THE JOY OF CANDLESTICK TRADING - a Learning Experience

Beginner Questions
985

[B]OK, we are continuing to have lots of questions.[/B]

I have a lot more material I want to cover so that success for everyone becomes a reality.

But the questions will slow me right down.
That is why I have not posted new material at this point.
And also, the Olympic Games!! :smiley: :smiley:

Now, I will answer all the questions, but please be advised, that lots of questions means little forward progress in our theory.
This is true of the classroom as well, and that is why teachers answer many questions after class or even after school! :slight_smile:

It is important that questions be answered but also important that we get on and make progress.

If you feel that you can answer someone elseā€™s question, then please do so.
It can save me lots of time.
If the answer contains an error, then I will respond.
Otherwise, I will leave it alone - it is good. And it helps the poster learn by answering questions.

[B]So here we goā€¦[/B]

986

Ok Tymen, if I think I know an answer I will post it. I just didnā€™t want to presume anything, but if it helps you I will.

987

To place a PNC order in Dealbook 360: Click Trades -> New Order, and select the Parent and Contingent order type.

Good stuff and excellent work [B]FXCaribbean [/B].
You are indeed a hard worker and your reward will surely come. :slight_smile:

To [B]VulcanClassic [/B]and [B]Condor [/B]:

I was wondering if there is any market condition that this system works best in. For example ranging or trending?

There is a candlestick pattern for every condition.

For a rapidly rising market the 3 green soldiers is the ideal pattern.
The evening star is for a reversal.
Engulfing patterns go from Bollinger to Bollinger.
You could consider 3 red crows for a rapidly falling market.

If the pattern is on the BB, as required, then the direction of the BB will give an indication of whether the pattern before you is safe to trade.

Again, I need to show more examples.

988

It [U]was [/U]juicy, not so much now as the whole world appears to be heading for a downturn!! :smiley:
Sorry [B]matjes[/B], it is not good to tell, [U]or even hint at[/U] on a public forum, how much money one makes. It is too dangerous.
There are thieves and hackers out there, as well as greedy tax departments.

[B]Never post publicly how much money you are making!! :mad:
This should be an important lesson to all who are reading this post.[/B]

So your aim is to trade the forex for a living in the future? Is it because you started to figure out that trading forex with your Candlestick system is the best approach for a good income?

I am not sure about trading forex only in the future. I am going to make some modifications to my stock trading.
When complete, the stocks definitely bring the money in faster than forex.
There are advantages and disadvantages in trading forex.
See below where I post a thread for you to look at.

Nevertheless, I do believe that the candlestick method developed on this thread, the [B]UM [/B]is the very best way for short term forex trading.
As it stands now, the [B]UM [/B]brings in a considerable amount of money for the user and it is tempting for me to consider putting all my funds into it.

Do you already make notes about your Forex trades using this system? If so, do you have some statistics how many patterns you trade in your sessions, what their lost/won ratio and the risk/reward on average was (Just interested in the Pips, no need to reveal any financial things)?

I do not need to make notes about my own system - it is in my head!
4 patterns in an 8 hour period is very good. (and tiring too). :slight_smile:
The r/r and w/l ratios are all matters addressed in this thread.

The stuff I trade is much the same as what is in the thread.
But I [U]never [/U]take details off my live trading - only the demo.
Reason - screen prints, editing etc take valuable trading time.
Also a mistake, and I have made many of those while preparing raw material, could easily ruin your live trading.

So my live trading remains separate and protected.
You readers should do the same - [U]always [/U]take examples, etc [U]only from a demo.[/U]

How much of your Equity do you risk in each trade?

Everybody should only risk about 1-2% of your equity on any one trade.
This is standard teaching.
I follow this rule closely.

To further answer your questions, I direct you to this thread of mine :
I wrote it last year.

http://forums.babypips.com/newbie-island/8071-forex-vs-stocktrading.html

989

Continuation patterns! Light bulbs are flashing on in my brain. I thought that continuation patterns would help you to know when to stay in a trade. I didnā€™t consider they would give entries in a strong trend.

There is so much more to learn! Thanks Tymen.

