[Volume Based Candles] and how to profit

brownsfan019 · March 17, 2007

BF: I'm a Broncos fan, but that doesn't mean I can't be a fan of yours
Would love to see some charts.

Also have a trading 101 question: What is the difference between a tick chart and a Volume Chart?

VSA tells us that volume=activity and thus tick based volume works where actaul contract volume is not offered. Do you believe the same?

The Russell doesn't release volume during the day, only tick volume, would you thus not trade that market or just use ticks?

BRONCOS???

Forget it, I am out of here.

Do you know what Elway and the Broncos did to my Browns in 86??????? I practically throw up every time I watch 'the drive' on ESPN. That was the LAST time the Browns had a competitve team!!!!!!

That changes things.

:mad:

brownsfan019 · March 17, 2007

Would love to see some charts.

Also have a trading 101 question: What is the difference between a tick chart and a Volume Chart?

VSA tells us that volume=activity and thus tick based volume works where actaul contract volume is not offered. Do you believe the same?

The Russell doesn't release volume during the day, only tick volume, would you thus not trade that market or just use ticks?

Ok, that was a joke. Thought a little humor would be good here, it's getting a bit stuffy in here. :p

Charts - I will try to post some, but what may actually be better is what I did with Tin - post a chart and I can screenshot it and annotate my thoughts so you can compare with yours. Just an ida.

Tick vs. Volume - A tick chart moves when there is a tick. I don't care for tick charts b/c if the market moves up a tick based on a handful of contracts traded, I am not interested. I want to see and KNOW there is volume being traded there, not just a random tick. A volume chart only produces a new candle when XXXX contracts trade - whether that is a couple ticks or not. I guess it depends on what you consider important - any and all movements or volume. For me, it's volume. I view a tick chart similar to a minute chart in that you can trade off both of them, but for me, a volume chart speaks volumes that those charts cannot.

ER2 - not sure what you mean, I use volume based charts there just like all the other e-mini's. At least, that's what TS is showing me. HOWEVER you bring up something that makes sense to me... My TS charts on the NQ and EC (CME based contracts) NEVER match the volume I see on my T4 trading dom; but my YM (CBOT based contract) matches perfectly to my trading dom... Can you provide more info on what you mentioned? Any links to the CME and/or CBOT that explains your statement more? Thanks!

Anonymous · March 17, 2007

That is just what I heard. I do not trade it and could certainly be wrong.

P.S. I wasn't going to mention THE DRIVE to spare your feelings, but since you brought it up....It's on!!!!!

Don't be surprised the next time we are having an agrument if I don't just utter those two beautiful words. LOL

Robert2617 · March 17, 2007

At this early stage of my recent volume candle enlightenment, I have come to the conclusion that volume candles are the most accurate v/s all other types of chart reading.

I now believe this because volume candles equalize each bar's importance. With "VCs", no bar means more or less than the last or the next. They just tell a story. A story you can trust because you know what each VC represents.

With time or tick based bars, you don't know the importance of any bar. You don't know how much emphasis to put on any bar or pattern. You can't trust them. You might as well use a line.

Now there are other indicators that may quantify volume but none will be as accurate as the VCs because VCs are the indicator!

Most importantly, it evens out the chart. It doesn't matter what volume interval you use because whichever interval you choose, all bars represent the same.

Wow, this is deep. I think this just saved me about $25,000 or more. I'm a total believer. It's so clear to me now. Thanks again. Wow, that all I can say. Wow...... :rolleyes:

MrPaul · March 17, 2007

I'll throw my two cents in here and give an opinion and an answer. In my opinion the time frame used 764v is much to myopic a candle length to lend an edge using traditional reversal/continuation candles. Brownsfan brought up an interesting question where he wrote... "where and how do you exit?". I utilize candlesticks not so much for patterns in a cursory manner but for gauges of supply and demand.

Therefore my exits are completely designed around change in that way. As soon as my mic comes in it should be easier to explain though a video but for now I tried my best with a chart. Nison is absolutely correct when he says candlesticks don't offer profit targets but they do offer something much more logical and relevant, a portrayal of momentum/sentiment shift between market participants...

Let's look at a 10min YM chart (the same day as Tin posted).

A.) A half hour into the trading session price forms a shooting star candle indicative of supply (and more importantly in some cases trapped late buyers)

B.) After the Shooting star a doji forms displaying indecision and momentary equilibrium. This is where I start thinking very hard about selling price, logically if price cannot find buyers at it current level or above it it will auction lower in search of sellers. What we need here is a trigger, a signal that can mechanically verify that the odds are price is going to be trading lower.

C.) that trigger/signal comes in the form of a candlestick close below the low of the shooting star. Selling on the close of that bar.

D.) This candle could be used for a more conservative play for the close below the last indecisive point (doji).

E.) Notice here that although price trades up and down it's *close* is always below that of the last candle. Lots of tight stopped traders got shook out during the leg down displayed by the wicks. That what I look for with sell momentum continuation, lower *closing* lows.

F.) At this juncture price has capitulated and volume has risen dramatically (relative). Price has found demand indicated by the lower wick and now any signs of strength or indecision is an exit signal.

G.) As we can see now indecision has entered the marketplace by price and volume made like Elvis and left the building. In a perfect world we could all pretend that the lows were covered but in reality anywhere between 12220 and 12205 is an area where you have confirmation that in all likelihood the leg has finished it's run down.

So we have an initial stop above the highs @ 12285 after a signal to sell @ 12265 (20 point risk/contract) with a conservative estimate of gain near (40-50 points/contract) after we exit.

The thing about using larger charts with candlestick analysis is that you are going to get more valid signals, and you can mechanically enter,exit, and set risk.

Once again everyone has their own way to trade and that's the best there is for them, I just wanted to throw out an example of how I think when I am watching price trade. :cool:

Robert2617 · March 17, 2007

Here ia a Candle Pattern Recognition TradeStation RadarScreen Indicator.

Good ol Rumpled one.

[LegacyColorValue = true]; 

{_SMAA_Dynamic_CPR - CandleStick Pattern Recognition  }


{Programmer:  Avery T. Horton, Jr.  aka TheRumpledOne}

{ http://www.stockcharts.com/education/ChartAnalysis/CandlestickDictionary.htm   }

{ http://www.litwick.com/glossary.html }

Inputs: 

iDecimals(2),

iOpen(open),
iHigh(high),
iLow(low),
iClose(close);

inputs: 

Length( 1 ),
Factor( 2 ),
Percent( 5 ) ;

variables: o3WhiteSoldiers( 0 ), o3BlackCrows( 0 ) ;

variables: oBullishHarami( 0 ), oBearishHarami( 0 ) ;

variables: oPiercingLine( 0 ), oDarkCloud( 0 ) ;

variables: oMorningStar( 0 ), oEveningStar( 0 ) ;

variables: oMorningDojiStar( 0 ), oEveningDojiStar( 0 ) ;


variables: 


xTriggerTime1(time),
xTriggerTime2(time),
xTriggerTime3(time),

xPeriods(60),
xInterval(0),

sFirstPass(true),

xMRO( 0 ),
xIndMin( 0 ),
xIndAvg( 0 ),
xInd(0),
tInd(""),


FG1(white),
BG1(black),

fg2(white),
bg2(black),

fg3(white),
bg3(black),

fg4(white),
bg4(black),

vdummy("");


{commentary variables}
variables: 
xcomm(0),
oComm1( "" ), 	
oComm2( "" ), 	
oComm3( "" ), 	
oComm4( "" ), 	
oComm5( "" ),
oComm6( "" ),
oComm7( "" ),
oComm8( "" ),
oComm9( "" ), 	
oComm10( "" ); 


