Candlesticks not profitable Massey University Research

[SOCRATES]

well, dont need to use matches to light the candles, now do we

i wonder what inherent capability may a candle have to move prices

saludos

jacinto

That is not the end of the story, because the other one....u may or may not...unohoo...now chips in to support the argument vociferously arguing that in addition it is the MACD that supports the whole idea, just like a tram on railway lines on a predetermined path that cannot be stopped.

Saludos con afecto.

 

[jacinto]

blimy

a long long time ago they use to say that the sun orbited around the earth....


wonder if prices orbit around candles

gracias, y saludos igual. buenas noches

jacinto

 

[PKFFW]

Listen PKFW what you do not realise is that I have forgotten more than most people know about this subject having been involved with it for a very very long time.

The deletion refers to an upstart who chose to attack me during my absence during a period when my membership was suspended for a week, who is a bus driver in Jersey but presents himself to be an expert, which is nonsense, as it takes YEARS of observation to finally get a grip on what actually causes prices to change under what conditions, in what markets, in what instruments and the underlying reasons why, which are often not clear and succeed in baffling nearly everyone including me in the very beginning until by thinking out of the box the bafflement evaporated.

Therefore the study carried out is correct.

My statement will not please a lot of people, including vendors, who insert "signals" and other trivia to promote the sale of their products and who despite the evidence to the contrary persist in insisting on the validity of indicators and other nonsenses.

Mechanisation cannot and will not work.

Other approaches work but it involves WORK that the great majority are neither prepared nor disposed to do.

I probably shouldn't respond at all but instead I will be brief.

Frankly I, and I suspect many others, care not a wit about what or who your remarks were about. It has nothing to do with this thread. Ergo, take it up with someone who does care and leave it out of this thread.

As for the rest of your posts in this thread.......thus far they amount to "I know so much and you all don't and I'm not going to tell you anything". Does that about cover it?

If so, can you now just let the thread get back on topic please? If you have something more valid to say then say it. Otherwise let those that want to discuss the topic do so.

Cheers,
PKFFW

 

[SOCRATES]

This is too philosophical for me. I'm just a trader. When I look at volume figures I wonder: how much of the volume is really from market participants risking their money and actually having a view of where prices are going to and how much is market maker interplay to create the impression that there is really a lot of action going on and to lure people in?

If, as someone has said, the question is what is the question, then this is the question.

The answer is that volume probably says nothing as related to price except in the case of violent downward moves where increasing volume may indicate that downward pressures continue, maybe.

Besides that, I don't think volume says nothing at all, given that some people can exchange shares at virtually no cost to them.

Alex

Now you appear to me to be a deep and incisive thinker.

Here is a riddle for you.

Take the volume on 10 minute bars.

Multiply it by two.

Does it equal the volume on 20 minute bars ? NOOOO

Take the volume on 20 minute bars..

Multiply it by three.

Does it equal the volume on hourly bars ?

NOOOO

Take the volume on hourly bars.

Multiply it by eight.

Does it give you the volume on Daily Bars ?

NOOOOOOO

Well then ?

 

[PKFFW]

Exactly. This is what succesful traders do as you say. You need a combination of techniques each adding to total value. The question is whether traditional candle sticks can provide such value. The answer is no, unfortunately, and one reason for that they have been extensively advertized and used.

This is the key point: if a method is widely used, the law of large numbers comes into play and the performance revertes to zero mean. People resist to accept this. But it is a fact of statistics. You need to use methods with an edge, methods not widely used.

I see your point. This is why I am wondering if any solid scientific research has been done on whether traditional candlestick patterns hold true to their stated meanings as opposed to whether they provide profitable buy or sell signals.

Candlestick patterns may not provide profitable signals for the very reason you stated. However, do they indicate a change? As they are claimed to indicate. That would be the research I'd be interested in seeing.

