THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Originally Posted by topgun

I like trading 4 hour charts though and nothing is better than a nice hammer "closing" @ the 200SMA .
topgun

4 hour charts - Yum! Very reliable patterns here and on the daily charts.

[tymen1]

Just keeping this thread alive. Will post the important condition that makes the patterns even more reliable next post - complete with chart.

[Max99]

Looking forward to your insight Tymen. It sounds like my trading style is similar to yours but I need some work and I’m not at the point I want to be.

I don’t have any charts prepared but I’ll briefly discuss my method, which is a work in progress. I don’t use anything other than candle patterns and Bollinger Bands on a 15 minute chart. I like reversals when the bands are extremely wide, preferably with the candles piercing through the bands, and then wait for an appropriate reversal candle pattern. I also use the bands when they are tight and look for a breakout. It seems that my biggest problem is the entry. I get too impatient and don’t wait for enough confirmation from the candles patterns.

Max

[tymen1]

To Max99 :

I hope that some of my future charts on this thread will help to solve your entry problems.

Determining when the BB are wide or when they are narrow can be a problem - it is all relative.

Next post will relate to exactly what you are doing !

[tymen1]

Here is the condition that makes the patterns so much more reliable - it is none other than the Bolinger bands.

By having your pattern on the BB you are working with an extreme price range. At this point the price action will most likely walk the band, ie if you have, for example, price action crossing the upper band, then it will most likely continue to walk the band.

The band itself will widen rapidly and the price action will go up with it. At some point the price rises will reach exhaustion and the bands will begin to close again.

The exhaustion point is clearly shown by the evening star pattern. At this point the extreme price action has become extreme plus. Both the BB and the evening star combine to give very high prediction that the price action will go back to the centre.

This is very clearly shown in the chart below. The first evening star is on the middle BB and still could go anywhere (and does). Trading this one will result in a loss.

The 2nd one is on the BB - and look at the profit !!



By tymen1 at 2008-02-21

[Max99]

Excellent example. It goes to show how important it is to pay attention to the Bollinger bands.

Where would you enter? As soon as the first bar after the evening star moves below the low? Or wait for that bar to close?

How about time frames? I'm experimenting with 15, 30 and 60 min.

[jlmac27]

Been waiting for this thread Tymen,
Good to see it getting on it's way!! What time frame do you favor?

[tymen1]

To Max99 and Jlmac27 :

Thanks for the compliments.

Further posts ahead will show you special entry techniques to get the best out of the pattern. These will also highlight the stop loss.

As for time frames, I use a whole string of them for intraday trading. They go from 20, 25, 30 mins......................1 hour in 5 minute increments for all 4 majors, EUR/USD, JPY/USD, GBP/USD, CHF/USD. I also trade AUD/USD and AUD/JPY but the pip spread on these last two is higher.


More charts to come. I will probably also do a post to explain for Newbies how to post a full sized chart. Also an explanation of how to post a thumbnail.

If people would like me show how to post a chart/thumbnail, please reply to this post soon. It is easy once you know how.

[dobro]

So glad to see you back, your contributions are some of the best on this and any other forum. I had some success with your strategy using BB late last year but as you noted the trading oppotunities were few and far between.

I definitely need to learn how to post charts and thumbnail. I am tweaking an overnight strategy and if it proves to be a winner then I want to post charts and trades for others to see. Am I asking too much: how do you post comments, arrows, circles, etc within a chart? Probably pushing my luck.

Anyway, glad to learn from a master - welcome back. d.

[amherbs]

Hi

great thread. i had just started learning candlesticks on my own, so i am hoping this will be a great help.

i have also started to study certain currencies pairings so as to gain a better understanding of how they move,so my question is, can someone explain to a newbie what exactley volume is in relation to an indivdual candle and how a figure is arrived at and how relavant it is to candle stick trading .

cheers

Martin