THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Thank you Sinn1, BrianSNJ, Ray_1 and Kenneth Lee for your continuing support.

[tymen1]

Right, back to my proposed ultimate candlestick trading method.

Look and study the following 5 minute chart of an evening star >>>


By tymen1 at 2008-06-07

This chart has the same format as the previous one.

Our short entry with 1 amount turned into a "retrace first" trade and was closed at -10 pips.

Note that we did not persist further in this chart or the previous chart with this entry.
Before, we would keep this entry, find the top of the retrace and add a 2nd amount with the computer averaging the entry.

Now we examine this short entry, find it to be going the wrong way and hence close it.
Remember that hyperlink I posted for reading just a little earlier.
Did you read it - here it is again.

Weekly Trading Lesson: Making and Correcting Trading Mistakes

The Starc band is now going up and, by definition, we look for the retrace top as the price action goes thro the Starc band. Preferably we should wait for a walk up the upper band for about 3 candles but the 2nd candle is red and no higher than the first. This green candle before it is also very extreme and passes thro the upper BB.
It will do for the purposes of illustration.

2 amounts, and again an exit when passing thro the lower Starc.
This gives 2 amounts of +17 pips = 34 pips.

The next trade is for experts only. The Starc band is now going down and a tag or near the top of the upper Starc is called for. The retrace does not do these things - instead it is a reaction from passing thro the lower Starc earlier.

I shall leave this amount out for now.

The next trade is a classic retrace/exit and follows the same rules as before with 2 amounts.
This gives 2 amounts of +20 pips = 40 pips.

Grand total is 64-spreads ie 64-6 (3 pips per trade) = 58 pips.

This chart was taken from an earlier trade shown on this thread, and, if I remember rightly, the stop loss was at 90.

Entry at 66. Risk is 90-66 = 24 pips.

So risk/reward ratio is 24 : 58 which is 1 : 2.4 which is good.

I have now to present a picture to show what I am driving at.

Tomorrow!!

[tymen1]

Before I embark on showing you the new method - it is time again for .......yes.......exercises!


EXERCISE 4

Look at the following 5 minute chart of an evening star trade >>>


By tymen1 at 2008-06-11

The short entry is shown by the black vertical line. After this candles are numbered 1 to 16.

1) Which number (s) would you consider to be a retrace point (s) ?

2) Give reasons for your answer (s).

3) Which number(s) would you consider to be an exit point (s)?

4) Give reasons for your answer(s).

[tymen1]

EXERCISE 5

Look at the following 5 minute chart >>>


By tymen1 at 2008-06-11

This is a chart of an evening star trade and candle S is the "star".
A stop loss (red dashed line), is set just above this candle.

Short entry is made at the black vertical line.

1) What is special about candle R?

2) Does the top of candle R qualify as a retracement point? If so, why and if not, why not?

3) If your answer to question 2 was yes, then how would you avoid the subsequent action of hitting the stop loss in candles A and B?

4) If your answer to question 2 was no, then what would you have done with the initial entry at the black vertical line?

Answers to exercises 4+5 after several posts of attempts at answers!

[sinn1]

My answer to Exercise 4:

First retrace point would be at top of '2'.. this is because STARC bands are going down so the top of retrace is usually at middle of STARC band. (I would sell a 2nd amount at this point).

**** edit**** - as in my answer to Exercise 5, I actually wouldn't have entered at candle '2' as I would have waited for the price to 'walk the band' for 2-3 candles.. I more likely would have entered at close of candle '5'. However, at the time, I would have been looking for a retrace point around the middle STARC band as the bands were moving down.. entering above the middle band would have been an extra bonus.

First exit would be half way down '7' when the price cuts the lower STARC band, or at 10pips+spread (whichever comes first).

Second exit possibly at '8' when price cuts lower bollinger band.

Second retrace is at '10'/'11'... this is because STARC bands are going down again so top of pullback usually at middle STARC band. I would sell 1 amount here.

Third exit would be when bar '12' crosses below lower STARC band and lower BB.

Because the price 'closed' below the lower BB and there's a STRONG piercing pattern at bar '13', I probably would not look for anymore retraces after that point.

[sinn1]

My answer to Exercise 5:

What's special about candle R - its BIGGG. It has very tiny shadows which shows a weakness in the sellers. It also crosses the middle bb, the middle starc and the upper starc, which is a lot to cross and shows buyers are strong.

Top of candle R does not count as a retracement point as Tymen recommends to wait for 2-3 candles to form that 'walk the upper STARC band' before another amount is opened.

The second candle therefore would have stopped us out of the trade.

The initial entry would hav given us a loss according to where the stoploss was placed... BUT.. looking at Tymens 2 previous lessons, he shows that the the initial entry is closed as soon as it reaches -10pips, even if another amount is opened at the retrace point. I personally would have lost the whole amount (up to the stoploss) as I am still using Tymens previous MM strategy without the '-10pip -first-entry-stoploss'. Maybe this is what Tymen will talk about next.

[tymen1]

Ok, more answers needed!!

Then I will give the correct anwers.

Please do not be afraid to post your answers even if they are wrong!

I notice that the viewer count has come to an almost standstill.

This worries me - are people still looking at this thread ???

If not then it is time to close this thread prematurely.

[VulcanClassic]

Hi Tymen,

Here's my take on the exercises;

4. I see candle 3 as the first retrace because it goes thru the top KC. Probably add to posn after candle 4. Candle 8 could be an exit as it goes thru bottom BB. Candle 11 could signal a pending turn and candle 12 is the turn down, but it probably happened so fast I probably would have missed it, so likely not a trade (depends on speed of candle).

5. Candle R is strong as it goes thru both the middle and top KC. I would just cut my loss on that one.

Please keep the thread going. I am still following along with interest, as are many others I'm sure.

[4xStar]

Originally Posted by tymen1;52621[B

If not then it is time to close this thread prematurely. [/b]

NOOOOOoooooooo!!!!!!

[KENNETH LEE]

Exercise #4

(1) 3,4 3 touches upper KC band. But 4 opens and continues up. Would enter when 4 started down.. 10,11 Same as above but Middle KC band.
Safer entry would be 3 and 10 but it continues up in both cases. So would enter on 4 and 11. If opened going down would enter straight away.

(3) 8 Hit bottom BB band But opened going down would have closed when it started to reverse . 13 line 12 was a fast down swing went way pass bottom BB. Would have closed when 13 started up, it opened did not make any new low and then headed up.3

Execrise #5

I don't like the initial entry point black line seems late.. But the long green candle is very bullish looking would have closed and taken loss on that entry.

If this star was initially spotted on a 20 min chart might have entered top of 5th (greencandle) from the star and exited 9th (red candle) from the star..

That is my take.... Please keep up the great work. I am here 3 -4 time a day... I need to reread the whole thread seem to be lacking on some things..