A few years back and after attending a seminar on candle sticks, I realized that those formations are combinations of the open, high, low and close of bars plus, in certain cases, volume. I then came across APS Automatic Pattern Search, a program that finds price patterns based on your own criteria. Now, there is no essential difference between price patterns and candle sticks as far as formations go. The important difference is that there are thousands, literally, of price pattern formations that can be thought as candle stick formations but they are not known, usede or advertised.

Check out this link for an article on price patterns:

http://www.tradingpatterns.com/About_Us/articles/article2/article2.html

I use price patterns as part of a trading method that involves several other indicators as well as discretionary filtering of signals.

Alex

Thanks for the article. On first brief scan it looks interesting. Will post more when I've had a chance to read it thoroughly.

Cheers,
PKFFW

 

[SOCRATES]

Here is another riddle to do your heads in properly.

First get hold of two computers...

Then advance one by say 3 minutes and retard the other one by say 2 minutes.

Run the data on both.

The charts on each will be different.

The candles will have different bodies and different wicks.

If you are running squiggly lines over them they will be different too.

Does this alter the outcome as you are able to interpret it ?

Well then ?

 

[SOCRATES]

The real migraine headache is reserved for the weekend, when I will decide whether to post it or not, as I do not go out of my way to be unkind, but for now, ta ta.

 

[wasp]

Decision, indecision, motive, strategies, games, shakeouts, fakeouts? Where's Mr. Marcus, when you need him?

Of course, candles tell you all this and more.

Candles possess strength, but so does a linechart.

Candles create pretty little patterns, so do linecharts.

Candles indicate S/R, so do linecharts.

There's really no need to be left in the dark, without candles.

They work, but not in the way people think they should work, line charts do the same job, only better.

Who needs a chart to see S/R at all...?

 

[Paul71]

Who needs a chart to see S/R at all...?

True.

 

[new_trader]

This is too philosophical for me. I'm just a trader. When I look at volume figures I wonder: how much of the volume is really from market participants risking their money and actually having a view of where prices are going to and how much is market maker interplay to create the impression that there is really a lot of action going on and to lure people in?

If, as someone has said, the question is what is the question, then this is the question.

The answer is that volume probably says nothing as related to price except in the case of violent downward moves where increasing volume may indicate that downward pressures continue, maybe.

Besides that, I don't think volume says nothing at all, given that some people can exchange shares at virtually no cost to them.

Alex

I think chart patterns are a load of hocus-pocus and I rationalise it this way. Like you say, there are a number of participants but they are of different quality, the public being the lowest. So, 1 candlestick is very different from another, even though they both look exactly the same. The most insignificant looking candlestick could actually be the most important one of them all. Getting back to the quality of traders. The common misconception I had is that for every buyer there is a seller. I am nothing but a drop in the ocean. I trade the ES contract that has a daily average volume of around 1 million contracts. I trade 1 contract with a capital of around US$5000. How many traders are there at my level? There are traders with 10 times my capital and perhaps trade 10 contracts. There are traders with 10 times the capital again and trade 100 contracts, and 10 times that again who trade 1000 contracts. Outdoing all of these are the super heavyweights who can afford to trade multiple lots of 1000 contracts. When you have this kind of money, the market will go where you want it to go. Now, try and think like a super heavyweight.

 

[TheBramble]

This is too philosophical for me. I'm just a trader. When I look at volume figures I wonder: how much of the volume is really from market participants risking their money and actually having a view of where prices are going to and how much is market maker interplay to create the impression that there is really a lot of action going on and to lure people in?

If, as someone has said, the question is what is the question, then this is the question.

The answer is that volume probably says nothing as related to price except in the case of violent downward moves where increasing volume may indicate that downward pressures continue, maybe.

Besides that, I don't think volume says nothing at all, given that some people can exchange shares at virtually no cost to them.

Alex

Alexander, philosophy is not the issue here at all. The germ of the answer to your own question is within the question itself. It is precisely the differentiation of what the volume means in the context of the existing price action for the timeframe under consideration. Relatively little price action on relatively heavy volume; relatively large price action on relatively light volume. Relatively being relative of course. And the broad spectrum in between those two points is exactly where you need to be looking to differentiate what may be the real intent of the big players from the background noise.