{candle  variables}

variables: 

xOpen(0),	
xOpen1(0),
xOpen2(0),
xOpen3(0),	


xClose(0),
xClose1(0),
xClose2(0),
xClose3(0),

xHigh(0),
xHigh1(0),
xHigh2(0),
xHigh3(0),	

xLow(0),	
xLow1(0),
xLow2(0),
xLow3(0),

xTop(0),
xTop1(0),
xTop2(0),
xTop3(0),

xBottom(0),			
xBottom1(0),		
xBottom2(0),		
xBottom3(0),

xMid(0),	
xMid1(0),
xMid2(0),
xMid3(0),


xTopShadow(0),
xTopShadow1(0),
xTopShadow2(0),
xTopShadow3(0),

xBottomShadow(0),			
xBottomShadow1(0),		
xBottomShadow2(0),		
xBottomShadow3(0),

xBodySize(0),	
xBodySize1(0),
xBodySize2(0),
xBodySize3(0),

xBodyAvg(0),	
xBodyAvg1(0),
xBodyAvg2(0),
xBodyAvg3(0),


t1DayPattern("DOJI"), 
t2DayPattern("DOJI"), 
t3DayPattern("DOJI"), 			

sFound1Day(false),
sFound2Day(false),
sFound3Day(false),	

xcdummy("");

{first time through}

if sFirstPass
then begin

sFirstPass = false;

{bar test}

If bartype = 4
then xInterval = 94
else
If bartype = 3
then xInterval = 93
else
If bartype = 2
then xInterval = 92
else
If bartype = 1
then begin
xInterval = BarInterval;
end; { If bartype = 1  }

end; {if sFirstPass}


{ INITIALIZE }

tInd = "";

t1DayPattern	= "" ;
sFound1Day	= false ;

t2DayPattern	= "" ;
sFound2Day	= false ;

t3DayPattern	= "" ;
sFound3Day	= false ;

FG1 = WHITE;
BG1 = BLACK;

fg2 = WHITE;
bg2 = BLACK;

fg3 = WHITE;
bg3 = BLACK;

fg4 = WHITE;
bg4 = BLACK;


xOpen = iOpen;
xOpen1 = xOpen[1];
xOpen2 = xOpen[2];
xOpen3 = xOpen[3];

xClose = iClose;
xClose1 = xClose[1];
xClose2 = xClose[2];
xClose3 = xClose[3];

xHigh = iHigh;
xHigh1 = xHigh[1];
xHigh2 = xHigh[2];
xHigh3 = xHigh[3];

xLow = iLow;
xLow1 = xLow[1];
xLow2 = xLow[2];
xLow3 = xLow[3];


xTop     = maxlist( xOpen , xClose );
xBottom  = minlist( xOpen , xClose );
xMid	 = ( xHigh - xLow ) * 0.5 + xLow ;

xTop1     = maxlist( xOpen1 , xClose1 );
xBottom1  = minlist( xOpen1 , xClose1 );
xMid1	  = ( xHigh1 - xLow1 ) * 0.5 + xLow1 ;

xTop2     = maxlist( xOpen2 , xClose2 );
xBottom2  = minlist( xOpen2 , xClose2 );
xMid2	  = ( xHigh2 - xLow2 ) * 0.5 + xLow2 ;


xTop3     = maxlist( xOpen3 , xClose3 );
xBottom3  = minlist( xOpen3 , xClose3 );
xMid3	  = ( xHigh3 - xLow3 ) * 0.5 + xLow3 ;

xTopShadow		= xHigh - xTop ;
xTopShadow1		= xHigh1 - xTop1 ;
xTopShadow2		= xHigh2 - xTop2 ;
xTopShadow3		= xHigh3 - xTop3 ;

xBottomShadow	= xClose - xLow ;			
xBottomShadow1	= xClose1 - xLow1 ;
xBottomShadow2	= xClose2 - xLow2 ;	
xBottomShadow3	= xClose3 - xLow3 ;

xBodySize 		= xTop - xBottom ;
xBodySize1 		= xTop1 - xBottom1 ;
xBodySize2 		= xTop2 - xBottom2 ;
xBodySize3 		= xTop3 - xBottom3 ;


{IF xBodySize  > xBodyAvg  THEN  LONG CANDLE }

xBodyAvg  = XAverage( xBodySize , Length ) ;
xBodyAvg1 = XAverage( xBodySize , Length ) ;
xBodyAvg2 = XAverage( xBodySize , Length ) ;
xBodyAvg3 = XAverage( xBodySize , Length ) ;



{-----------------------------}
{ One day pattern recognition }
{-----------------------------}

{Gravestone Doji

set{body_top,max(open,close)}
set{body_bottom,min(open,close)}
show stocks where body_top is less than .05 percent above body_bottom
and body_bottom equals low
and body_top more than .5 percent below high

}

If sFound1Day = false
and xOpen = xLow
and xClose = xLow
and xHigh > xLow
then begin
xTriggerTime1 =  Time;
fg1 = white;
bg1 = BLACK;
tInd 			= tInd + " 1:Neutral" ;
t1DayPattern	= "Gravestone Doji" ;
sFound1Day	= true ;
end;


{ Dragon Fly Doji
set{body_top,max(open,close)}
set{body_bottom,min(open,close)}
show stocks where body_top is less than .05 percent above body_bottom
and body_top equals high
and body_bottom more than .5 percent above low

}
If sFound1Day = false
and xTop = xBottom
and xTop = xHigh
and xHigh > xLow
then begin	
xTriggerTime1 =  Time;
fg1 = white;
bg1 = BLACK;
tInd 			= tInd + " 1:Neutral" ;
t1DayPattern	= "Dragon Fly Doji" ;
sFound1Day	= true ;
end;


{DOJI close = open}

If xClose = xOpen 
then begin
fg1 = cyan;
bg1 = BLACK;
end;

{  "Inverted Hammer"  }


If sFound1Day = false
and xClose = xLow and xHigh  > xOpen  and xClose < xOpen 
then begin	
xTriggerTime1 =  Time;
fg1 = green;
bg1 = BLACK;
tInd 			= tInd + " 1:Bullish" ;
t1DayPattern	= "Inverted Hammer" ;
sFound1Day	= true ;
end;

{ Hammer

set{body_bottom,min(open,close)} 
set{body_top,max(open,close)} 
set{lshadowsize, body_bottom - low}
set{tshadowsize, high - body_top}
set{body_size, body_top - body_bottom}
set{body_size2, body_size * 2}
show stocks where tshadowsize is less than 0.001
and lshadowsize > body_size2
and close decreasing for the last 3 days
and body_top < close 1 day ago

}
If sFound1Day = false
and xClose = xHigh  
and xBottomShadow > (xBodySize * 2)
and xClose < xClose1 and xClose1 < xClose2 and xClose2 < xClose3 
and xTop < xClose1
then begin	
xTriggerTime1 =  Time;
fg1 = green;
bg1 = BLACK;
tInd 			= tInd + " 1:Bullish" ;
t1DayPattern	= "Hammer" ;
sFound1Day	= true ;
end;





{ "Hanging Man"  }
{set{body_bottom,min(open,close)} 
set{body_top,max(open,close)} 
set{lshadowsize, body_bottom - low}
set{tshadowsize, high - body_top}
set{body_size, body_top - body_bottom}
set{body_size2, body_size * 2}
show stocks where tshadowsize is less than 0.001
and lshadowsize > body_size2
}

If sFound1Day = false
and xHigh = xTop  
and xBottomShadow > (xBodySize * 2)
then begin	
xTriggerTime1 =  Time;
fg1 = red;
bg1 = BLACK;
tInd 			= tInd + " 1:Bearish" ;
t1DayPattern	= "Hanging Man" ;
sFound1Day	= true ;
end;