990

Welcome to this thread [B]H20diver [/B]and [B]Alevio[/B]. :slight_smile: :slight_smile:

If you wish to make candlesticks you way of trading, you have a lot of reading to do!! :smiley: :smiley:

It is easy reading though.

I still believe that candlestick trading is the very best of trading.

Now both of you have asked the same question and I have already answered it somewhere - but I donā€™t know where!

So I repeat the answer here :

[U]Starc Bands[/U]

ATR periods = 15
ATR multiplier = 2
starc bands price = close
starc bands periods = 6
starc bands type = simple moving average.

[U]Keltner[/U]

ATR periods = 4
ATR multiplier = 1
EMA periods = 20 (the GFT platform specifies this as a modified moving average and does not give the periods, but a little research shows this is the correct value)

To [B]FXCaribbean[/B]

You may want to catalogue this post since this question above has come up more than once.

991

Welcome to this thread [B]SammyDeluxe[/B]!! :slight_smile:
Now, as you asked ā€œwas any chance to avoid this one?ā€

Yep!!..Just turn your computer off!! :smiley: :smiley: :smiley:

NO! I would not have shorted this pattern!!
The reasons are in the thread and it looks like you have covered that area.
I think I also saw this pattern the other day on the charts.

The price action is on the top BB only, the bottom one does not matter here.
We must always consider the [U]band on which the price action lies only[/U].
The lower band in this case, is developed the way it is because of the mathematics in producing a standard deviation.

We can see a [U]clear upward trend.[/U]
The price action is a clear breakout and the upper BB is showing a clear breakout.
The fact that the lower BB is not expanding is irrelevant.

It is ground for trading the [U]3 green soldiers.[/U] (a long pattern).
The evening star at best would produce a short period of level price action.
This is not satisfactory for good pips trading when the evening star calls you to go short.

If you did trade this pattern then a loss of 10 pips is to be expected in a ā€œretrace firstā€ trade.
After that, if my memory is right, while waiting for the first retrace, the price action goes up and up and goes above the star itself.
This shuts down the trade and we go no further.

The maximum loss should then be 10 pips total.

992

Tymen,

Thanks for the Starc settings. I am filing this away for safe keeping!

Thanks again for a wonderful thread. :slight_smile:

H20diver

993

Done.

May I recall to everyone that they now find 2 new thread (see my signature) for their training trade experience (live or not) in order to let this thread for lessons. I think we could then comment each of us and be able to give our feelings without disturbing the classroom.

To [B]Tymen[/B]

Like Vulcan wrote, Iā€™ll also try to answer my best to queries. But I would suggest that before queries, new readers have a look to the summary post nd USE the training thread to raise our skill.

FXCaribbean
"Donā€™t go where there is a path. Open a new one and leave a trail".
If you want to understand what weā€™re talking about here (UMS) then read this and set your screen and computer that way. Also read the live thread, UML Live and UMS Live

994

Good point, we should probably keep questions off this thread and on the UMS, UML threads instead, so as to keep the flow going.

Also Tymen, thanks for clearing that up with the market conditions. That was a huge key to this system IMO. When to trade what.

Awesome!

995

Thank you very much Sir, be sure that I wonā€™t leave it and that iā€™ll have a few questions here and there. Unlucky you :stuck_out_tongue:

I was kind of sure youā€™d answer that hehe. Iā€™ve got a question for you, but first iā€™d like to tell you that itā€™s not a rude comment at all, just would like to hear you on that matter.

Iā€™ve never seen you say something like ā€œwell, it was a good short, but you got unluckyā€. Itā€™s something you could say when going all in preflop with AAā€™s against some random hand in poker, and you end up losing (donā€™t know if youā€™re familiar with poker hehe). Arenā€™t your comments sometimes biased on results ? I mean, arenā€™t you sometimes result oriented ? Of course thereā€™s a little bit of provocation in this comment, I know youā€™re a wise guy, jus would like to hear about that :slight_smile:

But when you talked about the trumpet setting, you considered the lower band to say that the ā€œtrumpetā€ setting was very bad, assuming the lower BB was going down

Iā€™m not sure to have understood why this wasnā€™t a good trade except for the fact that the higher BB is going up (isnā€™t it almost always like that when you find an evening star pattern ?)

