THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Sorry about the late post - my internet from Australia to America for this forum has been failing all day. All other connections to America have been good.

Maybe its the 666 post.

[tymen1]

To Trav72 :

I will answer your questions in stages.
Beccause it is late (internet problem) I will do no new posts for today.

Thanks for continuing all this brilliant stuff, i really am enjoying it.

Good for you - I hope you gain much from it and trade well.

Also my next question is, where we look for our ideal entry using the KC method, and we have till the close of the next candle on the main chart(ie 35minutes) to do this, ie 3.5 candles(35minutes)on the KC, 10 minute chart.

We enter on the KC chart as soon the price action meets the requirements of the resultant vector,
eg, if the resultant is going up, then our best entry is between the middle and upper Keltner bands or better.

If the resultant is pointing down, mostly the best entry is at the opening of the entry candle.

Now, once we have entered the trade, how long can we stay on the 10/5 minute chart. I see in your example that the retracement point D occurs about 60 minutes after the opening of the trade, and we complete at approx 20 candles after open. (200minutes)

You can click between the KC and the main chart - and doing so is important.
Count the candles only on the main chart - approximate max of 7 candles. If the price has roared down, you can stay in longer, but if level, caution, maybe better to get out.

Also, If say we were to close at B and the price continues down, or doesnt retrace to a point that it crosses the BB or starc band is this trade finished and we move to next trade, satisified with our profit at B, or can we re-enter. ....................
When does a retracement become a change in direction?

When you close the trade at B, the trade is closed and what happens after that no longer matters.
If the price then continues to go up past the Keltner/Starc bands and still continue up after even that then the price will reach a point where your had your initial stop loss (now cancelled). In that case, your trade is finished, profit at B is what you will get.
Not all trades generate great profits, but with my approach you will not generate great losses either!
The retracement top is as I have shown in the diagrams - going thro the Bollinger bands. The subsequent change in direction will be seen by watching the live price action - it will go no higher.

I will continue answers next post to keep its length reasonable.

[tymen1]

Answers to questions, continued :

but the more i am reading the more i am seeing and understanding that i have to be flexible

Not flexible but rather follow the simple trading strategy - "pips first" or "retrace first".

............ but i read that you use 4 patterns with great success. I understand the evening star, i was wondering (again), if you could reveal your 3 others,

Basically dark cloud cover, engulfing (both ways) and Piercing or 2 inside/outside up. Another good one for longs is the 3 green soldiers pattern.

just place your four patterns on one page

This is generating a lot of unnecessary work for me. The are best shown on that website below with excellent explanations. I suggest you look at them, then practise drawing them from memory - that is a much better teacher!

I now have my deal book set up like yours, through kinetic...(the guy there said your a legend, true story)... and i must admit that it is so much clearer to see the good patterns.

Thank you for the compliment. Yes, GFT is an excellent, if not the best program out there for trading candlesticks.

Is the risk reward ratio the same for every trade,....

No, definitely not. We do, however, try to keep the risk/reward ratio so that the reward is always greater than or at least, equal to risk. Otherwise, we will eventually court disaster with a big loss.

......

say we take pips first with one lot (10 pips and exit), and then the price retraces and we add another 2 lots, and just say now we get stopped out and the trade ends, then maybe we have lost 20 pips (overall -10).

This is not correct. When we exit with the 10 pips we also smartly close our stop loss. We are now completely out of the trade.

Then when we re-enter short with 2 amounts, we watch the price go down, then set a new stop loss a spread distance down from the short entry. If we get stopped out, we lose nothing, we gain nothing. Then the total profit is 10 pips.
The price should not go up again after our retrace entry because our retrace top is just that - a top!!

Would the risk/reward ratio still be as it was when we started. Or is there a risk/rewrd ratio for the start of the trade in our mind, and then a risk/reward ratio, 'assessment' for outcome, or is it always the same regardless of what happens?

The 2 strategies I have developed and shown are designed to keep the risk/reward firmly in our favour.
The ultimate numerical figure can only really be stated at the end of the trade.
This is very different from your standard trades where you set your "stop loss" and "take profit" and thus you set your risk/reward in advance.
But as long as the risk/reward is in our favour, there is no real problem.

Sorry for being long winded..

It would help you and the readers if you numbered your questions....1,2,3...etc.

I hope all this helps you especially as well as the readers of this thread.

New posts continue tomorrow.