{ Marubozo SHOULD BE LAST OF THE ONE DAY PATTERNS }

{ Marubozo

A candlestick with no shadow extending from the body at either the open, 
the close or at both. The name means close-cropped or close-cut in Japanese, 
though other interpretations refer to it as Bald or Shaven Head. 
}

If sFound1Day = false
then begin

if xOpen = xHigh
or xOpen = xLow
or xClose = xHigh
or xClose = xLow

then begin
xTriggerTime1 =  Time;
fg1 = white;
bg1 = BLACK;
tInd 			= tInd + " 1:Neutral" ;
t1DayPattern	= "Marubozo" ;
sFound1Day	= true ;
end;

end; // If sFound1Day = false


{-----------------------------}
{ two day pattern recognition }
{-----------------------------}


{"Engulfing" }


If sFound2Day = false
and xTop > xTop1  and xBottom < xBottom1
then begin	
xTriggerTime2 =  Time;
fg2 = white;
bg2 = BLACK;
tInd 			= tInd + " 2:Neutral" ;
t2DayPattern = "Engulfing" ;
sFound2Day	 = true ;
end;



{Bearish Kicking

show stocks where body_top equals high
and body_bottom equals low
and body_top 1 day ago equals high 1 day ago
and body_bottom 1 day ago equals low 1 day ago
and body_top more than .5 percent above body_bottom
and body_top 1 day ago more than .5 percent above body_bottom 1 day ago
and close below open
and close 1 day ago above open 1 day ago
and open equals open 1 day ago
}
If sFound2Day = false
and xTop = xHigh 
and xBottom = xLow 
and xTop1 = xHigh1 
and xBottom1 = xLow1 
and xTop1 > ( xBottom1 + ( xBottom1 * .005) ) 
and xClose < xOpen 
and xClose1 > xOpen1
and xOpen = xOpen1
then begin	
xTriggerTime2 =  Time;	
fg2 = red;
bg2 = BLACK;
tInd 			= tInd + " 2:Bearish" ;
t2DayPattern = "Bearish Kicking" ;
sFound2Day	 = true ;
end;


{Bullish Kicking Pattern
set{body_bottom,min(open,close)} 
set{body_top,max(open,close)} 
show stocks where body_top equals high
and body_bottom equals low
and body_top 1 day ago equals high 1 day ago
and body_bottom 1 day ago equals low 1 day ago
and body_top more than .5 percent above body_bottom
and body_top 1 day ago more than .5 percent above body_bottom 1 day ago
and close above open
and close 1 day ago below open 1 day ago
and open equals open 1 day ago
}
If sFound2Day = false
and xTop = xHigh 
and xBottom = xLow  
and xTop1 = xHigh1 
and xBottom1 = xLow1 
and xTop > ( (xBottom + xBottom * .005) ) 
and xTop1 > ( (xBottom1 + xBottom1 * .005) ) 
and xClose > xOpen 
and xClose1 < xOpen1
and xOpen = xOpen1
then begin	
xTriggerTime2 =  Time;
fg2 = green;
bg2 = BLACK;
tInd 			= tInd + " 2:Bullish" ;
t2DayPattern = "Bullish Kicking" ;
sFound2Day	 = true ;
end;


{ Harami }

If sFound2Day = false
then begin

Value1 = C_BullHar_BearHar( Length, oBullishHarami, oBearishHarami ) ;

if oBullishHarami = 1 then
begin
xTriggerTime2 =  Time;
fg2 = green;
bg2 = BLACK;
tInd 			= tInd + " 2:Bullish  " ;
t2DayPattern	= "BullishHarami"  ;
sFound2Day	= true ;
end
else if oBearishHarami = 1 then 
begin	
xTriggerTime2 =  Time;
fg2 = red;
bg2 = BLACK;
tInd 			= tInd + " 2:Bearish  " ;
t2DayPattern	= "BearishHarami" ;
sFound2Day	= true ;
end ;

end ; // If sFound2Day = false


{ PierceLine_DkCloud }

If sFound2Day = false
then begin


Value1 = C_PierceLine_DkCloud( Length, oPiercingLine, oDarkCloud ) ;

if oPiercingLine = 1 then
begin	
xTriggerTime2 =  Time;
fg2 = green;
bg2 = BLACK;
tInd 			= tInd + " 2:Bullish  " ;
t2DayPattern	= "PiercingLine"  ;
sFound2Day	= true ;
end
else if oDarkCloud = 1 then 
begin	
xTriggerTime2 =  Time;
fg2 = red;
bg2 = BLACK;
tInd 			= tInd + " 2:Bearish  " ;
t2DayPattern	= "DarkCloud" ;
sFound2Day	= true ;
end ;

end ; // If sFound2Day = false




{ ShootingStar }

If sFound2Day = false
then begin


if C_ShootingStar( Length, Factor ) = 1 then
begin	

xTriggerTime2 =  Time;
fg2 = green;
bg2 = BLACK;
tInd 			= tInd + " 2:Bearish  " ;
t2DayPattern	= "Shooting Star"  ;
sFound2Day	= true ;
end ;

end ; // If sFound2Day = false


{-------------------------------}
{ three day pattern recognition }
{-------------------------------}

{
{ "Evening Star" }

If sFound3Day = false
and xClose2 > xOpen2 
and xOpen1 > xClose2 
and xClose<> xOpen 
and xClose < xMid2
then begin
xTriggerTime3 =  Time;
fg3 = red;
bg3 = BLACK;
t3DayPattern	= "Evening Star" ;
sFound3Day		= true ;
tInd 			= tInd + " 3:Bearish" ;
end;

}

{Shooting Star - bearish
set{body_bottom,min(open,close)} 
set{body_top,max(open,close)} 
set{lshadowsize, body_bottom - low}
set{tshadowsize, high - body_top}
set{tshadowsize2, tshadowsize * 2}
set{body_size, body_top - body_bottom}
show stocks where lshadowsize is less than 0.001
and tshadowsize2 > body_size
and close increasing for the last 3 days
and body_bottom > close 1 day ago
}

If sFound3Day = false
and xOpen = xLow
and (xTopShadow * 2) > xBodySize
and xClose > xClose1 and xClose1 > xClose2 and xClose2 > xClose3
and xBottom > xClose1
then begin
xTriggerTime3 =  Time;	
fg3 = red;
bg3 = BLACK;
t3DayPattern	= "Shooting Star" ;
sFound3Day		= true ;
tInd 			= tInd + " 3:Bearish" ;
end;


{inverted hammer
set{body_bottom,min(open,close)} 
set{body_top,max(open,close)} 
set{lshadowsize, body_bottom - low}
set{tshadowsize, high - body_top}
set{body_size, body_top - body_bottom}
set{body_size2, body_size * 2}
show stocks where lshadowsize is less than 0.001
and tshadowsize > body_size2
and close decreasing for the last 3 days
and body_top < close 1 day ago

}

If sFound3Day = false
and xClose = xLow  
and xTopShadow > (xBodySize * 2)
and xClose < xClose1 and xClose1 < xClose2 and xClose2 < xClose3 
and xTop < xClose1
then begin
xTriggerTime3 =  Time;	
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bullish" ;
t3DayPattern	= "Inverted Hammer" ;
sFound3Day	= true ;
end;


{Bearish Engulfing
set{body_bottom,min(open,close)} 
set{body_top,max(open,close)} 
show stocks where body_top above body_top 1 day ago
and body_bottom below body_bottom 1 day ago
and close below open
and open 1 day ago below close 1 day ago
and close 1 days ago increasing for the last 3 days