Volume has a great deal to say in all circumstances, not just the violent moves. For you to make this statement indicates to me you are not currently using volume, but merely monitoring it. As a trader, even ‘just’ a trader, you are, if this is the case, missing a vital piece of the puzzle from your endeavours.

And as for the cost of transacting deals, this has absolutely nothing to do with the record of volume transacted. Certainly your transaction costs will decrease as you deal in higher volumes, but you only get to deal in higher volumes if you learn to read volume.

 

[TheBramble]

grantx & timsk, I'll work something up and will post it in a more appropriate forum, but I'm surprised this hasn't been covered before. Thank you for the suggestion.

 

[jacinto]

Here is another riddle to do your heads in properly.

First get hold of two computers...

Then advance one by say 3 minutes and retard the other one by say 2 minutes.

Run the data on both.

The charts on each will be different.

The candles will have different bodies and different wicks.

If you are running squiggly lines over them they will be different too.

Does this alter the outcome as you are able to interpret it ?

Well then ?

very true

i use 2 different metatrader bucket shops for charts. 1 closes 4 hour bars-candles in russian time, the other GMT. the things one sees if one focuses on candles-bars are extremely different.

however, price still says the same, the same levels, the same highs, the same lows. just open and close are the difference, but the travel of price through time is identical.

kind of shouts the obvious dont it?

j

 

[A Dashing Blade]

i use 2 different metatrader bucket shops for charts. 1 closes 4 hour bars-candles in russian time, the other GMT. the things one sees if one focuses on candles-bars are extremely different.

however, price still says the same, the same levels, the same highs, the same lows. just open and close are the difference, but the travel of price through time is identical.

kind of shouts the obvious dont it?

j

Yup . . . time is not a dimension that the markets recognise.

I've never understood why the opening (say) hour when there's often quite a bit happening (and represented by 20x5 minute bars) should be considered equivilant to the lunchtime lull when there's b*gg*r all going on, maybe 1/10th the volume is traded but is also represented by 20x5 minute bars.

But hey . . . . you decide!

 

[barjon]

Here's my favourite when the long(ish) legged doji called the bottom of the bear market on the ftse in March 2003 on the four week chart. Doncha just luv it :cheesy:

Seriously though, I do find some candlestick formations useful - mostly on the exit side of things.

I suppose we are all looking for "a reason to enter" whatever technique we use. Once in, money management does the rest. Candlestick formations are as good as any in providing that "reason".

good trading

jon

 

[SOCRATES]

very true

i use 2 different metatrader bucket shops for charts. 1 closes 4 hour bars-candles in russian time, the other GMT. the things one sees if one focuses on candles-bars are extremely different.

however, price still says the same, the same levels, the same highs, the same lows. just open and close are the difference, but the travel of price through time is identical.

kind of shouts the obvious dont it?

j

Exactly..

 

[SOCRATES]

Yup . . . time is not a dimension that the markets recognise.

I've never understood why the opening (say) hour when there's often quite a bit happening (and represented by 20x5 minute bars) should be considered equivilant to the lunchtime lull when there's b*gg*r all going on, maybe 1/10th the volume is traded but is also represented by 20x5 minute bars.

But hey . . . . you decide!

I am not surprised you are baffled.

This is because you may well understand price, but you do not understand time.

 

[jacinto]

well, the concept of time is a tough one. we think time is linear just because that is the way we measure it....hence a mindframe.

issue is to think in time in non-linear ways and break the mindframe (dont ask, im not the expert )

 

[zambuck]

I suppose we are all looking for "a reason to enter" whatever technique we use. Once in, money management does the rest. Candlestick formations are as good as any in providing that "reason".

jon

Yes....few lines above are more to point than reams of irrelevant words....

 

[A Dashing Blade]

I am not surprised you are baffled.

This is because you may well understand price, but you do not understand time.

Hmmmm, personally I'm surprised at your ability to miss the point of my post.

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Actually, that's not true.