THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Analysis of the Ultimate Short Trading Method for Candlesticks (part 3)

Another 3 advantages..........



1) You do not have to exit after 10 pips on a retrace first if you wish. You can always exit earlier. For example, you may like to exit after 9 pips. That will give you a 1 pip advantage.

The 10 pips is not a hard and fast rule!




2) Stop loss.

With this method, the stop loss then for a retrace first trade is 10 pips (or 9, or whatever you set it at.)

This is absolutely great. You do not have to worry about setting a stop loss at the top of the star anymore!!!

If it is a "retrace first" trade, you will know in advance where you will exit!!

Now what about those retraces - where do I set the stop loss for those??

Say 10 pips again!! - or 3 pips above the star, whichever is the least!! The stop loss is later lowered to make your trade break even if the price action suddenly reverses against you.

In the case of a "pips first" trade, there will be retraces, even when the price drops like a bomb in your favour.

After a pips first leg (which is exited in accordance with Starc band rules), a retrace will occur and these are traded with the stop loss in the same way as above (10 pip gap).





3)By having the stop loss set in this way, you know your risk in advance!! And it is only 10 pips at the most!!
Wow!!

No more worrying about 29 pip stop losses!!!!!!!!!

You only have to trade now and get a profit above 10 pips to get your risk/reward ratio in proper order.






I now invite questions.

I also have to post a picture of the use of the Starc bands for entries/exits which will conclude the posts about the Ultimate Short Trading Method for Candlesticks.

But this post can wait till tomorrow.

I have posted an unusually large amount of material since Saturday and readers will need time to digest it all.

So I will slow down just for now and give others a go.

[Ray_1]

Hi tymen1,

Recently I had been busy with my personal matters and no time to visit the forum. I found that i was lagging behind and missing out on great stuffs. Time for me to reread all your previous posts. I must say you are really a good teacher in imparting all your knowledge. Hope that I can absorb all the info in time for your next candlestick pattern.

[KENNETH LEE]

I like this idea much better than figuring your risk:reward after a trade..

This way we can pre-set our Trading platform for max loss and a first profit target.

Plus if you do Have a loss you only need a 10 pip trade to make it up instead of maybe 3... So money management will be easier..

This is a perfect idea for me personally as I have had trouble with stops... But with some input from others on Babypips I came to realize it was mainlly when I got a large loss going that I didn't want to close it.

But with a set 9 or 10 pip stoploss. This will work in my favor,and keep from getting more than 10 pips in wrong direction (maybe 12 or so with slippage)
I can live with that.

Again this is great.. Thanks Tymen, Look forward to more... Yippeee Ken

[VulcanClassic]

Originally Posted by tymen1

Analysis of the Ultimate Short Trading Method for Candlesticks (part 3)


This is absolutely great. You do not have to worry about setting a stop loss at the top of the star anymore!!!

[/b]

Tymen,

I'm not criticising, just asking;

Seeing how the price generally won't retrace past the high of the pattern, but can come close to it, wouldn't this increase the chance of getting stopped out?

[KENNETH LEE]

I'LL take a stab at this,

I think the idea is to limit our loss and have less of a average to make up.

Even it continues to go against us , The loss will be less as we got in higher so less pips to our stop loss.

That is how I see it any way.

Plus you could put your stop back at the top of the pattern if you wanted, it should be close there anyway. But you wouldn't have the extra pips lost from where you got out with your 10 pip stop loss and where you got backin.

Say it retraces 20 pips you take a 10 pip loss reenter at the 20 pip area and it still goes against us , you save 10 pips.

That is my take on it anyway.. Ken

[VulcanClassic]

I guess it's all about the second entry with 2 amounts being in profit before the averaged entry of the previous method.

Need 5 pips with 2 amounts to break even with the 10 pip stop.

[edacsac]

Great thread! I've been reading and re-reading it over the weekend. Is there a similar alternative to the keltner band?

[tymen1]

Originally Posted by VulcanClassic

Tymen,

I'm not criticising, just asking;

Seeing how the price generally won't retrace past the high of the pattern, but can come close to it, wouldn't this increase the chance of getting stopped out?

Although Kenneth Lee tried to answer this one, I will answer it myself carefully.
Thanks Kennneth, for trying - that is how you improve your own work!!



To answer.....No.

The first stop loss of 9/10 pips is deliberate.
It shuts down a runnaway retrace first trade.
This works in accordance with the following hyperlink :

Weekly Trading Lesson: Making and Correcting Trading Mistakes

Each of the retraces which are traded have their own respective stop losses as seen in the diagram.

You can choose to have each stop loss different....say each one 10 pips (or less if you wish) above each individual retrace point price.

So if you have 3 retraces at prices 25, 33, 17, then you could set each stop loss at prices 35, 43, 27 respectively.

.......Or you could have each stop loss the same......that being the 3 pips above the star!!

For example, the star top may be price 35. Then you could set a universal stop loss of price 38.

The choice is yours to make.

In either case, you always lower your stop loss when the price action drops so that you break even if the price action suddenly betrays you.

Need 5 pips with 2 amounts to break even with the 10 pip stop.

That is absolutely correct. But it is also easy to make those new pips.
5 pips on a retrace is really nothing.

Remember also that this happens only when it is a "retrace first" trade.
If we have a "pips first" trade, we need not worry.

This Ultimate Candlestick Trading Method will be used exclusively in our future trading of the engulfing pattern.
You will then get a better idea of how it works and the great advantages it has.

[tymen1]

Originally Posted by edacsac

Great thread! I've been reading and re-reading it over the weekend. Is there a similar alternative to the keltner band?

Welcome to this thread Edacsac. I hope you will find your time here rewarding.


As you go on reading the thread, you will be aware that the settings for the Keltner bands in this trading method are not the default ones but .....

period ....4 or 5
factor......1

The Starc bands are a similar alternative to the keltner bands and these are used extensively in trading.
You will see their use as you go on in the thread.

The Starc bands have no settings.

You can read more about these bands on the following hyperlink :

Capture Profits Using Bands And Channels

[neboxian]

Thanks Tymen, Put on 5 trades today ... using the ultimate candle stick method ....the first one didn't go so well ....the problem was i jumped the gun on the retracement ....so by the time price fully retraced and just barley came back to me, i got out with a small 1 pip profit....that was great...didn't lose any $$....

the trick i suppose is to be careful on the reentry point ....i noticed on the 5m chart a reversal candle pattern will usually develop at the top of the retracement.... similar to the one on the main chart ... if one dosent develop...i considered the trade to be over...

so the following retracements were entered at the point of a dark cloud, engulfing,or evening star on the 5 m chart .....and it went very well..

made a total of 70 pips on 3 trades

Took a 10 pip loss on the final trade ...I got stopped out and then price immediately ran the correct direction and left me wishing i was still in the trade

also, another helpfull tip i discovered, is if an evening star starts to develop on the 20m chart, I will wait for it to develop on the 30 or 35 m chart before i go in.....the pattern seems to work better once it develops in the higher time frame...

.... wow!!! what a great method you have shared with us....Thanks!!!