[princess0304]

HI ya

With GFT Platform what are the best settings for moving averages, stichastics and also for the parabolic that you have found?


Princess

[greywolf238]

Originally Posted by princess0304

HI ya

With GFT Platform what are the best settings for moving averages, stichastics and also for the parabolic that you have found?


Princess

Princess,
Tymen doesn't use those indicators, this thread is about candlestick patterns and how to interpret them, using a couple of basic indicators.
There is no "best" settings for any indicator, the settings all depend on your trading style, time frame.. etc..

[trav72]

Thanks tymen for taking the time and answering the questions. I am so glad i came back to this thread and got through it and up to date. It is only now that i am trading with a plan (your plan) and confident, before i had no idea, i was just gambling with big wins and bigger losses. I got those patterns draw up this morning, they look good. I have attached it here, hope thats ok, i can delete or change or whatever..Question..
1.) With the piercing/dark cloud cover or engulfing, do you enter on the third candle or do you wait to see if the third candle turns the pattern into a 2 inside/outside , up/down pattern and then enter on the fourth candle

By travpip at 2008-05-19

By travpip at 2008-05-19
SELL.pdf

BUY.pdf

[jaguar1175]

Hope I'm not wasting everyone's time here. I am a super newbie and have been reading reading reading. I am following this forum with great interest but have only advanced to page 37 so far. Everyone is so helpful, but if you dont mind, could someone please explain a couple of terms being used frequently-MT4 and STARC. Also, I am using FXCM's demo account (with little success at this point) but there are no middle bands in the Bolinger bands, no Kentler channels and the charts are not really the candlestick type that are being shown here. Any suggestions would be appreciated. Thanks so much for your time and consideration.

[tymen1]

To Jaguar1175 :

It looks like you have some work cut out for you. But never mind, it is your first post. You have so much more to learn, especially little things that matter but appear to be insignificant.

MT4 is a forex charting program that you can download on the internet for free. I have downloaded MT4 myself and used it a little for comparison purposes.
It is good but not nearly as good as the GFT program which I use and recommend for trading candlesticks.

I have no experience with FXCM but have read good reports about them. I am sure the chart patterns can be switched to candlestick format.

A FXCM user really needs to answer the rest of your questions. I find it unusual for a middle Bollinger band to be absent.

The Starc channels are very similar to the Keltner channels especially with the Keltner set at period 4, factor 1. Both these have a middle band.

I think you should post a new thread saying something like "FXCM help needed".
Then you can get help straight away from across the forum.

If after much persistance, you really cannot get satisfaction, then I submit that the GFT program will have all that you need.

[tymen1]

Originally Posted by trav72

Question..
1.) With the piercing/dark cloud cover or engulfing, do you enter on the third candle or do you wait to see if the third candle turns the pattern into a 2 inside/outside , up/down pattern and then enter on the fourth candle

Wow! You have really done it now!

What a wonderful piece of artwork!

No doubt, in preparing this work, you were able to memorize the chart patterns!!

The dark cloud can be a straight entry, same with the engulfing but there are times when confirmation is needed. This is when extra candlework comes into play.

The best answer I can give you is to wait until I treat these patterns in earnest. They will be part of my "syllabus" but I need to complete our present work properly first - in typical school teacher fashion.
I do not like to leave matters half undone and there is more to come first regarding the basic trading strategies.

So I humbly ask for all to please be patient and we will get there with nothing missing in between.

[tymen1]

I am now going to show 2 trades in full with the strategies at work.

This will be a detailed set of posts showing excellent learning material
Several posts will be used to split the material into usable form.

The 2 trades are :
1) Evening star pattern.
2) Dark cloud cover pattern.

1) Evening star pattern


By tymen1 at 2008-05-09

Main chart

Shows a good evening star with medium risk on a 35 minute chart.
A green candle has developed.

Lets look at the KC chart.


By tymen1 at 2008-05-09

I am not sure why I have a 10 minute KC chart going for a 35 minute chart - it should really be a 5 minute chart (must have been late at night). Anyway, no harm done - we will persist.

The resultant is going somewhat down after summing the BB and MACD vectors (yellow oval). The MACD was going steeply down with the BB going slightly up.
The best entry is then between the middle and lower Keltner bands.

The opening is very low indeed and a little waiting gets us a better entry(halfway) in between the middle and lower Keltner bands.

Next post shows us the progress of this trade.