Candle formations and Time Zones

Hi there

Some traders use candle formations to signal what is going on in the market and help them with their decisions. However different brokers, have set their platforms on different time zones, which means different traders will see different candles forming on the 4h and 1d candles.

This would seem to me to make these candle formations irrellevent. Can anyone enlighten me?

Hi there! Candlesticks are valid for the timeframe they’re formed in. No matter what you see in other timeframes.

Of course you need some confirmation for the pattern but basically that’s it.

I hope I had helped you and if you have further questions feel free to ask.

Regards.

I for one trade with candlesticks only and I have seen different brokers with different times and different candles but always the candles are valid for that timeframe and that broker.

I think Pride was refering to something else, which I just encountered and am seeking a solution too.

For example, I am using thinkorswim platform and last week I was watching an education video on a 4hour timeframe. I looked up the days and tried to find the same candles and was surprised that they are totally different.

Some brokers uses EST, some GMT, some UTC some MST and so on. The good platforms allows one to adjust the timeframe in the charts but my current platform is fixed to EST.

With the different timezone, one long body green candle would show up as 1/3 + 2/3 green candle on another chart! This distort the analysis somehow. For example, the first picture belows shows the 4 hours GBP/JPY chart from the video and the 2nd from my platform (set to same 4 hours). If you lookedat the 3 candles, it may give you completely different analysis outcome!

Ideasmith, that’s exactly my query. How can you use the 4hr candle charts and say for example a doji candle might be a signal of a reverse, if the charts have different candle formations dependent on the broker setting.

INTERESTING IS IT NOT !

one might simply glance at an INDICATOR to see if confirmation does or doesnt exist and take it from there !

che

[B][I]revolution is in the eye of the beholder ![/I][/B]

The issue here is not on using other indicators etc, that is another interpretation by itself.

Pride is on the subject of candlestick patterns recognision. For example, some people may have learned that a super long red candle is very bearish, but if you look at my TOS chart (delayed one hour), the formation is 3 red candles. For candlestick it may be called a 3 black crow or something.

So I have this problem as well, if most traders are using candlesticks and they execute an order, i could be executing another order because my charts look different from theirs lol.

@pride, I got no ideas man, I am asking TOS can they add in a timeshift feature. I know some charting software can do this.

aware of the issues involved idea, but simply offering a temporary way to confirm whatever is seen, until this problem can be resolved, although its a very thorny one, different brokers presenting different price movement which creates different candles, and time zones being as screwy as they are.

im certainly not known as a “price action” trader, but i understand its worth, just that if this situation is to happen to those with differing brokers and time zones, can it be solved ?

fortunately, an indicator doesnt care about what time it is and where, so was offering a “workaround” until cures appear !

che

Idea,
How are you?

My name is Carlos. I’m new to the forum.

Do you by any chance have information about the 4h time frame educational video you watched.

Thank you!

Carlos
If you preserve your capital, your capital will preserve YOU.

So where is the outcome to this mess? I just recently realized that on the 4 hour charts different brokers using metatrader have their candlesticks forming at different times. i have encountered 4hour candlesticks changes at 9am est 1pm est 5pm est 9pm est 1am est 5am est and so on but metatrader platforms also show 4hour candlesticks opening up at 7am est 11am est 3pm est 7pm est 11pm est 3am est and so on. What gives? I can see having too correlate the 2 different discrepancies using 4hour candlesticks but those arent the only different times that candlesticks open up at, there’s still 2 more variations. I guess i am happy to see that other people at least noticed and said something. I have been demo trading for over 3 years and finally decide to open up a few different practice accounts to see how far off price changes can be among other forex brokers and to my surprise I seen another world of forex with different price patterns, highs and lows for the 4hour candle and a sudden knot in my stomach realizing i might have wasted 3 years of my time. You just don’t see this in stocks.LOL. Any thoughts or answers would be great. Like what is the best 4 hour time scheme out of the 4? Who knows, whata bunch of BS.

This is a very interesting topic and one I never though of. I would assume that if you are trading say usd/jdy. I would think you would want to trade on the est time frame due to the fact you would want to trade on the same time frame as the base currency. But then that is just my assumption.

Also very interested in peoples opinions regarding this.

