brownsfan019

In an effort to educate and stimulate some discussion, I'm going to try to put together a few steps for candlestick trading success!
 
Step 1: Identify the candlestick 'patterns' or 'formations'
 
There are a variety of websites and books out there talking about candlestick patterns or formations.
 
Some sites out there with some free stuff that can at least get you started in pattern recognition. Stockcharts.com in particular has a nice section on candlesticks (click hyperlinks):
 
Main Page
Intro To Candlesticks
List of Common Patterns
 
That's a few free links from stockcharts.com. Those are pretty good for being free. Keep in mind that is not meant to be a substitute for books, videos and live seminars. As mentioned previously, I like the work of Steve Nison.
 
So the very, very first step is to be able to look at a candle(s) and identify if there's a potential candle pattern or formation there. That's step 1. I know that seems easy, but it can take some practice, esp in real-time and esp in day-trading. I would suggest looking at some DAILY charts and just start flipping through charts of stocks to see what you can recognize. Don't worry about stock charts if you just trade futures, you just want to train your eyes to see patterns and formations.
 
And speaking of day-trading, there is one important consideration when using candlestick analysis in a day-trading environment - YOU MUST REMAIN FLEXIBLE IN YOUR DEFINITIONS OF CANDLESTICKS IN REAL-TIME, DAY-TRADING. The lower the chart timeframe, the more flexible you must be. And what I mean is that if you are only looking for picture perfect hammers, you might be waiting a while for a signal. As we get more charts posted, this will make more sense.
 
And from candlestick recognition, there are a couple schools of thought of how trade them:
 
1) Trade any of the patterns if your parameters are met.
2) Trade certain patterns based on your preference and testing.
 
This is going to be an integral part of your trading plan and there's no right answer here. It really is dependent on how you build your trading plan and what your testing has shown. I'm not going to do the work for you, so don't bother asking.

In this post, I explained to the OP that following your system when things are not looking good is easier said than done sometimes and thought I'd explain further.
 
Today (Dec 12) was one of those days where if I told you the end result of my P&L you might say, nice day.
 

Ending P&L: $779.89/ct after commissions Not the greatest, but acceptable.
 
Now, allow me to take you through how this day progressed and you can see why it's easier said than done to follow your system 100% and not lose faith.
 
I am currently focusing on 3 markets to trade - ES, EC/6E and ZN. The main reason being that I am trying to be more particular in my setups and instead of forcing on the ES only, I find it easier to be patient using 3 markets.


ES trades for Dec 12:
+1.25, -2.25, -2, -2, -1.5, -1.75, -1.5, +5.75 = -4.00 on Day
 
EC trades for Dec 12:
-13, -12, +26, -9, -9, +6, +36 = +25 on Day
 
ZN trades for Dec 12:
+21, -4, +19, +10 = +46 on Day
As you can see, not the easiest path to get from point A to point B. We know that the shortest distance between 2 points is a straight line and while it's much easier having a day where you start at 0.00 to +1,000 with no losses, that's not entirely realistic IMO.
 
But if you were to look at starting at 0.00 and ending at $779.89, it'd be hard to argue that was a bad day.
 
I posted this b/c in the other thread the OP is showing some solid faith in his system and following it. Once you know that your system makes money, then it's a little easier to do this. Of course you need to get there, but once there, you can do it.
 
In the end this business is first about knowing that your system makes money over time and then doing it while minimizing emotional impact. I still get frustrated at times but days like today remind me of how important it is to keep doing it. I had no idea going into the day that the ES would be so rough today. I had no idea that the EC would make money, but only after a few losses. And I had no idea that the ZN would be like taking candy from a baby. And I have no idea what tomorrow will hold. I just have the faith that I can do the job and follow the plan. As soon as I stray from that, then I am subject to P&L fluctuations not planned for.