You mean that the 3 green soldiers BEFORE the evening star pattern are a bullish pattern, so we should keep that in mind and be cautious about the evening star short trade ??

Thank you very much for taking the time to answer, and iā€™m sorry if my english isnā€™t perfect, french & german are my native languages

Sammy

996

Sammy, May I ?

This is not the fact that the BB is going up. You are true, we hope to use the method to radar short so it is also when trend is up. It is because you find there multiple things that should prevent you from going short with that one :

  • The trend is clearly an uptrend (see the low BB)
  • The first candle AND the star went thru the BB
  • 3 green soldiers before = up trend (and there are more than 3 !)

Actually i would have wait for another bearish pattern. This second signal has occured and you can find it as another evening star just 2 candles later. That one was yet better, because only the star went thru the BB.

Then the trend changed to ā€¦ level ā€¦ not even down.

Would you agree to post those very interesting kind of examples and questions here ?

FXCaribbean
"Donā€™t go where there is a path. Open a new one and leave a trail".
If you want to understand what weā€™re talking about here (UMS) then read this and set your screen and computer that way. Also read the live thread, UML Live and UMS Live

997

As [B]FXCaribbean[/B] [B]has said, it would be better to post long questions on [/B][B]the [/B][B]UMS live[/B] [B]and [/B][B]UML live[/B] [B]threads he has created.[/B]

[B]This leaves this thread alone to do its intended purpose - it is a teaching thread.[/B]
Many times I post a whole string of charts concerning a particular trade.
It is best that they are not interupted.

Arenā€™t your comments sometimes biased on results ? I mean, arenā€™t you sometimes result oriented ?

Sometimes my posts are just straight theory.
Then it may look like the results are biased.
But I am teaching.

Other times I take account of human frailty.

But when you talked about the trumpet setting, you considered the lower band to say that the ā€œtrumpetā€ setting was very bad, assuming the lower BB was going down

Can you dig up the quote for me? - I know it is in there but I will let you do the work! :smiley:
The explanation is very simple, but I need the quote.

Iā€™m not sure to have understood why this wasnā€™t a good trade except for the fact that the higher BB is going up (isnā€™t it almost always like that when you find an evening star pattern ?)

[B]FXCaribbean[/B] has given a pretty good answer.

The fact is that with evening stars the BB is NOT almost always going up!!

A lot of times the BB is going level or even down!!
The time to avoid the evening star is when the BB is rising extremely rapidly after the bands have narrowed, (a squeeze), and the price action is walking the bands like there is no tomorrow!

You mean that the 3 green soldiers BEFORE the evening star pattern are a bullish pattern, so we should keep that in mind and be cautious about the evening star short trade ??

Yes!!

Whenever you see a breakout occurring (the BB is like a trumpet), [B]and [/B]the price action is starting to walk the upper BB and you see 3 green soldiers, then you trade that pattern because it is the one for the job.

Then, of course, you set a stop loss and you make it a trailing stop loss so that you lock in profits.
If an evening star occurs, you may actually hit your trailing stop loss.
If not, you just keep going!! :slight_smile:

998

The question of an evening star with the Bollinger band ā€œtrumpetingā€ (correctly called a [U]breakout[/U]) has come up repeatedly recently.

[B]Therefore, for the sake of clarity, I will go over it again.[/B]

Here are two images.
The first is theory.
The second, an actual case >>>


By tymen1 at 2008-04-22


By tymen1 at 2008-04-22

As you can see in the actual case, the lower Bollinger is not always going down.
It starts to turn around and then goes up.
This is a product of the mathematics - an operation called standard deviation.
Depending on the exact way the price action goes up - the lower BB may go down first or follow the upper band in going up.

It is really irrelevant, unless you fully understand the mathematics.

