Candlesticks not profitable Massey University Research

[zigglewigler]

Ah, back to the matter at hand, at last.

Candles display the character of the market, is it pacey, twitchy, squat etc? A candle pattern will display, showing as Soc says nothing more than 'intent'. That intent is valid at that point, it might not last, don't expect it to become the defining description of the day's market.

In my experience, candles are indespensible on short time frames, and if you are trading such intervals, then learn to reassess the candles message as quickly.

What I find curious is that the same criticism is not leveled at bar charts, which give the same information as candles, just not as clearly. Bar charts don't work for me because they don't tell me what I need to know in a visual language I can read instantly and intuitively.

But alone the candles might misdirect, if combined with overbought/oversold readings, volume and adv/dec issues for example, then the patterns will, on balance, work.

 

[jacinto]

Ah, back to the matter at hand, at last.

Candles display the character of the market, is it pacey, twitchy, squat etc? A candle pattern will display, showing as Soc says nothing more than 'intent'. That intent is valid at that point, it might not last, don't expect it to become the defining description of the day's market.

In my experience, candles are indespensible on short time frames, and if you are trading such intervals, then learn to reassess the candles message as quickly.

What I find curious is that the same criticism is not leveled at bar charts, which give the same information as candles, just not as clearly. Bar charts don't work for me because they don't tell me what I need to know in a visual language I can read instantly and intuitively.

But alone the candles might misdirect, if combined with overbought/oversold readings, volume and adv/dec issues for example, then the patterns will, on balance, work.

RE the criticism on bars, i guess i agree that thay dont get the bad press

i remember reading here, in some other thread the preference of a member of using bars over candles, due to candles making the mind focus only on the body and not the wicks, wereas with bars, one would focus on the whole, open-hi-low-close.

I first started with candles, when i read that, tried to do the experiment, actually, it was very true. changed to bars since. i do change my charts at times to candles, but the dont really reveal that much to me.

anyway, that is just a personal opinion and preference.

j

 

[Crap Buddist]

The Massey University Finance Dept. Basing trading decisions solely on these techniques does not seem sensible but we cannot rule out the possibility that they compliment some other market timing techniques.

Download research link http://ssrn.com/abstract=980583

mmm well they do recognise their limitations when used without regard to other factors in the market which may have an impact of price.

If used without regard to the markets assessment of current valuations then its only a matter of time before the flame is snuffed out.

If we regard the markets assessment of current valuations then throwing darts would still probably be a better bet than the former.

If used with regard to the markets assessment of valuations and with regard to sensible auction or any business resale principle in exchange of goods, then you can exploit the hell out of them.

Those people from Honda suggest...

"What If"

So is it all about if's ?

 

[SOCRATES]

mmm well they do recognise their limitations when used without regard to other factors in the market which may have an impact of price.

If used without regard to the markets assessment of current valuations then its only a matter of time before the flame is snuffed out.

If we regard the markets assessment of current valuations then throwing darts would still probably be a better bet than the former.

If used with regard to the markets assessment of valuations and with regard to sensible auction or any business resale principle in exchange of goods, then you can exploit the hell out of them.

Those people from Honda suggest...

"What If"

So is it all about if's ?

"Assesment of valuations"...are you referring to fundamental analysis crap buddist ?

 

[Crap Buddist]

"Assesment of valuations"...are you referring to fundamental analysis crap buddist ?

good point, and as they mentioned equities I see what you may mean. But no.The markets assessment of current price valuation from a trading perspective, mmm T.A. Traders Analysis.

 

[SOCRATES]

good point, and as they mentioned equities I see what you may mean. But no.The markets assessment of current price valuation from a trading perspective, mmm T.A. Traders Analysis.

You mean "monkey business" instead ?

 

[Crap Buddist]

You mean "monkey business" instead ?

I can imagine the use of that word evoking some chest beating on these boards.

 

[SOCRATES]

I can imagine the use of that word evoking some chest beating on these boards.

Yes of course, and you may not necessarily sympathise but you can understand within the context that the hypothesis available in the public domain remains frustatingly incomplete. Then this missing crucial information is cause. The effect of this cause is bewilderment in mainstream interpretation, which is understandable.

Given that, it does not help when attempts are made to mechanise the concept.
It only makes the situation worse, not better.