What would be great is is brokers allowed traders to change timezones for pairs when trading.

Aha! you have stumbled onto one of my favorite candle topics, a bit of a quagmire! I recently stumbled onto this myself and did a lot of digging.

In a nutshell, the answer to your query is: EVERYONE IS RIGHT. That’s right, because at any given time in the market there are a million different trading setups. You could be bullish or bearish, it doesn’t really matter. And in some trading methods it doesn’t even matter if you get on the wrong side of the bias.

I was recently studying Nial Fuller’s price action method, and he recommends using New York closing candles. This is when I first began to research the concept at all. In my experience, most brokers were using GMT-close candles.

However, I did a fairly extensive personal study between the New York candles and the GMT candles and there was no discernible result. What I mean is, there was not a statistically relevant change, positive or negative, in using either candle set. The trade setups were different, but they pretty much equalized each other. As it was somewhat difficult for me to find a broker that matched New York closing candles, I finally just ditched the idea and went back to GMT-close candles.

One idea related to this that I have not explored very fully… is the concept of Daylight Saving. GMT does not observe Daylight Saving, but certainly New York and London do. So what impact, if any, does this have on the chart “personalities” when Daylight Saving occurs?

Hello,

This TOO has been a ‘bug bear’ of mine since ‘day dot’ and I’m quite surprised at myself for missing this thread when it was opened.

I believe that this is a bigger issue than many would think (my personal opinion based on experimentation). NOT ONLY does it affect candlestick patterns and chart patterns it affects indicator readings as well e.g. RSI which forms the basis of one of my trading systems of personal choice. It even has an effect on technical analysis e.g. what may be a swing point at one broker may not be a swing point at another (or it may come a day later or a day earlier).

Sometime last year a few of us did some automated backtesting using a MetaTrader EA (not ‘my way’ of doing things but it did indeed prove a point). It was a simple MA crossover if memory serves me correctly. Three different brokers in three different timezones each timezone differing by only a few hours. The same EA with the same parameters with the same pairs generated similar and consistent results on the 1 hour and shorter timeframes. On the 4 hour and daily timeframes: HUGE differences (and I’m not talking about differences that could be attributed to slightly different quotes and different spreads etc. the ONLY difference were the timezones)!!!

Unfortunately: this affects anyone and everyone trading anything that is traded 24/7 (well 24/5 or 24/6 i.e. you ‘get the picture’) e.g. forex pairs and UNFORTUNATELY even continuous futures as well. And then there is the ‘dreaded’ and ‘useless’ ‘Sunday Bar’ that some brokers show on their charts i.e. another ‘issue’ that could be material in nature depending on how you’re trading.

Regarding indicators: some brokers will show ‘empty days’ e.g. public holidays when there was no trading. An indicator does not know that there was no trading i.e. it keeps ‘ticking over’ as though the open, high, low, and close, for that trading day were the same i.e. no movement in price during the trading day thus ‘skewing’ it’s output for at least the future period equal to it’s period parameter setting.

There are a LOT of things to consider when trading forex pairs (well on any timeframe longer than 1 hour) in my opinion. As I trade only the daily charts: it’s one of the reasons why I’m pretty vocal about trading only intruments that are traded on an exchange that have a fixed opening and closing times e.g. stocks, commodities, ETF’s etc. At least that way you’re sure that you’re looking at the same chart and / or indicators that every other trader is looking at that is trading that same instrument. At least if I see a bull bar I know everyone else is seeing a bull bar and may (or may not) act / react accordingly. I’ve seen occasion where on a forex chart a bull bar at one broker is actually a bear bar at another in a different timezone. It cannot NOT make a difference ESPEICALLY if you’re ‘trading naked’. I reckon that at BEST case, for instruments traded 24/7 (24/5 or 24/6) four hour and daily charts that open and close on New York time are the closest you’re going to come to the ‘correct’ data. Let me put it this way: just about every book written on the subject of trading (at least EVERY book that I have had the pleasure of reading anyway) contains examples of trading systems etc. based on New York timezone charts. There must be a reason for this (well other than the fact that they’re all written by American traders I guess)!!! LOL!!!

