THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Originally Posted by FXCaribbean

It is the latest version of the said post with all the final correction.

I see.

This may take some time.

Modifications will continue to occur, I think.

[tymen1]

Well, it is now time to start looking at a trade.

So here we go. It is a long enfulfing trade of USD/JPY.

The chart timeframe is 35 minutes.

There are 10 charts in this series.
To save the work strain, I will post one a day.

Here is the first chart >>>


By tymen1 at 2008-07-24

Before this trade is started, one would see it coming.

Therefore, preparation is made.
Two 5 minute charts are prepared - one with the Keltner channels and the MACD's.
The other chart is readied with the starc bands.

The "new order" window is prepared to place stop loss orders and/or the market price window is prepared.

These things are done in advance to allow smooth, trouble free trading.

In this chart, we see a nice long engulfing pattern on the lower Bollinger band.
We waste no time in taking hold of this pattern to trade it.

[tymen1]

Having seen the main chart, we now smartly toggle to our 5 minute KC chart which was prepared beforehand in readiness >>>


By tymen1 at 2008-07-24

I have placed the most important stuff on the chart.

As always, the Bollinger bands are in royal blue.
The Keltner bands are in orange.
The MACD we use is the inverted Di Napoli MACD. It is in green.
The standard Di Napoli MACD can be seen in red ,sandwiched (minimized) between the chart and the Inverted MACD.

From now on the short (standard) MACD will be in red.
And the long (inverted) MACD will be in green.
This corresponds with the code for the candles - up = green, down = red.

The price opened at 97 (103.97) and started to go down.
Since we are trading long (up), this is against us, but it will give us a better entry to go long with.

With the resultant of the MACD and BB vectors being level, we get that better entry.
A level resultant tells us to enter at the mid Keltner band and that is what we do.
And so we get an entry of 94 (103.94)
That is 3 pips better than the opening!
That pays for the spread and slippage.

The price action continues to go down but we now have our entry.

It is now time to toggle to our 2nd prepared 5 minute chart - the one with starc bands on it.

From here we can determine whether we have a pips first or retrace first trade.

So that will be the subject of our next post.

[neboxian]

Great stuff! Yep.....I'm still present in the class room Just quietly LEARNING..
I'm all eyes and ears

[FXCaribbean]

Hi tymen,

The fact that during the trading retrace (or walking) we can wait for 3 candles, is it linked to the timeframe the shape has been detected ? (either engulfing or Evening star) so just before the design of the next candle in that main timeframe ?

If yes, then would you say it is possible to wait (Main_time_frame - 5mn)/5mn ?

Thanks for the answer.


FXCaribbean
"Don't go where there is a path. Open a new one and leave a trail".
If you want to understand what we're talking about here (UMS) then read this

[tymen1]

Originally Posted by FXCaribbean

Hi tymen,

The fact that during the trading retrace (or walking) we can wait for 3 candles, is it linked to the timeframe the shape has been detected ? (either engulfing or Evening star) so just before the design of the next candle in that main timeframe ?

If yes, then would you say it is possible to wait (Main_time_frame - 5mn)/5mn ?

errrrrr........I am a little confused here.

The matter is really much simpler than this.

We wait 3 candles in a retrace (pity you were not there when we did the exercises!), only when price action walks the starc band.
3 candles often exhaust the walking trend.

We do not offer any connection between this and the main chart.
Sometimes things link up with the 5 minute and main charts.
Sometimes they do not.

When we look for a retrace we stay with the 5 minute chart.

The only time we toggle back to the main chart is if we see that the candle pattern is reaching expiry, that is, we are more than 7 candles away from the pattern.

Keep watching this present trade example......it may answer your questions.

[tymen1]

Originally Posted by neboxian

Great stuff! Yep.....I'm still present in the class room Just quietly LEARNING..
I'm all eyes and ears

Good to have you here!!

Soldier on, Neboxian!!

[glundi2]

total newb question, when you mean by "enter" at a certain point, does that mean you buy or sell what ever currency you are using?

[Maverick731]

To Maverick731

Have a look to post #811 in the vocabulary stuff. All the settings should be written.




The BB's on the 5min chart seem to be tighter than the hr charts and such...

I am not sure if the setting are still the same for those, I like you input but I'd like tymen's as well

[tymen1]

To glundi2 :

Thank you for visiting my thread.

At the moment we are looking at long engulfing patterns.

By definition, they are traded long, so to answer your question - we are buying when we enter.
We then hope for the price action to go up.

To Maverick731 :

All the Bollinger bands have the same settings regardless of timeframe - the standard settings.
They are period = 20, deviation = 2