}
If sFound3Day = false
and xTop > xTop1   
and xBottom < xBottom1
and xClose < xOpen
and xClose1 > xClose2 and xClose2 > xClose3
then begin
xTriggerTime3 =  Time;	
fg3 = red;
bg3 = BLACK;
tInd 			= tInd + " 3:Bearish " ;
t3DayPattern	= "Bearish Engulfing" ;
sFound3Day	= true ;
end;


{Bullish Engulfing
set{body_bottom,min(open,close)} 
set{body_top,max(open,close)} 
show stocks where body_top above body_top 1 day ago
and body_bottom below body_bottom 1 day ago
and close above open
and open 1 day ago above close 1 day ago
and close 1 days ago decreasing for the last 3 days
}

If sFound3Day = false
and xTop > xTop1   
and xBottom < xBottom1
and xClose > xOpen
and xOpen1 > xClose1
and xClose1 < xClose2 and xClose2 < xClose3
then begin
xTriggerTime3 =  Time;	
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bullish  " ;
t3DayPattern	= "Bullish Engulfing" ;
sFound3Day	= true ;
end;

{3WhSolds_3BlkCrows}

If sFound3Day = false
then begin

Value1 = C_3WhSolds_3BlkCrows( Length, Percent, o3WhiteSoldiers, o3BlackCrows ) ;

if o3WhiteSoldiers = 1 then
begin
xTriggerTime3 =  Time;
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bullish  " ;
t3DayPattern	= "3WhiteSoldiers";
sFound3Day	= true ;
end
else if o3BlackCrows = 1 then 
begin
xTriggerTime3 =  Time;
fg3 = red;
bg3 = BLACK;
tInd 			= tInd + " 3:Bearish  " ;
t3DayPattern	= "3BlackCrows";
sFound3Day	= true ;
end ;

end ; // If sFound3Day = false


{ C_MornStar_EveStar  }

If sFound3Day = false
then begin

Value1 = C_MornStar_EveStar( Length, oMorningStar, oEveningStar ) ;

if oMorningStar = 1 then
begin
xTriggerTime3 =  Time;
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bullish  " ;
t3DayPattern	= "Morning Star";
sFound3Day	= true ;
end
else if oEveningStar = 1 then 
begin
xTriggerTime3 =  Time;
fg3 = red;
bg3 = BLACK;
tInd 			= tInd + " 3:Bearish  " ;
t3DayPattern	= "Evening Star";
sFound3Day	= true ;
end ;

end ; // If sFound3Day = false




{ C_MornDoji_EveDoji  }

If sFound3Day = false
then begin

Value1 = C_MornDoji_EveDoji( Length, Percent, oMorningDojiStar, oEveningDojiStar ) ;

if oMorningDojiStar  = 1 then
begin
xTriggerTime3 =  Time;
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bullish  " ;
t3DayPattern	= "Morning Doji Star";
sFound3Day	= true ;
end
else if oEveningDojiStar = 1 then 
begin
xTriggerTime3 =  Time;
fg3 = red;
bg3 = BLACK;
tInd 			= tInd + " 3:Bearish  " ;
t3DayPattern	= "Evening Doji Star";
sFound3Day	= true ;
end ;

end ; // If sFound3Day = false


{
Stick Sandwich

A bullish reversal pattern with two black bodies surrounding a white body. 
The closing prices of the two black bodies must be equal. 
A support prices is apparent and the opportunity for prices to reverse is quite good.
}

If sFound3Day = false
then begin

if  xClose2 < xOpen2
and xClose1 > xOpen1
and xClose2 > xOpen
and xClose  = xClose2
then begin
xTriggerTime3 =  Time;
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bullish  " ;
t3DayPattern	= "Stick Sandwich";
sFound3Day	= true ;
end;

end ; // If sFound3Day = false

{ Abandoned Baby Bullish 

A rare reversal pattern characterized by a gap followed by a Doji, 
which is then followed by another gap in the opposite direction. 
The shadows on the Doji must completely gap below 
or above the shadows of the first and third day. 
  }


If sFound3Day = false
then begin

if  xLow2 > xHigh1
and xClose1 = xOpen1
and xLow > xHigh1

then begin
xTriggerTime3 =  Time;
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bullish  " ;
t3DayPattern	= "Abandoned Baby";
sFound3Day	= true ;
end;

end ; // If sFound3Day = false




{ Abandoned Baby Bearish 

How to Identify it

First day is usually a long white day 
Second day is a doji that gaps in the direction of the previous trend 
The third day is a black day, gapping in the opposite direction, with no overlapping shadows 
}

If sFound3Day = false
then begin

IF xBodySize2  > xBodyAvg2
and xClose1 = xOpen1
and xLow1 > xHigh2
and xClose < xOpen
and xHigh < xLow1
then begin
xTriggerTime3 =  Time;
fg3 = green;
bg3 = BLACK;
tInd 			= tInd + " 3:Bearish  " ;
t3DayPattern	= "Abandoned Baby";
sFound3Day	= true ;
end;

end ; // If sFound3Day = false


{ Downside Tasuki Gap

A continuation pattern with a long black body followed by another black body 
that has gapped below the first one. 
The third day is white and opens within the body of the second day, 
then closes in the gap between the first two days, but does not close the gap. 
 }


If sFound3Day = false
then begin

IF xBodySize2  > xBodyAvg2
and xClose2 < xOpen2
and xBodySize1  > xBodyAvg1
and xClose1 < xOpen1
and xHigh1 < xLow2
and xClose > xOpen
and xOpen > xClose1
and xOpen < xOpen1
and xClose > xHigh1
and xClose < xLow2
then begin
xTriggerTime3 =  Time;
fg3 = yellow;
bg3 = BLACK;
tInd 			= tInd + " 3:Continuation  " ;
t3DayPattern	= "Downside Tasuki Gap";
sFound3Day	= true ;
end;

end ; // If sFound3Day = false

{Upside Tasuki Gap

A continuation pattern with a long white body followed by another white body 
that has gapped above the first one. 
The third day is black and opens within the body of the second day, 
then closes in the gap between the first two days, but does not close the gap. 
}

If sFound3Day = false
then begin

IF xBodySize2  > xBodyAvg2
and xClose2 > xOpen2
and xBodySize1  > xBodyAvg1
and xClose1 > xOpen1
and xLow1 > xHigh2
and xClose < xOpen
and xOpen > xOpen1
and xOpen < xClose1
and xClose < xLow1
and xClose > xHigh2
then begin
xTriggerTime3 =  Time;
fg3 = yellow;
bg3 = BLACK;
tInd 			= tInd + " 3:Continuation  " ;
t3DayPattern	= "Upside  Tasuki Gap";
sFound3Day	= true ;
end;

end ; // If sFound3Day = false


{ plots }

If t1DayPattern <> ""
then begin
Plot1( NumToStr(xTriggerTime1,0) + " " + t1DayPattern, "1Bar Pattern", fg1 ) ;
SetPlotBGColor( 1, bg1);
end;

If t2DayPattern <> ""
then begin
Plot2( NumToStr(xTriggerTime2,0) + " " + t2DayPattern, "2Bar Pattern" , fg2 ) ;
SetPlotBGColor( 2, bg2);
end;

If t3DayPattern <> ""
then begin
Plot3( NumToStr(xTriggerTime3,0) + " " + t3DayPattern, "3Bar Pattern" , fg3 ) ;
SetPlotBGColor( 3, bg3);
end;

Plot4( tInd, "Message", fg4 ) ;
SetPlotBGColor( 4, bg4);



xComm = _fCommentary(oComm1, oComm2, oComm3, oComm4, oComm5, oComm6, oComm7, oComm8, oComm9, oComm10);

CommentaryCl(oComm1 );

