Here is why I think candlestick patterns have no value: with example

[30seconds]

The issue I see with candlestick charts is that the same values produce different charts if the time is offset. So a pin bar can be "produced" if you offset the time, but if you don't then there is no pin bar. So I was thinking... If I just offset the time by 1s/1m/1h can have different patterns, what is the point of looking at those patterns? Just because happened to be the right offset doesn't mean anything...

For example on the hour chart in a country that has +30m timezone offset, will see all hourly charts completely different. Same with the daily charts between countries, they are different in all countries. So what is the point if the patterns appears in some countries but not in others?

What do you think?

Image 1:
Check attachment of the same chart. On the left you can see the pin bar, on the right you cannot, but the chart is the same, just a bit of offset.

Image 2:
The candlestick are different between providers
- 1st Ig
- 2nd livecharts
- 3th investing

Notice:

- IG vs livecharts and investing: Ig has an extra tick highlighted in black. That happens because of the time offset.
- livecharts vs investing: bottom right images, you can see the differences in the candlesticks. They are almost the same, but not the same.

Image 3:
So what do you think about point and figure charts? They change based on trend change and not on time. Check out http://www.investopedia.com/articles/technical/03/081303.asp

 

[timsk]

. . .What do you think?

Hi 30seconds,
Welcome to T2W.

I think you make an extremely valid point that traders would do well to consider. For the very reasons you outline, intraday time based charts are largely an illusion, as there is no open or close in the market. I have long advocated the use of non time based charts such as Point & Figure, Renko and Kagi as they pretty much eradicate this problem to enable traders to focus more easily and clearly on price. That said, many traders love their Pin Bars, Hammers and Dragonfly Dojis etc., and don't take kindly to the likes of me telling 'em they're starring at the TA equivalent of fools gold! Of course, if they can make money trading them, and do so consistently, then that's a different matter and I take my hat off to them.

Good debut post.
Tim.

 

[30seconds]

Hi 30seconds,
Welcome to T2W.

I think you make an extremely valid point that traders would do well to consider. For the very reasons you outline, intraday time based charts are largely an illusion, as there is no open or close in the market. I have long advocated the use of non time based charts such as Point & Figure, Renko and Kagi as they pretty much eradicate this problem to enable traders to focus more easily and clearly on price. That said, many traders love their Pin Bars, Hammers and Dragonfly Dojis etc., and don't take kindly to the likes of me telling 'em they're starring at the TA equivalent of fools gold! Of course, if they can make money trading them, and do so consistently, then that's a different matter and I take my hat off to them.

Good debut post.
Tim.

Yes, exactly about the point and figure. I've been reading a book from a thread on trade2win that is exactly about point and figure, the one that goes really deep into it.

Anyway I think the charts that are affected the most are the daily in each country. For countries that have offset that is not multiple of 1h but multiple of 1m will have issues on the hourly, 30m, 15m, 10m and 2m...

I saw even trader_dante mentioning using candlesticks on the hour and daily candles, and he is a reputable member of the trade2win forum. I would like to know what is his opinion on this.

 

[dbphoenix]

I don't want to offend anyone, but P&F, Renko, Kagi, "pinbars" and all the other filters we apply to evaluate "price action" are McGuffins. What matters is neither the interval (1m, 5m, 1h, etc) or the illustration (bar, candle, Renko, whatever) but rather the point at which price reverses. This morning on the NQ, for example, price reversed at 4768.5, and whether one uses a tick chart or an hourly chart is irrelevant. Traders are encouraged by "the industry" to be perpetually looking at the wrong thing in the wrong place for motives that should not be too difficult to unravel.

 

[abc163]

I don't want to offend anyone, but P&F, Renko, Kagi, "pinbars" and all the other filters we apply to evaluate "price action" are McGuffins. What matters is neither the interval (1m, 5m, 1h, etc) or the illustration (bar, candle, Renko, whatever) but rather the point at which price reverses. This morning on the NQ, for example, price reversed at 4768.5, and whether one uses a tick chart or an hourly chart is irrelevant. Traders are encouraged by "the industry" to be perpetually looking at the wrong thing in the wrong place for motives that should not be too difficult to unravel.

Hi DB,

What do you think of PnF? It seems you don't talk much about this chart in Wyckoff discussion. Wyckoff used it to evaluate how many points a move could go. If this is the way to measure the distance, is there any scientific or logical reasons behind it, or just another subjective pattern thinking?

Regards,

abc

 

[barjon]

I don't want to offend anyone, but P&F, Renko, Kagi, "pinbars" and all the other filters we apply to evaluate "price action" are McGuffins. What matters is neither the interval (1m, 5m, 1h, etc) or the illustration (bar, candle, Renko, whatever) but rather the point at which price reverses. This morning on the NQ, for example, price reversed at 4768.5, and whether one uses a tick chart or an hourly chart is irrelevant. Traders are encouraged by "the industry" to be perpetually looking at the wrong thing in the wrong place for motives that should not be too difficult to unravel.

Very true, db. Don't the bars, candlesticks or whatever paint a picture of that reversal, though? If it is a meaningful reversal you might expect some downward momentum building up. As you see the price changing and that momentum building you know what the picture of it is going to look like for the period whilst it is going on (see the 15min at the reversal time).

