THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Many thanks again to all those posters who are encouraging me to go on. Thanks to Tonymand, Sweet Pip, Daydreamer65, Dobro, Max99, Cdawg, VulcanClassic - I acknowledge you all.


Now I am going to show you something that I thought was amazing when I discovered it.
But I am sure you people know about it already.

Have a look at the picture below >>>


By tymen1 at 2008-03-11



>>> this picture introduces you to the world of vectors - magnitude and direction.

One of the vectors represents the direction of the Bolinger middle band.
Another one represents the direction of the MACD.

These vectors are then added together to obtain a RESULTANT which, if you look carefully, is the direction of the price action.

This works in every case and on the 5 minute chart, is good for forcasting several candles in advance.

Thus knowing this, we are going to use this as a weapon in our entries.

The chart for entries will be a 5 minute chart with a MACD (standard settings), Bolinger bands (standard settings) and from these we can do a price prediction with the keltner channel.

I will show more posts to explain how this is done.

[tonymand]

Originally Posted by Sweet Pip

Hi tonymand, I found it on the MQL4 codebase website. It doesn't look like Tymen1's example with his being a solid gray matter so I presume his is like that for demonstration purposes (being that he's doing his examples in a Paint program). These are the band lines like what is illustrated in the articles he provided links to.

I can't seem to upload a file like I can a picture so here's a link to where I got it from:

Keltner Channel - MQL4 Code Base

Hope that helps

Thanks Sweetpip

[cbarnett808]

Tymen-
I am following along, too. Please go on. Many thanks for your generosity.

Thanks also to Sweetpip for dragging up that code!

[tymen1]

Thank you Cbarnett808 :

The following picture shows several case senarios with the BB and MACD vectors. In each case the resultant is the direction of price action for the next few candles :




By tymen1 at 2008-03-11


Next : to explain how this works with the Keltner channel.

[moneda]

Tymen,


Keep on trucking! We appreciate your lessons.


Thanks

[tymen1]

Thank you Moneda (love your avatar!)

Because the BB middle band can rise or fall steeply and the MACD can also rise or fall steeply, it means that the resultant, the price action, can also rise or fall steeply.

So what has this to do with the Keltner channel?

The Keltner channel, like the Bolinger band has 3 bands - middle, upper and lower.

I will now explain how it all works............................

Procedure

Step 1

Once we spot the completion of a candlestick pattern (say the evening star) on the main chart, we then open a 5 minute chart with the following indicators :

1) A MACD (standard settings)

2) Bolinger bands (standard settings).

3) A Keltner channel with settings.......period 5, factor 1.

That is all.

However, care must be taken with colours. The BB and Keltner must be clearly different - both the BB and Keltner have middle bands. Make the colours clear. eg one blue, the other red.
DON'T CONFUSE THE TWO!!


Step 2

At the point of entry draw the MACD vector on the MACD indicator. (use line drawing facilities in your charting program).

At the point of entry draw the middle BB vector on the middle band.

Now estimate or draw the RESULTANT. This will be the direction of the price action for the next few candles.
You can draw the resultant right over the middle BB if convenient - as long as everything is visible to you.


Step 3

The rules

If the resultant is going up (price action up) then enter at TOP keltner band.


If the resultant is going level (price action level) then enter at MIDDLE keltner band.

If the resultant is going down (price action down) then enter at BOTTOM keltner band.




Next post - some real case senarios

[daedalus]

Tymen - i'm staggered by the Vector analysis. Makes so much sense but I can't belive i've never made the connection. Props to you!

[VulcanClassic]

Tymen,

Could you please post a chart shot with that entry?

I'm just not sure how to draw the vectors, from peak to peak or extending the MA.

Awesome stuff.

[Sweet Pip]

Originally Posted by daedalus

Tymen - i'm staggered by the Vector analysis. Makes so much sense but I can't belive i've never made the connection. Props to you!

Daedalus...arn't fibonacci fans a vector type tool? Have you explored using them? (I'm at work right now so can't play with them)

Just a thought

[tymen1]

I'm just not sure how to draw the vectors, from peak to peak or extending the MA.

Coming tomorrow VulcanClassic