CommentaryCl(oComm2 );
CommentaryCl(oComm3 );
CommentaryCl(oComm4 );
CommentaryCl(oComm5 );
CommentaryCl(oComm6 );
CommentaryCl(oComm7 );
CommentaryCl(oComm8 );
CommentaryCl(oComm9 );
CommentaryCl(oComm10 );




CommentaryCl( " xOpen = ",  NumToStr( xOpen  , iDecimals) ) ; // Open ; //
CommentaryCl( " xOpen1 = ",  NumToStr( xOpen1 , iDecimals) ) ; // Open[1] ; //
CommentaryCl( " xOpen2 = ",  NumToStr( xOpen2 , iDecimals) ) ; // Open[2] ; //
CommentaryCl( " xOpen3 = ",  NumToStr( xOpen3, iDecimals) ) ; // Open[3] ; //

CommentaryCl( " xClose = ",  NumToStr( xClose , iDecimals) ) ; // close ; //
CommentaryCl( " xClose1 = ",  NumToStr( xClose1 , iDecimals) ) ; // close[1] ; //
CommentaryCl( " xClose2 = ",  NumToStr( xClose2 , iDecimals) ) ; // close[2] ; //
CommentaryCl( " xClose3 = ",  NumToStr( xClose3 , iDecimals) ) ; // close[3] ; //

CommentaryCl( " xHigh = ",  NumToStr( xHigh , iDecimals) ) ; // High ; //
CommentaryCl( " xHigh1 = ",  NumToStr( xHigh1 , iDecimals) ) ; // High[1] ; //
CommentaryCl( " xHigh2 = ",  NumToStr( xHigh2 , iDecimals) ) ; // High[2] ; //
CommentaryCl( " xHigh3 = ",  NumToStr( xHigh3 , iDecimals) ) ; // High[3] ; //

CommentaryCl( " xLow = ",  NumToStr( xLow , iDecimals) ) ; // Low ; //
CommentaryCl( " xLow1 = ",  NumToStr( xLow1, iDecimals) ) ; // Low[1] ; //
CommentaryCl( " xLow2 = ",  NumToStr( xLow2 , iDecimals) ) ; // Low[2] ; //
CommentaryCl( " xLow3 = ",  NumToStr( xLow3 , iDecimals) ) ; // Low[3] ; //


CommentaryCl( " xTop     = ",  NumToStr( xTop , iDecimals) ) ; // maCommentaryCl( " xlist( "CommentaryCl( " xOpen , CommentaryCl( " xClose ) ; //
CommentaryCl( " xBottom  = ",  NumToStr( xBottom, iDecimals) ) ; // minlist( "CommentaryCl( " xOpen , CommentaryCl( " xClose ) ; //
CommentaryCl( " xMid	 = ",  NumToStr( xMid, iDecimals) ) ; // ( "CommentaryCl( " xHigh - CommentaryCl( " xLow ) * 0.5  ; //

CommentaryCl( " xTop1     = ",  NumToStr( xTop1 , iDecimals) ) ; // maCommentaryCl( " xlist( "CommentaryCl( " xOpen1 , CommentaryCl( " xClose1 ) ; //
CommentaryCl( " xBottom1  = ",  NumToStr( xBottom1 , iDecimals) ) ; // minlist( "CommentaryCl( " xOpen1 , CommentaryCl( " xClose1 ) ; //
CommentaryCl( " xMid1	  = ",  NumToStr( xMid1 , iDecimals) ) ; // ( "CommentaryCl( " xHigh1 - CommentaryCl( " xLow1 ) * 0.5  ; //

CommentaryCl( " xTop2     = ",  NumToStr( xTop2 , iDecimals) ) ; // maCommentaryCl( " xlist( "CommentaryCl( " xOpen2 , CommentaryCl( " xClose2 ) ; //
CommentaryCl( " xBottom2  = ",  NumToStr( xBottom2 , iDecimals) ) ; // minlist( "CommentaryCl( " xOpen2 , CommentaryCl( " xClose2 ) ; //
CommentaryCl( " xMid2	  = ",  NumToStr( xMid2 , iDecimals) ) ; // ( "CommentaryCl( " xHigh2 - CommentaryCl( " xLow2 ) * 0.5  ; //

CommentaryCl( " xTop3     = ",  NumToStr( xTop3, iDecimals) ) ; // maCommentaryCl( " xlist( "CommentaryCl( " xOpen3 , CommentaryCl( " xClose3 ) ; //
CommentaryCl( " xBottom3  = ",  NumToStr( xBottom3 , iDecimals) ) ; // minlist( "CommentaryCl( " xOpen3 , CommentaryCl( " xClose3 ) ; //
CommentaryCl( " xMid3	  = ",  NumToStr( xMid3 , iDecimals) ) ; // ( "CommentaryCl( " xHigh3 - CommentaryCl( " xLow3 ) * 0.5  ; //




CommentaryCl( " xTopShadow		= ", NumToStr( xHigh  , iDecimals) ) ; //  " xTop  ) ; //
CommentaryCl( " xTopShadow1		= ", NumToStr( xHigh1  , iDecimals) ) ; //  " xTop1  ) ; //
CommentaryCl( " xTopShadow2		= ", NumToStr( xHigh2  , iDecimals) ) ; //  " xTop2  ) ; //
CommentaryCl( " xTopShadow3		= ", NumToStr( xHigh3  , iDecimals) ) ; //  " xTop3  ) ; //

CommentaryCl( " xBottomShadow	= ", NumToStr( xClose  , iDecimals) ) ; //  " xLow  ) ; //			
CommentaryCl( " xBottomShadow1	= ", NumToStr( xClose1  , iDecimals) ) ; //  " xLow1  ) ; //
CommentaryCl( " xBottomShadow2	= ", NumToStr( xClose2  , iDecimals) ) ; //  " xLow2  ) ; //	
CommentaryCl( " xBottomShadow3	= ", NumToStr( xClose3  , iDecimals) ) ; //  " xLow3  ) ; //

CommentaryCl( " xBodySize 		= ", NumToStr( xTop  , iDecimals) ) ; //  " xBottom  ) ; //
CommentaryCl( " xBodySize1 		= ", NumToStr( xTop1  , iDecimals) ) ; //  " xBottom1  ) ; //
CommentaryCl( " xBodySize2 		= ", NumToStr( xTop2  , iDecimals) ) ; //  " xBottom2  ) ; //
CommentaryCl( " xBodySize3 		= ", NumToStr( xTop3  , iDecimals) ) ; //  " xBottom3  ) ; //

{



Bullish Upside Tasuki Gap
Bullish Side-by-Side White Lines
Bullish Separating Lines
Bullish Three Line Strike
Bullish Upside Gap Three Methods
Bullish xHigh arami Cross
Bullish Three xOpen utside Down
Bullish Three Inside Up
Bullish xHigh xOpen ming Pigeon
Bullish xHigh arami
Bullish Morning Doji Star
Bullish Tri-Star
Bullish Meeting Lines
Bullish Unique Three Rivers
Bullish Abandoned Baby
Bullish Matching Low
Bullish Engulfing
Bullish Concealing Baby Swallow
Bullish Three White Soldiers
Bullish Kicking
Bearish Upside Tasuki Gap
Bearish Side-by-Side White Lines
Bearish In Neck
Bearish Separating Lines
Bearish Three Line Strike
Bearish Downside Gap Three Methods
Bearish Thrusting
Bearish xOpen n Neck
Bearish xHigh arami Cross
Bearish Three xOpen utside Up
Bearish Three Inside Down
Bearish xHigh arami
Bearish Evening Doji Star
Bearish Tri-Star
Bearish Meeding Lines
Bearish Advance Block
Bearish Identical Three Crows
Bearish Abandoned Baby
Bearish Two Crows
Bearish Engulfing
Bearish Dark Cloud Cover
Bearish Three Black Crows
Bearish Kicking
Bearish Deliberation
Hanging Man


}

Soultrader · March 17, 2007

Hello guys,

I am a newcomer into this thread.... I've been having trouble keeping up with all the posts that come across on this board now. It's growing! But man! How did I miss this thread?

