Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

brownsfan019

Step 1: Identify the candlestick 'patterns' or 'formations'

Recommended Posts

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. ;)

Share this post


Link to post
Share on other sites

Thanks Brownsfan. This really helps me alot. It's always better to hear from someone who actually uses the methods, etc than just reading a book anyways. It gets filtered through experience.

Share this post


Link to post
Share on other sites
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. ;)

 

That is an excellent point Brownsfan. If you are too rigid in your definition of a candle you will let many fine opportunities pass you by. One common thing I notice about doji's is that many traders only accept them as signs of indecision of they are textbook, a Narrow Range Bar for instance shares much of the same psychology.

Share this post


Link to post
Share on other sites

I agree, I never have been a big fan of the ones that make candlestick analysis into a rote process of following the candles exactly without actually thinking about what they mean. Thanks again for the info

Share this post


Link to post
Share on other sites
Guest forsearch

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.

 

BF,

Awhile ago you were musing about the possibility of automating your trading.

 

Since - by your own reckoning - your method of candlestick trading is largely DISCRETIONARY in nature, would this preclude mechanizing your setups as a result?

 

-fs

Share this post


Link to post
Share on other sites
BF,

Awhile ago you were musing about the possibility of automating your trading.

 

Since - by your own reckoning - your method of candlestick trading is largely DISCRETIONARY in nature, would this preclude mechanizing your setups as a result?

 

-fs

 

Not necessarily although it will not be easy. Hence the reason it has not been worked on. ;)

Share this post


Link to post
Share on other sites
Guest forsearch

You could just set triggers based on the firm criteria that MUST be met in order to qualify as a potential trade. Then you manually decide whether to drop the hammer or not...so to speak.

Share this post


Link to post
Share on other sites
You could just set triggers based on the firm criteria that MUST be met in order to qualify as a potential trade. Then you manually decide whether to drop the hammer or not...so to speak.

 

If I am going to spend time and money to automate my trading, it will run at 100% automation. If it can't do that, I'm not interested. ;)

Share this post


Link to post
Share on other sites

Brownsfan,

 

Are CandleStick a primary method for you...or

a secondary part of you overall method/system or something else?

Simply, are you one of those Hardcore Candlestick traders or you just use them in conjuction with your overall methods.

 

 

-------------------

nevermind...

saw one of your post that answered my question.

Edited by sep34

Share this post


Link to post
Share on other sites

As I've stated previously, using a 'candle finder' software ESPECIALLY in intra-day trading is not only lazy but cannot possibly find the appropriate patterns.

 

In intra-day trading there is not room for rigid, computer defined 'find-a-shape' programs. You must remain flexible in your definition of patterns if using candles in your trading.

 

And before any of our new friends chastise me for saying 'my backtesting shows these do not work' 1) candles are not the be all end all - must be used in conjuction w/ some other analysis 2) if you use rigid, computer defined find-a-shape program, it cannot possibly do the intra-market analysis that a brain can.

 

Simply put - computer find-a-shape programs are for those that want a quick and easy way to trade via candlestick patterns. Inevitably, these WILL fail.

Share this post


Link to post
Share on other sites

i cant agree more with brownsfan. The candlestick patterns by themselves is a weak way of making money (probably losing more than winning) if they are not used in context with the situation. The use and identification of candlesticks has to be wholistic and used in conjunction other tools with appropriate money management.

Share this post


Link to post
Share on other sites
...The candlestick patterns by themselves is a weak way of making money (probably losing more than winning) if they are not used in context with the situation. The use and identification of candlesticks has to be wholistic and used in conjunction other tools with appropriate money management.

 

Candle patterns on their own are really not sufficient to make money in the markets. This is exacerbated by the fact that most "patterns" that can be found in books or on the internet are losing (low probability) patterns.

 

What one really has to understand is the price action PRIOR to the pattern.

 

Most traders fail here because they assume that the candle pattern defines the price action. The truth is the price action defines the candle pattern.

Share this post


Link to post
Share on other sites

You say tomato, I say tomatoe...

 

;)

 

Point is that candlestick patterns are incredibly useful tools for the visual learner, like myself, when used in a context that makes sense. Much of this has been explained throughout this entire area of the forum so I won't regurgitate.

Share this post


Link to post
Share on other sites

Axis-IT matched 'Three Outside Up Bullish' high priority Bullish Reversl candlestic pattrn on 22nd of July.

 

Pattern:

a) After an established downtrend, day-one continues the trend with a red candle

b) 2nd day is a long green day that engulfs the body of the first day, closing well above the previous days open.

c) The 3rd day is a green day with an even higher close than the second day.

 

axisit_2207.png

 

Src: CandleStick Patterns

 

When the stock is positive trend, y is it called Bullish Reversal?

Share this post


Link to post
Share on other sites
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. ;)

 

There are a few sources that I would recommend. Steve Nisson has written a few books and did seminars in the Past If you want to Code Candle sticks to use candle sticks in your Trading System as an adjunct there was an article in the Stocks & Commodities November 1999.