 

[Crap Buddist]

Yes, agree. And I recognise the right thing to do is not to "Rob" the individual of their own priceless learning experience. I can see Its like a natural filter/ selection process.

A tough one too , it doesnt descriminate with regards to who can attend ,it doesnt need to ,the filter ensures the attendee's themselves either allow themselves to be selected to participate or not.

And in that sense. It's beautiful.


So are the best traders essentially "self taught" or qualify themsleves via the hard slog.

Or has anyone created a trader, to a level of very high standards ? If so with this outside influenced trader are they any different? I mean do they or would they appreciate it less ?

Has anyone conducted this experiment?

Ive skewed off on a wobbly angle but thats what came to mind.

OK so if you are a Prop bank trader for example, are you trained or shown that which takes others years to learn by experience?

So how do the commercials grow traders ? OR do they aquire knowledgable saplings.

 

[dcraig1]

Pages of waffle about intent and what goes on inside a candle and no mention of time and sales and the order book.

Five times in the last 2 hours of trading, as the DAX approached VWAP from above, big size appeared on the bid. This says something, at least momentarily, about intent. Nothing secret and sworn oaths involved here.

But it's much easier to ramble on for pages than deal with any facts.

 

[SOCRATES]

Is it possible for anyone who does not follow mainstream candle theory to complete the missing piece? Hard work, study and practice?

Yes.

 

[dcraig1]

(IMO) You can't take 1 thread alone. Socrates has posted hints, allegories and cryptic clues in many different threads. I (think) I am beginning to assemble a much clearer picture of what he is trying say. Intent, the twig bird etc all fall into place, but then sometimes he hints at something deeper which makes me wonder if I have really have all the pieces necessary to complete the picture correctly.

Here's more than a hint. If you are trading futures, you are missing a big piece if you cannot interpret the DOM. I use my own charting software for this. I have posted samples before. Many traders use the price ladder display and they have my respect as I could get nothing from it without computer analysis. Probably attention deficient or something.

Spend more time on this and less on deciphering cryptic clues and allegories.

 

[new_trader]

Here's more than a hint. If you are trading futures, you are missing a big piece if you cannot interpret the DOM. I use my own charting software for this. I have posted samples before. Many traders use the price ladder display and they have my respect as I could get nothing from it without computer analysis. Probably attention deficient or something.

Spend more time on this and less on deciphering cryptic clues and allegories.

I use DOM and I think you may be confusing intent with spoofing. I have written my own version of DOM in C# so that I am not distracted by spoofing. The cryptic clues and allegories have been some of the most helpful things I've read here.

 

[dcraig1]

DAX is now trading 22 points above VWAP. I rest my case.

 

[dcraig1]

I use DOM and I think you may be confusing intent with spoofing. I have written my own version of DOM in C# so that I am not distracted by spoofing. The cryptic clues and allegories have been some of the most helpful things I've read here.

No I am not confusing intent with spoofing. Far too much is made of alledged spoofing and it is used as an excuse to dismiss the value in the DOM. In a sustained up trend size is consistently visible on the ASK and in a downtrend, it is consistently visible on the BID side of the book. This is not spoofing and is contrary to a "common sense" interpretation.

 

[SOCRATES]

Pages of waffle about intent and what goes on inside a candle and no mention of time and sales and the order book.

Five times in the last 2 hours of trading, as the DAX approached VWAP from above, big size appeared on the bid. This says something, at least momentarily, about intent. Nothing secret and sworn oaths involved here.

But it's much easier to ramble on for pages than deal with any facts.

Here we are talking exclusively about candles, in case you have not noticed, and we are adhering to the title of the thread.

Time and Sales is a completely different topic, as is VWAP.

Please do not persist in interrupting and posting off topic, thank you.

 

[SOCRATES]

Such a pity - The last post had the distillation into a nice short paragraph of a key facet of the discussion. This post has an overly long and on the face of it a slightly spurious sounding story I can't verify and even if I can is of absolutely no use to me at all.

Why no use? Because I haven't managed 13 years in the markets without figuring out that 1) it's all a little more complicated than one would at first imagine and 2) There are sometimes forces at work that I am not privy to at that point in time. And most sensible people on these boards also figured these two things out pretty early (obviously there are some people that will never be told but hey such is life).