Amazing stuff brownsfan... it got me studying volume charts for the past 2 hours What triggered my attention was your statement on how you want to see the fight and not the breather. That is so true it blows my mind that I never though of it. I have a few things that I want to clarify, hopefully you guys can help me out.

First, I am experimenting with a 1000 share bar chart. Is this correct? Or do you guys use a 1000 tick count chart? Also, Im still trying to find the ideal count on the YM... so any input on this would be appreciated.

Also, I want to go over the absolute basics of volume. In an uptrend, a healthy trend will show more volume on the rally and less on the decline. Now with the volume chart, would this be shown by more candles printing on the rally and less on the decline? Also, when plotting a volume chart is it not possible to plot the volume histogram panel as well? My TS is having issues doing this.

Now one of the things I am having trouble seeing is the comparison in volume at a double top or a test. I like to watch for less volume on a test of the highs or lows. With a volume chart how would one observe this? Does one need to gain a feel of the fast/slow process of candle formation?

Also, great explanation on the chart Paul. And good point on candles not offering profit targets. My question is what determines your exit point? If the same confirmation method is being used for an exit, wouldnt you leave a good amount of points on the table? This is the hardest part I have with using candles.... the exit point. Due to my nature as a pivot and tape reader, I do look for exits at a pivot. Now majority of the time I end up exiting too early. Exiting early is something I can live with... but exiting too early is a horrible habit. Wide range candles is also an exit bar that I look for... just curious to see how you guys exit based on candles. Thanks

brownsfan019 · March 17, 2007

At this early stage of my recent volume candle enlightenment, I have come to the conclusion that volume candles are the most accurate v/s all other types of chart reading.

I now believe this because volume candles equalize each bar's importance. With "VCs", no bar means more or less than the last or the next. They just tell a story. A story you can trust because you know what each VC represents.

With time or tick based bars, you don't know the importance of any bar. You don't know how much emphasis to put on any bar or pattern. You can't trust them. You might as well use a line.

Now there are other indicators that may quantify volume but none will be as accurate as the VCs because VCs are the indicator!

Most importantly, it evens out the chart. It doesn't matter what volume interval you use because whichever interval you choose, all bars represent the same.

Wow, this is deep. I think this just saved me about $25,000 or more. I'm a total believer. It's so clear to me now. Thanks again. Wow, that all I can say. Wow...... :rolleyes:

Robert - I will be happy to accept a 50% 'savings' fee of that $25k. Just send me a PM and we can arrange for the bank wire of $12.5.

Thanks!

brownsfan019 · March 17, 2007

Paul - great chart with explanations.

I think you found a great example where the candlesticks worked well.

There looks to be another nice short around 12:30pm on your chart as well - two hanging men back-to-back. And then about 5 hammers that signified that down move was over and a small move up on those hammers.

I will say this - I LOVE hammers/hanging men. I actually call hanging men 'inverted hammers' simply b/c I see hammers easily. I don't see the hanging man. So, if I ever write inverted hammer, it's just an upside down hammer.

brownsfan019 · March 17, 2007

Here ia a Candle Pattern Recognition TradeStation RadarScreen Indicator.

Good ol Rumpled one.

Robert,

You bring up something that needs to mentioned -

I HIGHLY RECOMMEND YOU LEARN TO READ CANDLES FOR YOURSELF.

Do NOT rely on a computer program to find your candle formations.

Why?

Here's why:

Computer programs do not have the 'flexibility' to be able to see a candle pattern.
You are relying on someone's interpretation of candle formations and the ability to put them into code.
You really need to know how these work, look, feel, etc. before relying on a computer program. It's like when you learn how to add and subtract in school... why bother when there are calculators? You need to LEARN it before turning it over to a computer.

I cannot stress how important this is. I've tested many, many programs out there and other than Nison's MarketScan (which is only on his website, not a downloadable program), I have not found ANY worthwhile.

Here is my opinion - when I see a 'hammer' a program may not simply b/c the shadow/wick is not quite long enough. In intraday trading, you MUST be flexible on what you call a hammer b/c the picture perfect hammer does not show every day. And if you rely on that program to find your hammers, you'll be sitting waiting for the perfect one b/c the program is set by design to find the textbook hammer. Well, as we all know - real life doesn't always look like textbooks. If so, we'd all be multi-millionaires from trading by now.

Robert and others that are studying this - take the time to purchase Nison's books/DVD's and learn to find these on your own. When I looked at the charts posted here, it took me a whole 2 minutes to just see all the candle patterns on them. And that comes from training your eyes and repetition.

Just my 2 cents...

brownsfan019 · March 17, 2007

Hello guys,

I am a newcomer into this thread.... I've been having trouble keeping up with all the posts that come across on this board now. It's growing! But man! How did I miss this thread?

Amazing stuff brownsfan... it got me studying volume charts for the past 2 hours What triggered my attention was your statement on how you want to see the fight and not the breather. That is so true it blows my mind that I never though of it. I have a few things that I want to clarify, hopefully you guys can help me out.

First, I am experimenting with a 1000 share bar chart. Is this correct? Or do you guys use a 1000 tick count chart? Also, Im still trying to find the ideal count on the YM... so any input on this would be appreciated.

Also, I want to go over the absolute basics of volume. In an uptrend, a healthy trend will show more volume on the rally and less on the decline. Now with the volume chart, would this be shown by more candles printing on the rally and less on the decline? Also, when plotting a volume chart is it not possible to plot the volume histogram panel as well? My TS is having issues doing this.

Now one of the things I am having trouble seeing is the comparison in volume at a double top or a test. I like to watch for less volume on a test of the highs or lows. With a volume chart how would one observe this? Does one need to gain a feel of the fast/slow process of candle formation?

Also, great explanation on the chart Paul. And good point on candles not offering profit targets. My question is what determines your exit point? If the same confirmation method is being used for an exit, wouldnt you leave a good amount of points on the table? This is the hardest part I have with using candles.... the exit point. Due to my nature as a pivot and tape reader, I do look for exits at a pivot. Now majority of the time I end up exiting too early. Exiting early is something I can live with... but exiting too early is a horrible habit. Wide range candles is also an exit bar that I look for... just curious to see how you guys exit based on candles. Thanks

Hey Soul! Welcome to the party!

I'll try to tackle your questions and I'm sure others will have opinions as well.

YM Chart settings - It really depends on how 'fast' you want the candles to print. I use under 1000, closer to 500. That's just me, I like things to print. The actual # is not important. It's simply how quickly do you want things to print. And the type of chart on TS you want is the Share Bar Chart.

Trends - in a good moving trend, you should see more candles being printed. It's amazing to watch them fire off during a move, esp around econ news. As for a volume histogram, I don't see the point since each bar will be identical. If you set your chart to say 500 on the YM, each volume bar/histogram if displayed separately will be exactly 500. That may be why TS doesn't like it.

Double tops - you are correct, since each candle on a volume based chart is identical in volume, you have to learn to read the candles better. For example, in Mr. Paul's post with a chart, there is actually a nice double top. See my attachment. To me, there is a clear as day double top with two very nice looking inverted hammers (aka hanging men). For a traditional candlestick trader, that's a reason to short right there. You could actually short the first leg, which was a small winner or loser, and then reshort on the double top test and have a nice trade.

