Trading using Candles Only....

[ceydababy]

There seem to be lots of threads discussing the pro's and con's off CCI, MACd etc and even out of the box trading systems. However, there seems to be a distinct lag of threads (well that I can see) discussing candlestick patterns. So I have decided to start one.

To get the ball rolling I have attached a powerpoint document that I use for a reference. I have my favourite Candle patterns documented with simple and concise instructions on how to identify. These are the patterns I look for daily on Eur/Usd and FTSE. It is worth pointing out these patterns work on all markets.

If anyone has any others they trade please feel free to post. If anyone has any questions be glad to attempt an answer.

Was a powerpoint now a doc file ! Should open for everyone.

Please note that the entry is after the final bar of the formation has finished. EG On a 3 bar pattern you enter on the 4th bar and on a 5 bar formation you would enter on the 6th bar.

Also this was originally a powerpoint document, I had to convert from a PPT to a DOC file to upload here. Feel free to print as a reference. These do work it's all about practice in identifying.

There are plenty more out there, but these are the main patterns I try to identify and trade.

 

[N Rothschild]

i think candles are over rated, its all about the price..a bar chart will tell you everything a candle will if you know how to interpret the price action

 

[nile_croc]

i think candles are over rated, its all about the price..a bar chart will tell you everything a candle will if you know how to interpret the price action

I'm a bar man too. Candles can be fun to watch at times, but the whole shooting star, harami, three black crows, doji, dark cloud cover, bouncing baby boy, seal giving birth, polar bear falling through the ice, whatever, gets kind of weird. Some people swear by them, however.

My own opinion is that patterns are much easier to spot on a bar chart as opposed to candles. Candles tend to crowd a chart, at least the way I see it.

 

[rols]

i think candles are over rated, its all about the price..a bar chart will tell you everything a candle will if you know how to interpret the price action

Quite correct.

Candles, esp. coloured ones are too emotive.

In fact I am with Trader Dante who suggests the traders with an edge currently are those who do not use charts but just trade by the numbers.

Perhaps reductionism will be the new buzz word in trading....

From Wikipedia

Reductionism can either mean (a) an approach to understanding the nature of complex things by reducing them to the interactions of their parts, or to simpler or more fundamental things or (b) a philosophical position that a complex system is nothing but the sum of its parts, and that an account of it can be reduced to accounts of individual constituents.

In decision theory, a nonlinear utility function for a quantity such as money can create a situation in which all relevant decisions to be made in a given time period must to be considered simultaneously in order to maximize utility, if all relevant decisions act on utility only through this quantity. In such a situation, the optimal choice for a given decision depends on the possible outcomes of all other decisions, including those which may have no causal relationship to the decision at hand. Breaking such a problem apart into individual decisions and optimizing each smaller decision can lead to drastically sub-optimal decisions. Such nonlinear utility functions for money are used in economics and are necessary in order to satisfy reasonable assumptions about rational behavior.

 

[Bloodhound]

FWIW I have found this site very useful as a point of reference for candles - Candlesticker by Americanbulls.com - Candlesticks

 

[MrGecko]

Excellent contribution Ceyda!

I might make a point though - candle's and bars are exactly the same, save a bit of colouring in. Anyone who says that bars are preferable to candles because some formations have stupid sounding names is missing the point by a country mile.

What is important is the relationship between price changes over time. What isn't important is how you draw them or what you call them.

 

[zupcon]

a bar chart will tell you everything a candle will if you know how to interpret the price action

?

As they both show EXACTLY the same information (Open, High,Low and Close) over a given time period how can one be interpreted any differently to the other ?

Granted, the minute that you start coloring things red or green it can have a psychological effect, but this bars v candles argument really is rather silly dont you think ?

 

[N Rothschild]

i never said they could be interpreted differently..i was saying you can see exactly the same things on a bar chart as you can on candles..hence candle patterns are overrated as its just price action...

 

[nile_croc]

I would never say one is better than the other, all I would say is that for me, I prefer bars just because I think that candles tend to crowd a chart pattern. I grew up reading bar charts and that what I've always been used to.

Point and Figure charts are good too.

Different strokes I guess.

 

[Splitlink]

Nevertheless, although they are the same, doesn't the trader who prefers bars over candles pay give more importance to the highs and lows, whereas the candles trader tends to watch the four components more? I think that I do. The patterns take on more significance to me with a bar chart
and the chart gives me more satisfaction when I look at it. As nile_croc said, the candles crowd the chart more.

 

[brutusdog]

Nevertheless, although they are the same, doesn't the trader who prefers bars over candles pay give more importance to the highs and lows, whereas the candles trader tends to watch the four components more? I think that I do. The patterns take on more significance to me with a bar chart
and the chart gives me more satisfaction when I look at it. As nile_croc said, the candles crowd the chart more.

hope this doesnt turn into another thread that results in a retarded discussion that is way off the original point, bars or candles isnt the point, how price reacts is.

 

[Lightning McQueen]

I have moved the thread to the candlesticks forum from general trading chat, hopefully discussions will now continue on track with the topic in question and in a friendly manner

 

[Phil Mibbutz]

On the bars v candles debate, surely the colours help to make candles 'readable'? I'm a fan of the Heikin-Ashi variety, FWIW.

 

[ceydababy]

Great Short Setup This Am....

Let's look at the FTSE this am. These setups in my opinion are far stronger than any signaled by an idicator. I am using the 5 minute chart for trend and the 1 minute chart for a trigger.

The idea is to see the reversal/continuation on the 5 minute and then get in to that trade using a trigger taken from the 1 minute chart.

A great short from this AM's FTSE....

Any questions please give me a shout.

Both time frames shown below. You can see EXACTLY what I am doing.

 

[ceydababy]

Tidy Long in play.......

Then we come on to the sweet long trade we have just had signalled.

Again remember 5 min reversal/continuation and 1 min for trigger. Simple......

Charts of both time frames below and annotated so you can see exactly what I am doing.

Any questions give me a shout.

 

[KillPhil08]

Then we come on to the sweet long trade we have just had signalled.

Again remember 5 min reversal/continuation and 1 min for trigger. Simple......

Charts of both time frames below and annotated so you can see exactly what I am doing.

Any questions give me a shout.

I got before the break of the downtrend, out at 72 my target (seems like an important level to watch today).

 

[MrGecko]

nice trades

 

[ceydababy]

I got before the break of the downtrend, out at 72 my target (seems like an important level to watch today).

I always wait for the trend to break on the 1min.

I find that sometimes you can get what looks like a sweet reversal pattern on the 5 minute and it doesn't come off.

By waiting for that trend break on the 1min thats my safety net. On the downside I doubt my entries are going to be as tight as yours.

 

[KillPhil08]

I always wait for the trend to break on the 1min.

I find that sometimes you can get what looks like a sweet reversal pattern on the 5 minute and it doesn't come off.

By waiting for that trend break on the 1min thats my safety net. On the downside I doubt my entries are going to be as tight as yours.

Indeedy, just add to the break then stop loss break even. Today has been a rough ride for breakouts though (mainly due to the fact its trending i think?).

By the way, when you said in the ftse traders thread i thought you meant "candles" as in the members thread, sorry for not really adding anything...

I think candles are the way forward though, i doubt you could get realible entry bounces with line charts (or mountain!).

 

[GoldenY]

I think candles are the way forward though, i doubt you could get realible entry bounces with line charts (or mountain!).

I quite agree - by using the close only - you neglect the useful information that is conveyed in the full price range for the bar