I also saw mention in this thread of charting packages that allow you to change the timezone. Be careful with these i.e. in my experience all they do is change the DISPLAY time but do not redraw the candlesticks based on the timezone specified. If anybody here knows of a charting package that will actually REDRAW (RECALCULATE) the candlesticks based on the timezone specified then do post details here i.e. I for one would be keen to take a look at it.

Regards,

Dale.

Edit:

Sorry ‘dusktrader’: the daylight savings time issue is not something that I’ve quite been able to figure out in my own mind as yet!!! LOL!!! That being said: it’s normally only a one hour difference either way is it not so I suppose if one ‘sat out’ for 24 hours from the day of the change then things would return to ‘normal’??? Not sure (I’ve got enough to occupy my mind with this stuff as noted above)!!! LOL!!!

Hi, i am also confused on this topic, i’ve been thinking how to read the 4h and 1D candles most correctly. I am gonna post my alternatives here for you guys, would be happy to hear your thoughts.

I will base my theories around this: Candlestick were constructed by the japs to be able to read the psychology in the market.

Alternative A:
Would it be a good idea to have for example one chart for the Asian session, one chart for the European session, one chart for the NY session and then make an average candle of all this 3? That would actually give the overall psychology printed?

Alternative B:
Say for example that i am trading on the European session, i will use the time zone for London and only trade european crosses?

Alternative C:
I will just use NY session times for my candles, i am assuming that the majority of forex traders (retails/institutions) are using this? like dpaterso said about the books that prints candles from the NY session.

Alternative D:
Almost the same as B but, i will stick to say for example European time zone and trade for example EUR/USD. Then i could read the psychology for this group of traders. But then we have the problem when the New York market starts and overlaps the EU market.

Which alternative do you guys think is the most logical one? And why?

Is there some statistics of what % of the overall traders use to draw their candles?

Maybe we have to connect diffrent pairs to diffrent time zone candles?

As much as I hate replying to ancient threads, I guess I will anyway.

First off, I love candlestick patterns as much as the next guy. That said…

The problem people have with candlesticks (or bars) and the differing formations they see based on broker start/stop times essentially comes down to this: they overlook the fact that candlesticks are just another form of lagging indicator – just like the MACD, RSI, CCI or stochastics.

Candlesticks are just a snapshot of what price did during a certain amount of time. Looking at the last closed candle on a one hour chart, for example, will show that price opened at a specific price, moved to this high, went to that low and then at the end of the hour closed at whatever price it closed at.

The same is true of RSI, for example, using a look-back period of 14. Based upon the values used to calculate the RSI over the last 14 bars the current reading is X. If you change the look-back period to 5 then RSI will look completely different and the current reading will be Y. If you change the above mentioned one hour candle to a four hour candle then it too will look completely different because you are using a different look-back period on a lagging indicator. This time it just happens to be a candlestick instead of RSI.

So, which is the BEST broker time to use on a four hour or daily chart? It doesn’t matter!!! You are just looking at what price did during a certain, completely arbitrary, period of time. That’s all!

But, you say, this broker’s 4 hour chart shows a shooting star and this broker’s chart shows a marabuzo! Which one is right? Which do I make a trading decision off of?

They are both correct – for the particular look-back period used by each broker’s lagging indicator, the 4 hour chart candlestick. Which do you make a trading decision off of? Your broker’s!!! Not mine, not some other guy’s… YOURS. Hopefully, you are using a little more than just a candlestick to base a trading decision off of but any broker’s chart patterns are just as valid as another using different start/end times. The bars are only a reflection of the ticks that occur within a completely arbitrary time period.

I would suggest learning to look at price movements (through candlesticks, bars, lines, tick bars or any other format) to gauge the general ebb and flow of the market and the reaction of price at key levels (whatever levels you determine to be key – support/resistance, supply/demand, trendlines, volume levels… whatever) instead of demanding that price does a certain thing because the last bar (or two or three bars) said it must do that particular thing. Something I have needed to work on a bit more myself, actually.:15:

Markets are very fluid things. Arbitrary candlestick patterns, the arbitrary times imposed to calculate them and most trading systems are all very rigid things. In the end, the fluid markets win every time. Learn to trade the market, not a candlestick. Let the candlestick, regardless of broker GMT offset, assist in seeing what and where price is reacting in conjunction with other factors because the candlestick, again, is nothing but an indicator.