Exit point - here is probably the biggest issue with candles, in my opinion. They offer clearly defined entries and stops. Profits however, not so much. Here are the options that I have found:

Fixed profit target sitting out there.
Trailing stop.
Exit only when a candle pattern that is opposite of your current trade appears.
Some combination of these if trading more than 1 lot.

And there is no perfect answer, you have to test different setups and see what you like.

Robert2617 · March 17, 2007

Robert,
You bring up something that needs to mentioned -

I HIGHLY RECOMMEND YOU LEARN TO READ CANDLES FOR YOURSELF.

Do NOT rely on a computer program to find your candle formations.

Why?

Here's why:

Computer programs do not have the 'flexibility' to be able to see a candle pattern.

You are relying on someone's interpretation of candle formations and the ability to put them into code.

You really need to know how these work, look, feel, etc. before relying on a computer program. It's like when you learn how to add and subtract in school... why bother when there are calculators? You need to LEARN it before turning it over to a computer.

I cannot stress how important this is. I've tested many, many programs out there and other than Nison's MarketScan (which is only on his website, not a downloadable program), I have not found ANY worthwhile.

Here is my opinion - when I see a 'hammer' a program may not simply b/c the shadow/wick is not quite long enough. In intraday trading, you MUST be flexible on what you call a hammer b/c the picture perfect hammer does not show every day. And if you rely on that program to find your hammers, you'll be sitting waiting for the perfect one b/c the program is set by design to find the textbook hammer. Well, as we all know - real life doesn't always look like textbooks. If so, we'd all be multi-millionaires from trading by now.

Robert and others that are studying this - take the time to purchase Nison's books/DVD's and learn to find these on your own. When I looked at the charts posted here, it took me a whole 2 minutes to just see all the candle patterns on them. And that comes from training your eyes and repetition.

Just my 2 cents...

I totally agree that the goal is to learn to identify and understand the patterns without a program telling you what to do. However, using the program or indicator to help you learn I think is good. Think of it as training wheels. One day when it becomes clear, you take the training wheels away. That is a beautiful day. It is like learning to read a new language, then tossing out the translator.

You said yourself that you have some problems seeing "inverted hammers", maybe the program or indicator can or can be adjusted to find those for you. Maybe being program assisted is not that bad.

The fellow that wrote this and many indicators said his goal was to try to get to a place where he didn't have to even look at a chart at all. He said he was tired of squiggly lines. The reason I mention this is because TS's RadarScreen won't use volume based intervals. This CPR indicator may not match the chart. It may be useless anyway. I'm not switching back to time intervals. I think that would be going backwards.

notouch · March 17, 2007

A lot of people are asking about the settings for volume candles. They can be adjusted to take into account the day's volume. For example we went through that long low volume period where I found 233V charts ideal but on the big 500 point crash day candles just started whizzing past so you could really feel the volume coming through but it was impossible to keep up so I changed to 1000V and then 5000V on that day. Now I'm back down to 1000V or 500V. In response to ST, you'd want to see a lot of candlesticks in the direction of the trend and fewer candlesticks during pullbacks as this would show more volume flowing in the direction of the trend.

This is all for YM. For ES 10,000V candles or so would be equivalent.

GCB · March 17, 2007

Volume charts basically incorporate price and volume into one entity. (Sort of like that hair product that's shampoo and conditioner in one, for active guys on the go.) I like the idea and it seems to me at first blush that if you are going the route of reading candlesticks as a primary signal that volume charts make the most sense.

One advantage of these types of charts is they make moving averages much more relevant and useful. With time-based charts and their intermitent huge candles, moving averages tend to "get behind" and become useless for a while. With volume and tick charts they keep pace easier. Whether this consitutes an edge is not certain, however.

One problem with volume and tick charts I've found is that the passage of time is a factor in trading and you lose that with volume or tick charts. What you gain in incorporating volume into the chart you lose by taking time out. You have to look at the time scale at the bottom (when looking at the charts in retrospect) to get any sense of time.

Another problem is that since chart of the $TICK can only be time-based, it's hard to do back studies and compare the action of a volume or tick chart with the $TICK. Since the $TICK is so much a part of my trading I recently went back to time-based charts. But who knows what the future holds.

What would be great is if they had a volume chart which kept the time scale at the bottom constant and simply widened the space between the bars to match the passage of time. That way your eye would instantly see all three--price, volume and time--reflected in the candlestick chart itself. Call TradeStation!

brownsfan019 · March 17, 2007

I totally agree that the goal is to learn to identify and understand the patterns without a program telling you what to do. However, using the program or indicator to help you learn I think is good. Think of it as training wheels. One day when it becomes clear, you take the training wheels away. That is a beautiful day. It is like learning to read a new language, then tossing out the translator.

You said yourself that you have some problems seeing "inverted hammers", maybe the program or indicator can or can be adjusted to find those for you. Maybe being program assisted is not that bad.

The fellow that wrote this and many indicators said his goal was to try to get to a place where he didn't have to even look at a chart at all. He said he was tired of squiggly lines. The reason I mention this is because TS's RadarScreen won't use volume based intervals. This CPR indicator may not match the chart. It may be useless anyway. I'm not switching back to time intervals. I think that would be going backwards.

Robert - sorry, I wasn't clear. I do not have problems seeing inverted hammers (hanging man) on the chart, I simply refer to the hanging man as an inverted hammer. It's just an upside down hammer, that's all. When I said I don't 'see' the hanging man, I meant that I do not understand the description - why a hanging man? I don't know, so inverted hammer works for me.

I can understand the training wheels argument, but I can also see the thought process of - well, this appears to be working, so why bother taking the time to learn! Again, it's like going to school... Microsoft Word can spell check for you, calculators can do all the math you could possibly need, etc. - so why bother learning the basics the 'hard way' yourself first?

And for me, I could not feel comfortable putting my entire trading in the hands of some guy I met on a forum. What I mean is that I have NO IDEA how HE defines candles, which can be VERY different from mine, so to rely on his definition and coding of candles is just dangerous to me. Again, I truly believe you are going to miss out on many trades by relying on a software program to tell you when there is a candle pattern. The other issue I saw with programs that recognize candles is that you are going to get candle 'alerts' on the entire chart, when you really just want to see candles at the beginning and/or end of the trend. Hammers appearing in the middle of chop is just noise and you do not want to be alerted to every little candle formation when there are so many.

I'd be interested to see some charts, so when you have the program running, post some charts where his alerts go off.

Anonymous · March 17, 2007

Exit point - here is probably the biggest issue with candles, in my opinion. They offer clearly defined entries and stops. Profits however, not so much. Here are the options that I have found:

Fixed profit target sitting out there.

Trailing stop.

Exit only when a candle pattern that is opposite of your current trade appears.

Some combination of these if trading more than 1 lot.

And there is no perfect answer, you have to test different setups and see what you like.

This is where WRB analysis comes into play. One can use Wide Range Bodies as profit target/profit taking levels. WRB analysis will give one support/resistance levels as well. They are also usually precursors to (secondary) candle patterns analysis.

In the chart below, note the WRB's that precede the valid sub group hammer pattern.

Once in the trade, one can use the creation of a WRB to exit some of the position. Note as the candle becomes a WRB, some of the position is taken off the table.

brownsfan019 · March 17, 2007

What would be great is if they had a volume chart which kept the time scale at the bottom constant and simply widened the space between the bars to match the passage of time. That way your eye would instantly see all three--price, volume and time--reflected in the candlestick chart itself. Call TradeStation!

GCB - I see what you are saying, the problem there would be that during certain trading times you are going to get massively large or small candle bodies. For example, if you want the first 1 hour on your screen, some days there could be hundreds of candles squished down to meet your parameters and others day there could literally be a handful of massive candles. The EC comes to mind - some mornings this thing is printing like crazy (and would cause your chart to be super tiny) and other days it can put you to sleep (and would cause your chart to have massively large candles).