There's nothing to say that will continue but a trader may judge the chances from observation of earlier instances and may trade it accordingly using the "picture" of the changing price over a period of the trader's choice?

 

[dbphoenix]

By the time one has painted his picture, the reversal is already over. Which doesn't mean that the trader can't enter anyway, but he's much farther away from the reversal point and thus assumes greater risk. As to whether or not the reversal becomes "meaningful", that's a matter of management, not entry. And downward "momentum" may be surprisingly weak, as in the case of grind (slow pace, low activity, but an inexorable downward drift).

One of the chief advantages of trading price is being able to anticipate where the most likely trading opportunities will occur. This morning's reversal was anticipated since yesterday afternoon, but the fact of the reversal had nothing to do with how the trader chose to illustrate it.

 

[barjon]

By the time one has painted his picture, the reversal is already over. Which doesn't mean that the trader can't enter anyway, but he's much farther away from the reversal point and thus assumes greater risk. As to whether or not the reversal becomes "meaningful", that's a matter of management, not entry. And downward "momentum" may be surprisingly weak, as in the case of grind (slow pace, low activity, but an inexorable downward drift).

One of the chief advantages of trading price is being able to anticipate where the most likely trading opportunities will occur. This morning's reversal was anticipated since yesterday afternoon, but the fact of the reversal had nothing to do with how the trader chose to illustrate it.

Yes, as I said, the chances of it being over comes from earlier observations. Perhaps it is a question of prefering some confirmation rather than trading a set level.

You say the reversal was anticipated - maybe it was and you could advances several technicals for where it might occur (50% of yesterday's fall for example) which would be apparent from the "illustration".

 

[dbphoenix]

The more confirmation one needs, the greater the risk he assumes: price risk vs information risk.

As to the anticipation, yesterday's low was 4718.75. Price then rallied to 4768.50. That is the range in which we found ourselves this morning. So one waits until price reaches one side or the other and trades the reversal (which is a large part of what auction market theory is about). It isn't so much about "technicals" as about behavior: buyers were eager to reverse price at 4718.75 yesterday but declined to pay the ask at 4768.50. They may or may not repeat the same behaviors today. If they do, the alert trader is ready to act on that information. If they don't, he does nothing.

 

[barjon]

Yes and yes. I was just trying to suggest that valid information can be gleaned from the bars/candlesticks and that they are not entirely useless.

 

[dbphoenix]

They're useless in terms of trading price. But they may be useful in some way for those who are trading bars and candles.

 

[barjon]

They're useless in terms of trading price. But they may be useful in some way for those who are trading bars and candles.

Well, everyone is trading price in the end but I see what you mean

 

[dbphoenix]

Actually the only people I know here who are trading price are Gringo and Kleft. Everyone else trades bars, candles, indicators, patterns, "feelings" and so forth. All of which is fine if they're making money. I wrote the Trading Price thread (see below) for those who aren't and are looking for a reset.

 

[barjon]

Mmm, I think you trade price as defined by the sort of analysis you do and others trade price by the sort of analysis they do. You look for trading opportunities at places identified by your analysis, they at places identified by theirs.

If all make money that's fine even though yours may well be the one that displays a deeper understanding of the action of the market. There are several ways to skin a cat as a read of Market Wizards illustrates.

 

[dbphoenix]

If you know someone who trades price without using any of the aids I mentioned, I look forward to learning who they are. It's always helpful to compare notes.

 

[Splitlink]

If you know someone who trades price without using any of the aids I mentioned, I look forward to learning who they are. It's always helpful to compare notes.

Is it? The more I compare notes with others, the more uncertain I become. I am reading less and less about what others do as I go along. Most of it is opinionated, including mine.

 

[Fugazsy]

personally I would not know how to trade without candle charts, to me everything is important in a candle: the open, the close, the length, where did it close and when...

In a down wedge of a bull I need a trend bull bar to go long confirming to me I am not the only one seeing it and there is participation in continuation....

 

[dbphoenix]

Is it? The more I compare notes with others, the more uncertain I become. I am reading less and less about what others do as I go along. Most of it is opinionated, including mine.

One of the chief advantages of trading without all the aids I listed is that opinion matters much less.

 

[tomorton]

They are an indicator of price, they are not price itself. But with that caution they are still useful, even if on a rolling basis, as long as you don't take them literally.

e.g. If I want to know it its raining outside, I can go out and directly feel the precipitation or I can look out the window to use an indicator - to see if passers-by have their umbrellas up. One gives a definite answer, the other gives an indication of a probable answer.

 

[Fugazsy]

personally I would not know how to trade without candle charts, to me everything is important in a candle: the open, the close, the length, where did it close and when...

In a down wedge of a bull I need a trend bull bar to go long confirming to me I am not the only one seeing it and there is participation in continuation....

nu 4h
I entered 1 pip plus spread above that bar, a classic BOPB.

If it was the bar printed 4 bars before (bar with bear stick) I would not have entered because it would confirm to me a possible side way market was on the way instead.