you start from 1930s or even before. But that doesn't mean you would want to be long in october last year. Does a doji on a 5 min chart mean a great deal if you're planning to hold long term positions? No it probably doesn't. But if you're trades last only minutes, then it might.

Check out a thread called "potential setups" (not potential setups 2, or setups-the popcorn), and you will find many people using candles like hammers/pin bars.

 

[Anne Onymous]

Hello,
I completely agree. Candlesticks are an extremely useful expression of market psychology. Over the timeframe they are displayed, or larger timeframes if you blend them. Depending on its location, a doji is commonly thought to express market indecision. If you see a 5min doji then you may want to wait for confirmation of direction over the next 5mins. Would it disappear on a 10min chart? Probably yes, but then it may be blended with the previous candle to make up another signal, this time to be interpreted over the larger timeframe.
Nison suggests to use candlesticks with oscillators or MAs for instance, and many people do so successfully. I am sure you would get many interesting insights from his work. And if you trade forex your studying will even be cut short as many patterns require windows or at least distinct closes and opens, which is not very relevant to that market.

 

[Christiaan]

i'm gonna buy the book as soon as possible

Don't know that much about candlesticks...material on web is mostly introductory and I quess that to really study it and understand it you do need a book like the one nison wrote.

from my point of view I really do disagree with the guy from the webinar who is an expert in his own right but that is the thing about tecnical analysis nobody can say that this is wrong and that is right because at the end of the day anything that can get results is right.And there can be many "right" paths to success

Thanks for responding i will spend a R1000 south-african rand and buy the book.

 

[Jason101]

Christiaan,

If money is tight, you could search candlestick videos on you tube, loads there.
You can also download an e-book version of Nison's book for free, preview, read it and then decide to buy or not.

Jason

 

[white_goodman]

ive read 20 books this year alone, and all for free.... google '4shared' and enjoy.... my printer at work has been working hard so far this year ha

 

[jiggly]

price, volume, time

these are your windows to view the market through. everything else just revolves around them.

 

[tomorton]

Candlesticks are the most important indication of price action. A big enough timeframe will of course make them disappear, but you can play that trick with anything in the markets if you increase your timeframe sufficiently. If you take a 100-year view of the market, almost every bear market disappears from view. But which of us can take a 100-year view?

When you focus in on turning points that can make or break a trading career, you will find a candlestick formation over 2 or 3 or a few days that shouted what was happening and pointed the way ahead. Learn to recognise these and stay alive.

 

[Trader333]

Candlesticks are the most important indication of price action

Why are they ? There are plenty of successful traders that don't use them at all. Normal OHLC bars are just as effective when it comes to determining price action.


Paul

 

[tomorton]

Paul - I can't believe you don't know why, or don't understand why, but perhaps I was arrogant in stating my position without justification. My apologies, and please see below -

It has to be preferable that both candlesticks and bars confirm each other, but if I had only one or the other, candlestick patterns have greater visibility and a wider vocabulary of meanings.

OHLC bars give equal weight to all sections of the session, candlesticks make it easy to give more attention to the 'real body' section of the sesison, located between Open and Close. The addition of hollow and filled real bodies, also of different colours according to price action, allows greater nuance and clearer analysis. Some pattern formation rules for OHLC bars differ from those used in candlestick pattern identification, eliminating or hiding some signals, such as in engulfing patterns without a new high or low preceding the reversed price action. Some OHLC bar patterns are just not readily identified nor identifiable, such as candlestick stars, haramis and dojis.

 

[Trader333]

I have a very good knowledge of all candlestick types and patterns but I don't agree that they are the most important indication of price action and neither do many other traders who use price action to trade. I have my own price action set ups but they don't need and would be no better using candlesticks.


Paul

 

[tomorton]

Hi Paul - Then you should continue to use your own specification set-ups, whereas I am generalising e.g in general, a Land Rover makes a prettty poor road car, which is what most of us need: but if you're a hill farmer, then my beloved Mondeo just won't do: likewise, the unique features of the Land Rover wouldn't help me.

