THE JOY OF CANDLESTICK TRADING - a Learning Experience

[Jimmy Jones]

Yes I am trying to learn how dealbook works as well as this system that Tymen has come up with. I didn't like dealbook at first but I am used to it now. There are still some things I don't understand about it and Forex in general but this is not the place to ask.

In regards to Tymen's system, WOW! Today I have had 5 trades, all wins. By going with the rules of the system I actually do not feel like I am gambling. With the Cowabunga system there was just the feeling that I was gambling instead of investing.

I do have a question and I could not seem to find the answer. In regards to the first entry after a quality trend changing pattern has completed; if I enter and the trade turns out to be a pip trade instead of retrace trade, then I am not trying to enter a second amount, right? I am assuming the 2 amounts idea only applies to retraces?

JJ

[KENNETH LEE]

The 2nd amount entries are for retrace first trades or if we hit our 10 pip stop loss first.. We will reenter with 2 lots at the retrace area,,

In refrence to GFT system if you go to Parameters ,then trades, you can preset your order amounts and then when you want to close one lot. Just place 1 opposite order off the chart and it will re-average subtracting 1 lot..

Hope this helps... Good Trading

[Maverick731]

what is your BB applied to? Close?

thanks

[Jimmy Jones]

My bb is applied to the close, I believe that is what Tymen posted early on in the thread...

[tymen1]

Greetings.

I have had a good rest and a chance to do some of my own trading as well.

Making a number of successful, larger pip trades.

But I am sustained by my trading on the Australian stock market which makes me more money than forex trading.

So now we go on with the thread by looking at the engulfing pattern - long so as to compliment the short evening star.

The engulfing can, of course, be traded long or short. Just make sure it always sits on the Bollinger bands.

However, before we commence, answers to the wonderful posts put up recently are needed.

[tymen1]

To Neboxian :

Ericoco is correct - the Starc bands are only used on the 5 minute chart.

The only extra on your main chart are the Bollinger bands.


To VulcanClassic :

Trav72 is correct - the dots do indeed represent short positions only.

But now that we are going long be prepared to be extra confused!!



Thank you KENNETH LEE for answering some of the questions raised.



To Pipso Facto, Maverick731, Nicolebobbin and Jimmy Jones :

Welcome to this thread!
I trust you will gain much and add many pips to your accounts!!



To Ericoco and Pipso Facto ;

Thank you for your wonderful compliments.
I shall do my best to teach to improve your trading so that you make lots of pips!!



To Maverick731 :

Jimmy Jones is correct. The Bollinger is applied to the close. Settings - period 20, standard deviation 2.



To Jimmy Jones :

You are learning very well. You have posted a very high quality, large, easy to see chart.
Well done!

I personally prefer white background - it has higher resolution - shown by setting the Guppy multiple moving average.
But if you like black (definitely more sexy), then go for it.

Still, can you quickly tell the difference between those light grey and dark grey candles?
I would submit that the down candles would be better off in red or orange - excellent fashion style with black and grey!!

I see that you are trading better now with your 5 winning trades.
Good for you.
There is still a problem with my Ultimate Candlestick Trading Method when the price action drops like a bomb. Here 2 amounts are better.
But I have tried to accomodate all possibilities.
We will solve this problem in due course.

The problem with your first trade (the chart you posted) is that the pattern is not an evening star pattern.

The first candle of the pattern has a much higher wick than the star. This basically rules the pattern out.




I say this to everyone, and I say it again :

Always choose quality patterns only.
Do not choose just anything that resembles the orthodox pattern just to get a trade.
You will lose - or stand a very high risk of losing.
What good is that?
Wait patiently instead.
Be a sniper.
Pick your trade.

Then aim carefully................and shoot.

..............and collect your pips!!

[tymen1]

Here is my first post regarding the long engulfing pattern.


By tymen1 at 2008-07-14


There are 2 drawings here.

The first is the traditional long engulfing.
It is the one used in stock trading.

The body-to-body is the critical component.
It is a stronger signal if the 2nd candle engulfs the entire range of trading, that is, the shadows (wicks) as well.

The close of the red candle (bottom of red body) and the open of the green candle (bottom of green body) are apart from one another, that is, there is a gap between them.

This is important.
It shows the extent of the powerful upthrust of the price action in the green candle, that is, the bulls have taken control.

If there has been a downtrend, a reversal here may be expected, and the price action now to go upwards.



The 2nd drawing shows the engulfing pattern in forex.

Here we do not have gap action since the price is 24 hour continuous.
The close of the red candle (bottom of red body) is equal to the open of the green candle (bottom or green body).
These points are, therefore, level.

So how do we discern an engulfer in forex??

Well, we look to the wicks or shadows.
The lower wick of the green candle should be longer than the lower wick of the red candle.
This shows that price action has bottomed out and a powerful upthrust has occurred to produce the green candle - hence the bulls are now in control.

Where the green candle is longer than the red one but the lower wick relationship is not correct, we rule out such a pattern.

So the following requirements apply.......

1) Two candles on lower Bollinger band, 1st one a bear candle (red), 2nd one a bull candle (green).
2) Bull candle (green) is longer than the bear candle (red).
3) Both body bottoms are equal.
4) Bottom wicks - the 2nd candle, the bull candle (green), has the longer wick.

If these wicks are equal in length, other considerations are taken into account.
The length of the top wicks is not so significant.
The body-to-body relationship is the most important part.
The Bollinger band direction applies just as it did in the evening star pattern.

That's all for now. Tomorrow, some examples.

[trav72]

Great to hear from you again Tymen
Looking forward to this next installment, already of to a fantastic start.
Explaining the wick sizes has already helped me as i was never sure really there effect if any. Now i know the second candle lower wick must be longer than the first candle for it to be considered.

[Ray_1]

Originally Posted by tymen1

Here is my first post regarding the long engulfing pattern.

So the following requirements apply.......

1) Two candles on lower Bollinger band, 1st one a bear candle (red), 2nd one a bull candle (green).
2) Bull candle (green) is longer than the bear candle (red).
3) Both body bottoms are equal.
4) Bottom wicks - the 2nd candle, the bull candle (green), has the longer wick.

If these wicks are equal in length, other considerations are taken into account.
The length of the top wicks is not so significant.
The body-to-body relationship is the most important part.
The Bollinger band direction applies just as it did in the evening star pattern.

That's all for now. Tomorrow, some examples.

Hi Tymen1,

Great to see you back in the forum. In the engulfing pattern, a buy signal will occur on the lower Bollinger band and for a short signal the pattern will appear on the upper Bollinger band? Do we still apply the 5 mins chart as our entry point?

[tymen1]

Originally Posted by Ray_1

Hi Tymen1,

Do we still apply the 5 mins chart as our entry point?

Yes, you have it correct here, and with the buy/sell signals on the BB as well.

The 5 min chart will be reversed because we are going long. You will see this in examples as we go along.