The Coding can be been done. A trader that I am no longer in touch with was able to get the Procedure to work. I can't find the working Code however. O

Share this post


Link to post
Share on other sites

"Japanese candlestick charting" has numerous patterns that are considered by many to be high probability. IMHO there is more to it than just the obvious. Candlesticks patterns are a way to describe market sympathy, ie, market pressures. Many many patterns that correctly indicate market sympathy can be found that are not part of any list of patterns I've ever seen before. I have been cataloging market sympathy changes as candle patterns at those times and integrated these into my automated trading system with excellent results. Beauty is more than skin deep and the candle pattern theory is beautiful. Look beneath the surface for understanding and a new world of trading will open up for you as it did for me.

 

Cheers

Share this post


Link to post
Share on other sites

IMo if one could easily predict the Doji, Hanging man and the morning star then we may not need the other methods of candlesticks. Offcourse every traders has his/her own choice of candlesticks to follow bt the above mentioned work for me and no need to go beyond and learn the kinda more complicated patterns..

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Why are Market Wizard's insults and humiliations tolerated with impunity whereas our replies are sistematically banned? Just curious.
    • Bitcoin (BTC) Consolidates As Bears And Bulls Tussle Above $9,400 Support Key Resistance Zones: $10,000, $11,000, $12,000 Key Support Zones: $7, 000, $6, 000, $5,000 BTC/USD Long-term Trend: Ranging Bitcoin has failed to break above $10,400 overhead resistance. The bulls made two unsuccessful attempts at the resistance. In the recent one, the bears took the price to a low of $9,290 and then pulled back above $9,400. In the interim, the price is fluctuating above $9,400 and approaching the high of $9,800. As the bulls have failed to push above the overhead resistance, the pair may commence a range movement. Nonetheless, it is anticipated that if the bears break below the $9,400 support, selling pressure may resume. Meanwhile, BTC may continue the range-bound movement. BTC/USD – Daily Chart Daily Chart Indicators Reading: After the downward move of Bitcoin, the Relative Strength Index has also fallen to level 52. This simply means the coin is above the centerline 50. In other words, BTC is in an uptrend and it is likely to rise. Price broke the support line of the ascending channel. The uptrend will be in proper perspective only when the bulls break into the ascending channel. BTC/USD Medium-term Trend: Bearish On the 4- hour chart, Bitcoin now trades between $9,400 and $10,200 after the first breakdown at the $10,400 overhead resistance. The bulls tested the resistance at $10,200 twice , before the downward move. The large bearish candlesticks tested a low of $9,290. However, the small body candlesticks that follow are called indecisive candlesticks. BTC/USD – 4 Hour Chart 4-hour Chart Indicators Reading Presently, BTC is trading above a 25% range of the daily stochastic. That is the coin is in the bullish trend zone. The 21-day SMA and the 50-day SMA are sloping horizontally indicating a sideways trend. General Outlook for Bitcoin (BTC) From every indication, if the bulls fail to push above the overhead resistance, the price action in October and November will repeat itself. For the past three days, BTC is still fluctuating above $9,400. Instrument: BTC/USD Order: Sell Entry price: $9,700 Stop: $9,900 Target: $8,400 Note: Learn2Trade.com is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results Source: https://learn2.trade 
    • The Sharp Recovery In EURJPY Lose Momentum, Falters Beneath The Level At 121.00 EURJPY Price Analysis – February  21 The single European currency rose 88 basis points or 0.73% against the Japanese yen in the previous session. After two consecutive sessions showing strong growth, EURJPY is now losing some momentum amid JPY bulls. Key Levels Resistance Levels: 122.37, 122.87, 121.00 Support Levels: 119.99, 117.08, 115.83 EURJPY Long term Trend: Ranging The EURJPY rebound from the level of 118.46 continues to advance from the previous session, but today it has stalled. Super-speed acceleration claims that a decline from 122.87 level could have ended in three waves to 118.46 level. However, the support level formed by the intersection of the moving average of 5 and 13 at 119.90 level can support the exchange rate during the trading session on Friday, while greater advance can continue from the level of 115.83. EURJPY Short term Trend: Ranging From an analysis of the 4-hour time frame, the intraday bias is now on the rise for a resistance level of 121.15 at first. The breakthrough will be aimed at 122.87 high levels. On the other hand, a breakdown of the secondary support levels of 119.99 could change the bias towards lower testing to retest the low level of 118.46 instead. Instrument: EURJPY Order: Sell Entry price: 121.00 Stop: 119.66 Target: 121.47 Note: Learn2Trade.com is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results Source: https://learn2.trade 
    • What makes InstaForex a good choice is that it is a reliable binary options trading platform so the trader would not have to dread anything if he decides to choose this platform.  They offer a 24/7 consultancy support. The exclusive online support facilitates the trader to get all the help that he has been looking for so far. This means that if the trader has any questions he can put them up ready to reach a solution to his problems. InstaForex provides trading binary options on currency pairs, cryptocurrency pairs, metals, and CFDs on shares.   InstaForex Broker 2.000$ Forex / Binary Options No Deposit Bonus! Crypto Trading Available! https://binaryoptionsfree.eu/review/instaforex-broker-2-000-forex-binary-options-no-deposit-bonus/
    • CRYPTOBO Broker - Binary Options No Deposit Cryptocurrency Bonus Real 10,000 Satoshi For Free!Make Financial Bets using Bincoins and win Bitcoins!Receive 10,000 Satoshi for Free Without Deposit to bet and win!Read CRYPTOBO Review!
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.