And don't go taking this personally Socrates - I've never met you so forming a valid opinion about you as a person is tricky, but don't you think it's exactly this sort of post that has everyone railing at you. I'm sure you have some genuinely useful insights to share about the market, but you seem to insist in hiding them behind some totally unnecessary air of mystery. If you genuinely have something to say, say it. I'd love to hear it.

I'm my own person and have spent a few years forming my own opinions about the nature of the market, but I'm always open to hearing someone else's view. I just don't have the time in my day to wade through all the clutter that comes with yours. Sorry matey, but your pearls (if that's genuinely what they are) are being lost amongst the sediment. And at the end of the day I'm sorry but yours is just one view. Not all views are equally relevant or correct, but neither are you the sole oracle of the markets, so stop talking AT people and start talking TO people - you'll get far more respect that way (which seems imho to be what ticks you off about the response to your posts).

Got to get back to work now - have an internal research piece to put out from the trading desk with a bit of market colour on it. Doesn't contain the sum of all knowledge on it though - just a few salient facts that anyone here could glean if they put their minds to it.

My $0.02 as always. Hope you take it in the spirit in which it meant (well, a guy can dream).

Peace

GJ

I tell everything as clearly as I can within prudent parameters, u c ?

But there are many things that an individual has to experience and verify for himself as no amount of explaining will do.

I always do my best to point people in the right direction, but I cannot and will not walk it for them.

As I have said before, it is for the individual to push his own envelope and not to expect others to push it for him.

I give lots of pointers, lots and lots and lots.

Candlesticks are not complicated. If you spend time looking at them and studying them from a correct viewpoint uncontaminated by the opinions of others, all will reveal itself to you in due course, but it is you who has to make the effort.

Lets see if this can be explained more clearly still.

The candles are the candles.

They are there for people to understand them and not the other way round.

Therefore effort has to be put in to get to grips with the significance of what it is they present as the market action unfolds and what intent they represent.

 

[dbphoenix]

And there you have it - in a nutshell (although we have had to endure some awful rot to get here). The candles don't show cause (at least not on their own, and certainly not to someone who doesn't really know what they're looking for). And without this causal information, sometimes the only way to truly master the price action is to watch it tick by tick (I'm sure DBP etc would agree with me here).

My $0.02 as always

GJ

Yes, I would, though incorporating volume is also a plus.

Db

 

[dbphoenix]

I'm an FX trader - can't get sensible measures of volume. Stop teasing me with it mate ;-)

GJ

Don't mean to tease. As I said, volume is a plus, but it's not absolutely necessary. I've taken to using the term "trading activity" rather than "volume" because so many people confuse "volume" with bars and with a self-contained beginning and ending (okay, that bar is finished so that "volume" is no longer pertinent).

If one tunes in to the effort that's being made to move price in one way or another and to the results of that effort, along with the pace or tempo of that effort, volume data can become an elective rather than a required (just as, at some point, one can do away with charts entirely).

But, as I've said more than once, what matters is the flow. If one ignores or forgets that flow, relying instead on consecutively plotted summaries, i.e., bars or candles, then those bars/candles can come to "mean" something -- in his mind -- that is considerably divorced from the reality of the price movement.

These are not just dots and lines and bars forming themselves in random fashion. They are the result of traders' activities, traders trading. If one forgets that, it all becomes a big mystery indeed, and those who encourage the perception of the big mystery can attract quite a following.

Db

 

[dbphoenix]

Agreed - think Frugi posted something somewhere that very concisely and sensibly reminded everyone that what looks like your favourite pattern setup on an hourly chart may have little significance (or worse still, a contradictory suggestion) on a daily one.

This is why I tend to favour more 'robust' measures such as good old support / resistance. What looks fantastic on an hourly chart usually can stand scaling up to a daily one if it's a fibo level, trendline, horizontal S/R etc. Something oscillators etc can't usually boast.

But then I'm a simple sort of guy. Another reason why candles aren't the perfect solution for me.

GJ

There's a lot to be said for simple. The gurus like to make a big mystery of it all because their egos require a great deal of care and feeding. But there's no mystery. It's all there for anyone to see who is willing to put in the time and effort. But that means that the trader is going to to have to do the work rather than search for something -- like candles, or moving averages, or MACD, or . . . -- to do the work for him.

Db