 

[Tradesurfer]

I agree with tomorton on the candles. As a trend trader quite often reversal candle patterns at tops and bottoms can help me indicate when its time to either get out or tighten stops. And the nice thing is that you can always get back in if the high or low of the candle is breached.

With regard to different time frames, the one that matters most is the time frame you trade on while being aware of say bigger picture on daily or weekly etc.

 

[jsc]

Having used them for many years i would suggest they are most useful when considered on a daily chart and provide good confirmation. Most people try and guess the candelstick formation before it has completed or believe that they can switch timeframes to obtain confirmation - these people lose.

Like anything they should be used in conjuction with a variety of indicators and timeframes prior to taking a position.

 

[Mike Broudy]

Candlesticks should be used as one of many tools in the technical analyst's tool chest. It is true that time frames will have very dramatic results based on how they are altered. Daily candlesticks are significant because there is a definite open and close where all trading can be bounded for that specific day.

It can also be useful to "combine" two or three candles (in your mind). For example a shooting star following by a hanging man could be seen as a tall white candle.

 

[SvenFoster]

I use pretty much nothing but candles however they are definately more useful on the larger TFs.

The biggest problem I have is trying to ignore them on the current bar/candle.

I would love some charts that have candles except for the current period which out be a bar..till its closed.. I think my trading would improve.

 

[tomorton]

I use pretty much nothing but candles however they are definately more useful on the larger TFs.

The biggest problem I have is trying to ignore them on the current bar/candle.

I would love some charts that have candles except for the current period which out be a bar..till its closed.. I think my trading would improve.

On larger TFs I suppose you mean daily. Bars and candlesticks are much more significant when there is a closed period between daily sessions such as overnight or over weekends - this changes market participants' behaviour and objectives: shorter TF candlesticks can't be given the same weight because the participants don't give such weight to their periods e.g. 4 hours. Its the beliefs of the participants that makes them open/close positions and that is what moves prices, not TA.

 

[Splitlink]

Hey guys

I watched a webinar done by one of those guys from the online trading academy and he basically said that candlesticks is not that usefull he also made a remark that if you have a doji for example and you change the timeframe,what happens to it,it vanishes.

But then a lot of things changes when you switch the timeframe does'nt it.My point that I want to make or rather the question I want to pose it does anybody make practical use
of candlesticks,because i'm planning to buy nisons' book when I have the money but I want to make sure that a intensive study is really worth a R 1000 south-african rand.

So please post your remarks and thoughts I don't nessasarily agree with this guy but hell i'm still a rookie

what do you think?

What are you going to use instead? If you are only interested in closes, then a line chart will serve you better. If you are using bars, then I suggest that a candle displays the information more efficiently. Personally, I use candlesticks but I do not believe in reading too much about cloud cover, dojis and all that jazz.

I understand what your tutor is saying about TFs. There so many pins and other formations in TF5 that you will find more useless ones than useful but going higher, to hourly and daily, there will be fewer and they will be more viable. The downside to that is that to trade with a pattern on a larger time frame will require, also, more patience because the stops must be further away and you must be prepared to risk more. 10 point stops on a 10 minute chart of an index would, probably, be useless on an hourly one.

I quote from Jack Schwager's chapter on candles in his "Technical Analysis.

"Only a small minority of pattern/market combinations tested showed profitability on a
five year test"

and

"The bottom line is that a determination of whether candlesticks are a useful tool must be made individually by each trader based on experience and experimentation.

If you can get his book from the library you will find it useful becaue he does not not try to teach anything, he just states the pros and cons of what is available.

 

[counter_violent]

I use pretty much nothing but candles however they are definately more useful on the larger TFs.

The biggest problem I have is trying to ignore them on the current bar/candle.

I would love some charts that have candles except for the current period which out be a bar..till its closed.. I think my trading would improve.

Try Renko Candles...you can determine the block size/points/pips.

 

[rathcoole_exile]

does anybody make practical use
of candlesticks,

no