The real matters to look at when considering an evening star in this case are :

  1. Is the upper BB breakout coming from a narrow BB? (look at the left of the chart)
  2. Is the upper BB now rising extremely rapidly?
  3. Is the price action now walking this rising upper BB?
  4. Is therefore, an obvious trend visible?
  5. When the evening star appears, does the upper BB just keep rising without any kinks in it?
  6. Are there more red candles in the trend besides the one of the evening star?
  7. Does the price action just keep going up even though there are some red candles?

If the answer to each of these questions is ā€œyesā€, then this trade is a very risky one to take.
The very best you can expect, is for the price action to go level, that is, to ā€œrange tradeā€.
A second short candlestick pattern is now needed to bring the level price action down.

999

So tymen1, you will not take this trade. You will wait for another evening star to appear then enter a position. Sorry for interrupting your engulfing pattern lesson with my question.:o

1000

[B]Correct.[/B]

If you do enter this trade, then you will make very few, if any pips, even if you are very skilled in using the [B]UM[/B].
Examine the chart carefully after the evening star. You will see that what I am saying is true.

[U]Yes, you wait for another shorting pattern to appear[/U] - such as another evening star, or a short engulfer, or a dark cloud.

[U]But much better still[/U], we note this breakout going [U]long [/U]from the beginning.
We note that the Bollinger bands were very narrow at the beginning.

Then we simply wait for 3 green candles and trade long (up) with the 3 green soldiers pattern (3 white soldiers).
This is a vastly superior tactic given the direction of the price action.

1001

[B]I now wish to go back to that engulfer trade that we looked at and analyse some profit taking.[/B]

Firstly, a reminder of the trade >>>


By tymen1 at 2008-07-24

The long engulfing pattern is in the middle of the chart (green) on the lower BB.
The lowest wick value is 84 (103.84)

At the end of the trade 77 pips were made in 140 minute with the [B]UM[/B].

But what if we used a simpler approach that would be suitable for total candlestick beginners?
Lets have a lookā€¦
[U]
Simple one amount trading[/U]

If we had entered this trade with only 1 amount at the open (no KC chart) and closed at the very top, we would have made [B]40 pips[/B].
Entry was 97 (103.97)
Exit at very top was 37 (104.37)

Now a stop loss would be placed 3 pips below the lower wick at 81 (103.81)
Entry - stop loss is 97-81 = 16 pips
Profit = 40 pips given above.

Therefore, [B]risk/reward [/B]is 16:40 = [B]1:2.5[/B]

[U]Improve using the KC chart.[/U]

If we traded as above but entered using the KC method, we would have made [B]43 pips[/B].

[U]Improve using multiple amounts.[/U]

If we traded as above (using KC), but entered 2 amounts and closed 1 amount at 10 pips, we would have made [B]53 pips[/B].

[U]Improve using the [B]UM[/B][/U]

We would have made [B]77 pips[/B] as stated above.
The [U]worst [/U]risk/reward in this caseā€¦copied from post #925 on page 93ā€¦

So [B]risk/reward[/B] at worst = 33/60
Which is approx [B]1:2[/B]
Which is excellent.

So you can now see the progressive improvement in pips gain culminating in the [B]UM[/B].

We improved the pip gain from 40 to 77 - a 93% improvement.
And the risk/reward ratio changed only from 1:2.5 to 1:2, a 20% change.

[U]The [B]UM [/B]provides a real alternative to long term trading whether thro candlesticks or indicator trading.[/U]

[B]Soā€¦

Who would like to change to long term trading?[/B]

1002

Someone is about to advance up.:slight_smile:

Hmmmā€¦ Who could that be?:smiley:

Do you have a special post planned?:p:)

1003

Yep!! :slight_smile: :smiley:

I have been looking forward to this promotion.

I notice that this thread has reached 100 pages simultaneously.

[B]In accordance with becoming an honourary member, I have decided to put a face to my posts[/B], just like Dale Paterson.
I hope the Tonymand may do the same at some point.

The next persons to become FX Honourary members are [B]Rhodytrader[/B], who is just 2 posts away, and you, [B]Mytwopips[/B]! :slight_smile:

[B]Daydreamer65 [/B]is also on the way.
He has been here a long time.

[B]Now I will celebrate[/B] >>>


By tymen1 at 2008-03-28

1004

Congratulations Tymen!