THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Well, my nest post is due but it is so late at night just now so I will post it tomorrow between trading.

[tymen1]

Here is my first post on entries.

The below chart shows a traditional entry with an evening star highlighted in light blue - there are 3 candles. The 4th candle is entered upon when it appears, the entry being at the bottom of the 3rd candle.

However, a good entry tactic would be to place the entry at the mid point of the 3rd candle. This often collects a few extra pips - enough to pay for your commission.

In the below chart this would not work so what you could do is to cut your trade lots in half. Set half of your trade at the bottom of the 3rd candle and half at the mid point of the 3rd candle.

Very often this makes for an excellent entry.

You can also choose to set all your lots at the mid point.


In an even better tactic, I will show how to set the best possible entries using the Keltner channel in the next few posts.







By tymen1 at 2008-03-10

[Sweet Pip]

Hi Tymen1,
Just to make sure I'm following correctly, so far, on basically any time frame, we are looking for evening stars on the upper BB bands for a short signal entry at about the mid point of the 3rd candle... and we are not using the MACD or any other indicators. Without meaning to get ahead of your lessons, would other reversal patterns work too?
Thanks

[tymen1]

To Sweet Pip :

No other indicators at present. But after this post a 5 minute chart will also be introduced to time and correctly place entry.

the only other patterns I use are ;

The engulfing pattern - long or short.

The dark cloud cover - short.

The piercing pattern - long .............be careful here - trends can be very shortlived.

All good for scalping. For longer term some trend in the other direction is very good.

Posts coming.

[tymen1]

Now take a look at the following 5 minute chart. It is a chart of the previous trade which was a 25 minute chart.

The idea of a 5 min chart is to get the best possible entry after the evening star pattern has formed.

When the 3 candles of the evening star are complete (on the upper BB !!) and the 4th candle starts we then set up a 5 minute chart.

On the 5 min chart we set up the usual Bolinger bands.
We now also enter on it the Keltner channel.

The Keltner channel is a probability channel. Candles outside this channel are likely to stay outside and go up or down depending on the trend. The Keltner is based on Average True Range and, as such, is a volatility based indicator.
It is extremely sensitive to volatility and has very little lag to it.

Look at the following hyperlinks :

Capture Profits Using Bands And Channels

Trading the BSE using Keltner Channels

My settings for this Keltner channel are a little unusual - period 5, factor 1. This makes sure that most of the price action is inside the channel (intended).

The Keltner channel is shown shaded grey on the chart below. Further discussion on this post is below this chart >>>




By tymen1 at 2008-03-10




>>> As you can see, the middle BB is going down. The Keltner is also going down.
Price action is now going down and it is ,therefore, important to get in immediately ie trade short right now. No time to waste.

The time is 15.05 on both the 25 and 5 min charts, and , if you are really quick, you would get in at the 71 pip mark shown on both these charts.

These charts have taken a very long time to produce on Microsoft Paint. Emphasis has been given to clarity and ease of reading.

The purpose of the Keltner channel will become clear as we go along.

For now, note that a 5 minute chart with a Keltner now gets used to get precise entries.

[daedalus]

A truly great thread tymen1!!! Well worth anyones time. I have always been very interested in trading pure price action because I can see the inherent power in it. In fact, I also recognize that many of my trades benefit directly from the analysis you propose. Except I never knew what were the best patterns to focus on, etc. Now I do.

Keep up the great work! I'm eagerly awaiting each update!

[Sweet Pip]

Originally Posted by tymen1

On the 5 min chart we set up the usual Bolinger bands.
We now also enter on it the Keltner channel.

The Keltner is based on Average True Range and, as such, is a volatility based indicator.
It is extremely sensitive to volatility and has very little lag to it.

Look at the following hyperlinks :

Capture Profits Using Bands And Channels

Trading the BSE using Keltner Channels

My settings for this Keltner channel are a little unusual - period 5, factor 1. This makes sure that most of the price action is inside the channel (intended).

Hi again,
I don't have a Keltner channel on my MT4 so from reading the articles at the links you provided, it says basically it's a combination of 3 MA's (one to high, one to low, and 1 median)...but what period...I presume 5 as yours above, and 1 would be Simple or Exponential?

In trying to compare the using the MA's in this way to the ATR , I guess setting the MA's so low it reduces the lag right down so then it is more sensitive to volatility?

Thanks

[Sweet Pip]

Originally Posted by Sweet Pip

Hi again,
I don't have a Keltner channel on my MT4 so from reading the articles at the links you provided, it says basically it's a combination of 3 MA's (one to high, one to low, and 1 median)...but what period...I presume 5 as yours above, and 1 would be Simple or Exponential?

Thanks

Ok, I found myself a Keltner channel indicator...(a bit different from my mickey mouse rendition as above ) . Ready to continue now!

Oh and I love that investopedia site...tons of articles giving great examples of what, where, when & why one might want to use various indicators & tools!

[tymen1]

To Daedalus :

Thank you so much for your encouragement. So few people are replying so that I think I might be wasting my time. But your post gives me the motivation to continue on. I do hope you can get something out of this thread.

[tonymand]

Sorry Tymen, I thought the value of what you are doing was self evident and like the way you are approaching it. I read each installment with interest