THE JOY OF CANDLESTICK TRADING - a Learning Experience

Beginner Questions
713

[B]Analysis of the Ultimate Short Trading Method for Candlesticks (part 3)[/B]

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!

  1. [U]Stop loss.[/U]

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!! :smiley: :smiley: :slight_smile: :slight_smile:

No more worrying about 29 pip stop losses!!!

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

[B]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.[/B]

714

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.:slight_smile:

715

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 :smiley:

716

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?

717

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… :slight_smile: Ken

718

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.

719

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

720

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!! :slight_smile: :slight_smile:

To answer…No.

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

http://forums.babypips.com/analyst-arena/13522-weekly-trading-lesson-making-correcting-trading-mistakes.html

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

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 [U]universal [/U]stop loss of price 38.

[U]The choice is yours to make.[/U]

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 [B]Ultimate Candlestick Trading Method [/B]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.

721

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

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

722

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 :smiley:

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 :frowning:

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!!!

723

The [B]Ultimate Candlestick Trading Method [/B]appears to have a built in protection mechanism. :smiley: :smiley:

Well done!!
No pips lost!
No harm done!

the trick i suppose is to be careful on the re-entry 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 … …

I have noticed this too…but it is not always the case because the patterns developed on 5 minute charts are unreliable, that is, they do not nearly have the reliability of the longer term charts.

Patterns formed on a daily chart, for example, are extremely reliable.

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…

So I take it that you short entered when the price started to go down again.

It is best to get as close to the top of a retracement as you can.

Posting some pictures/charts of these entries would be of great interest to us all and make a good discussion point.

made a total of 70 pips on 3 trades

That’s 23 pips per trade - well done!!

I have yet to see that sort of consistency from the indicator traders, with such a short learning time!! :smiley:

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

This can happen even to professionals.

Oh dear,… a huge, massive, tremendous, gigantic loss of…10 only pips. :smiley:

Your risk/reward ratio is completely intact.
At 23 pips win and 10 pips lost we have 10:23 = 1:2.3
Excellent!!

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…

The pattern will develop quite differently on a higher time frame. Be careful here. As I said, higher time frames are more reliable.
But when the pattern has formed on you chart, and it is a quality one, with the BB favourable, then it is time to enter.

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

Glad to be of service to you Neboxian!

It looks like you are really understanding the system and how it works.

Now [U]continue to soldier on[/U] and we will soon be considering a new pattern, the engulfing pattern.

724

[B]The time has now come to show the Starc bands and entry points in pictures as I have promised[/B] >>>


By tymen1 at 2008-07-01

This picture shows the Starc bands going up,level and down.

Retrace points are shown in blue.
Exits are shown in red.

The dots represent the most likely points. The larger dots are the highest probability.

The arrows with the 1,2,3 are walkings of the bands, either touching or some distance away. The numbers are the candles…1st, 2nd and 3rd on the band walk.

I have kept the drawing simple, without clutter.

You may find it useful to print the picture for future reference.

725

[B]Behold this very important post.[/B]

It was post #325 made by Cbarnett808 and can be found on page 33 of this thread.

It was [U]the post[/U] that made me decide to go on a pilgrimage to search for a trading method that would have a consistently [U]positive risk/reward ratio.[/U]

Up till this time we had only looked at scalping trades, always exiting when the trade was in our favour.
There is nothing wrong with that approach as such, if you [U]always [/U]exit when the trade is winning for you. In fact, that way you will never have a loss.

But when searching for greater numbers of pips, rather than just scalping, losses are a possibility, and thus the search began to deal with the risk/reward ratio.

In this search we have considered many things. Better entries, multiple lots, where to place stop loss orders and, of course, the fluctuations which result in pullbacks or retracements.
Suitable time frames have been chosen to develop a method that will handle all situations and still keep the risk/reward in our favour.

I believe we have now found that trading approach and I call it the [B]Ultimate Method for Candlestick Trading.[/B]
It can be used both long and short.

[B]Therefore, I consider it now appropriate to bring this long search, with all its relevant posts, to a timely END.[/B]

[B]I now declare this part of the thread, starting from page 33 to be now CLOSED.[/B]

We will now use the [B]Method[/B], as developed, to go on in our trading.
We will now look at a new pattern, the going long engulfing pattern, by popular choice.

[B]At this time I am going to take a short break of a few days, time to rest from this exhausting work, time to prepare new material.
And above all for me, time to do some of my own trading as well.

See you all soon, keep posting in the meantime.[/B]

726

Excellent Tymen. Feel i have learnt so much cause of this thread. Definitely my foundations are being built here. I do feel i can perform as required to make the system work.
Problem i have is the pschology of trading that i am working on, as i tend to get ahead of myself. I am patience an execute properly for a trade or two and generally am successful following the methods learnt here. My problem is i then get excited and break every rule…its me…so i am still doing demo until i can get myself sorted…think iiii…think …iiiiii…think…iiii will get there…

Anyway thanks for all this great stuff, and you definiately deserve a well earned break, but i am looking forward to seeing you back here asap for the LONG EGULFING pattern. I am fascinated to see how it is all going to work!

I love those SL rules…they are GREAT!..i could feel/sense that it was there, this brilliance, but i couldnt quite get it. I was figuring an early exit on the retrace was better than waiting to renter, but i still couldnt quite get it but NOW we have THE Ultimate Method for Candlestick Trading. I knew you were taking us somewhere, but when it finally came it was like. AHA…THAT IS IT!!!..WAHOO!

727

Hi Tymen. I have read your thread here over the last week and am very impressed with your teaching style and with this method of trading. I have never felt the need to post on any forum before now, but I want you to know that there are those of us “quiet ones” out here that truely appreciate all you are doing here.

 I have started trading on a demo account and have had mixed results because I am so anxious to trade I forget to be selective in my choices of candles.  The up side is that when I do make the smart choice I am amazed at how things work out.  And when I make a not so smart choice I am aware of why it doesn't work out.  I know with patience and time that I will be able to make more right choices and I have you to thank for that.  Thanks for this wonderful method and don't feel that the lack of responses from out here is in any way indicative of the support you have for this terrific method of trading.

 I will be glued to this thread for any and all future posts.

                                                                             Jerry
728

Is the new Starc band graph based on the main chart or the 5m chart?:confused:

729

Tymen,

Have a good break.

I take it those dots represent short positions only?

730

Tymen; if anyone deserves a break it is you, This thread is far and above the best designed and executed I have seen. I am sure there are alot of other folks reading your thread that don’t chime in. I was like that for along while , Don’t want to look the fool. But you know as well as We have been told our entire lifes there are no stupid questions, except the ones we don’t ask…:stuck_out_tongue:

Hope you have a great time off and don’t spend it all working on this. Have a day or 2 at the beach ( oops forgot it is winter down there) anyway have some fun. Life is to short not to enjoy it. :cool:

We will be waiting for your return… Take Care Ken:D

731

Just to answer this question,I believe the starc bands are only used on the 5 min charts and not on the main chart.:slight_smile:

732

when have we gone long vulcan?