You are correct though, anyone looking at these charts in hindsight needs to pay attention to the actual time elapsed between each candle print. There are times when it's literally seconds. So, you may see a great hammer on a chart and think - Wow, look at that hammer! And while that is true, in order to capitalize on that hammer, you may have need to pull the trigger in a matter of seconds. So, from start of the candle to your entry - it can be under 60 seconds easily.

brownsfan019 · March 17, 2007

This is where WRB analysis comes into play. One can use Wide Range Bodies as profit target/profit taking levels. WRB analysis will give one support/resistance levels as well. They are also usually precursors to (secondary) candle patterns analysis.

In the chart below, note the WRB's that precede the valid sub group hammer pattern.

Once in the trade, one can use the creation of a WRB to exit some of the position. Note as the candle becomes a WRB, some of the position is taken off the table.

Pivot - interesting. Let me ask this - what is the idea behind exiting on a large real body being formed? I don't know much about WRB as it's been awhile since I looked at it, so maybe you can give us a little education leeson here.

I understand that the exit is when a large real body is forming, but why? Also, how is a WRB actually defined? In other words, when you are preparing to exit when you see a WRB, how much of a move constitutes a WRB? Are you already sitting out there with an order or just hitting the market button as the candle forms?

I'm really curious to hear how this is used in real-time trading.

Take a look at my attachment - would those be other WRB's? If so, why do you ignore certain ones?

This could really be a thread in itself really. Maybe we should have someone move these 2 posts to a thread about WRB.

Anonymous · March 17, 2007

Wide Range Body and Long Shadow (wick) analysis are used to detemine changes (shifts) in supply and demand.

WRB'S also give a visual interpretation of volatility.

As for determining what constitutes a WRB, that is up to the trader. A WRB can be the widest range bar in the last 3 bars, or 5 bars, or 8. Once a trader determines what number to use, the idea is to stay consistent with that number.

Note in the chart that PT 1 comes on a wide range bar 3 (WRB(3)). Actually all the targets shown do. Now the first candle you have highlighted is not a WRB(3) as it is narrower than the candle labeled pt 2. The next candle, is again not a WRB(3). Note that it is narrower than the first candle highlighted.

Mark says he usually goes up a timeframe after the first PT 1 in order to stay in the move. That is a bit more advanced than where I am currently at, so I would just stay on this time frame and continue to look for another WRB.

The total number of PTs would of course not exceed the total amount of contracts traded. Thus the last PT shown is PT 3 for a three lot trade or multiple of three even. Now, the fourth candle labeled is after the third Pt. It is also not the widest range bar as the PT 3 is wider.

It depends on how many contracts one trades and the technique used to scale out. In other words, one could scale out in thirds, halves, or trading 5 lots, one at a time.

As for the actual exit, a market order needs to be used. As soon as you see the candle is a WRB, you pull the trigger. So one does need to pay attention to the position while in the market. Remember, for the PTs shown, they would be exited before the close of the candle and while still WRBs. Once they close, they become LS.

walterw · March 17, 2007

Paul - great chart with explanations.

I think you found a great example where the candlesticks worked well.

There looks to be another nice short around 12:30pm on your chart as well - two hanging men back-to-back. And then about 5 hammers that signified that down move was over and a small move up on those hammers.

I will say this - I LOVE hammers/hanging men. I actually call hanging men 'inverted hammers' simply b/c I see hammers easily. I don't see the hanging man. So, if I ever write inverted hammer, it's just an upside down hammer.

the technicall name for that upside down hammer is shooting star... this link is a three session seminar from John Person : he combines pivot analisis with candlesticks.... the second part is about candlesticks and he makes enfasis in only two most easy and performing patterns like doji and hamers shootingstars... unfortunately he doesnt use volume, but I like his insights in this two candle formations that I find very simple and powerfull... think we all agree that combining key levels candlesticks and volume make a pretty decent aproach to trading... here is the seminar CBOT - Candlesticks, Pivot Points & Advanced Trading Techniques

brownsfan019 · March 18, 2007

the technicall name for that upside down hammer is shooting star...

Walter - yeah, I can't even get the names right when I try. LOL.

Shooting star, hanging man, whatever... That's what I say!

Joking aside, it's best to learn candles the 'right' way and once you get it, you'll see why I call upside down hammers inverted hammers. Just easier on the mind (my mind at least).

I think part of the power of candles is that many traders use them in some shape or form. We may not all see the candles the same way, but there are many traders using them, which is why I think they are so powerful.

I'm hoping Pivot and I can get a discusson on WRB analysis going as well.

Anonymous · March 18, 2007

the technicall name for that upside down hammer is shooting star... this link is a three session seminar from John Person : he combines pivot analisis with candlesticks.... the second part is about candlesticks and he makes enfasis in only two most easy and performing patterns like doji and hamers shootingstars... unfortunately he doesnt use volume, but I like his insights in this two candle formations that I find very simple and powerfull... think we all agree that combining key levels candlesticks and volume make a pretty decent aproach to trading... here is the seminar CBOT - Candlesticks, Pivot Points & Advanced Trading Techniques

Technically a shooting star will have a body that is higher than the high of the preceding candles.........LoL. We can play this game all day long.

Most of the time I use the term inverted hammer as well.

The problem with candles is in the minute details of this candle name or that candle name. This is why the best approach is to understand the PRICE ACTION that comes before it. Is there a News event that was recently released?

Price Action creates the prism through which to view the candle pattern. Also note that candle patterns work better than candle lines. A hammer is a hammer. But if there is a certain price action leading up the hammer and sometimes after, we have a hammer pattern.

Hammers are important because they show shifts in supply and demand. But not every hammer line (candle) is worth a trade trigger. Hence whether it is an inverted hammer or shooting star, means little if the price action is not appropriate for a specific candle pattern. In this is case inverted hammer with the sub-group being reversal.

fatdog1 · March 18, 2007

"Hammers are important because they show shifts in supply and demand."

I agree with that statement but rather than look for hammers and inverted hammers, I look for the areas of supply and demand ahead of time that will cause the hammer and inverted hammer to form.

Hammers occur when price reaches an area of demand.

Inverted hammers occur when price reaches an area of supply.

For example, a hammer will occur when the Russell trades down to the

horizontal line at 777.00 which is an area where demand exceeded supply the last time price traded at this level. The first time price revisits this area of the imbalance, a hammer will be the result.

The inverted hammer will occur the first time price revisits the 814.90 area which is an area where supply exceeded demand the last time price traded at that level.

These two areas are the both areas that have not been revisited by price since the imbalance. The area of demand at 777.00 formed on 3-14-07 and the area of supply at 814.90 formed on 2-27-07.

There is an area of demand at 782.50 that has been revisited twice on Friday and it did produced a hammer once already.

Unfortunately, there is an area of supply directly above 782.50, so the bounce was very small.

There are other areas of supply ahead of 814.90, but they have already been revisited and some of the supply at those levels have been absorbed.

Z_trade · March 18, 2007

I think one of the best way to incorporate volume and candles is to use Equivolume chart, though there are not many software packages to support plotting this special type of candles.

And here is a most comprehensive guide on how to trade equivolume by R.W. Arms.

Arms Richard - Trading with Equivolume.pdf

brownsfan019 · March 18, 2007

I think one of the best way to incorporate volume and candles is to use Equivolume chart, though there are not many software packages to support plotting this special type of candles.
And here is a most comprehensive guide on how to trade equivolume by R.W. Arms.

Z - the only problem with equivolume is that you cannot apply traditional candlestick analysis to it. Each print is simply a rectangle - some bigger, some smaller. At least it looked that way from the PDF you attached.

Did I miss something?

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