THE JOY OF CANDLESTICK TRADING - a Learning Experience

Beginner Questions
145

Hmmm…no scalping on Oanda ??? Really? Thats the first I have heard of that.
I use the GFT platform.

[B]Anyway, to complete the charts for this trade. Notes below[/B] >>>


By tymen1 at 2008-03-17

We now enter as shown.

The chart below shows the final result (which you can see from the main chart anyway) >>>


By tymen1 at 2008-03-17

Please note that the highest price (the best possible entry for going short) was no higher than the upper Keltner band as was predicted.
[U]This prediction method saves a lot of headaches when trying to decide the best entry point.[/U]

Then, as you can see, the price roared downwards and, since we are going short, we make a nice profit.

This now ends this particular trade. Comments invited.

[B]I will continue with more of these trades to help the understanding of this method.[/B]

146

[B]Before I go any further - just a break. Have a look at the chart below.[/B]

Notes below the chart >>>


By tymen1 at 2008-03-24

Only a few days ago I saw this simultaneous set of dark cloud covers. All 3 pairs were doing this at exactly the same time. Time frames were 20/25 minutes.

All 3 went on to make a big profit if you went short which is the way the pattern directs you to trade, ie they were a huge success. :slight_smile: :slight_smile:

My times of 10.40am, 10.41am, 10.42am are different only because of the time I needed to screen print them and edit them in Microsoft Paint, then load them onto Image shack.

147

Hi Tymen,

I just want to verify if I see this correctly;

Look for the reversal off BB on the longer timeframe (for me 30min is closest to 25 min).

Then go to 5 min and do your vectoring to look for best entry on KC.

Do I have that right?

148

Tymen,

Let me see if I understand this whole trade correctly. I�m using MetaTrader so I don�t have 20 minute charts but I am looking at the 15, 30 and 60 minute charts.

First I identify the evening star at the upper Bollinger Band on one of those timeframes and look to enter on the second bar after the evening star.

Next I switch to the 5 minute chart. It�s a little confusing because it seems to contradict the earlier charts posted but on the latest charts you would go short when the middle Bollinger band is up, MACD is up and the price is at the upper Keltner channel band?

I�m still trying to understand the vectors and the resultant direction of the price.

Thanks, I�m learning a lot but I�m still a little confused.
Max

149

Hi,

As soon as I started being profitable my platform started to disconnect me and I would be unable to exit my trade until it was too late and it would move against me. After some time I contacted the live operator and this is the conversation that took place :

gold4me: My platform disconnect me after each trade and I’m unable to log in or stay on for any period of time. Are you not allowing short term trades?

Oanda:The only type of trading we discourage is latency trading, where someone uses a potentially fast feed to try and predict where prices will move next on the FXTrade platform.
OANDA: If you’re not able to connect, feel free to contact us by phone or chat, and we can close a position for you.

gold4me: latency trading? Are you referring to scalping method?
OANDA: Yes, our definition of scalping is latency trading. We’re not concerned with how long trades are kept open, but we don’t want traders using a potentially faster price feeds to predict where our prices will move next.

Faster price feed??? I was just using their price feed and how fast that can go?

Comment are welcome.

150

Yes, everything is correct except your reversal which should be…look for an evening star pattern on the upper BB of the longer time frame, then wait for the 4th candle. As it appears, go to the 5 min.

The reversal then is the evening star pattern.

You are doing well VulcanClassic !! :slight_smile: :slight_smile:

151

To Max99 :

Tymen,

Let me see if I understand this whole trade correctly. I�m using MetaTrader so I don�t have 20 minute charts but I am looking at the 15, 30 and 60 minute charts.

Metatrader allows you to program any chart timeframe you want. You just need to find out how to do it.

First I identify the evening star at the upper Bollinger Band on one of those timeframes and look to enter on the second bar after the evening star.

You enter [U]short[/U] on the 4th candle. The first 3 are part of the evening star pattern.

Next I switch to the 5 minute chart

Correct.

It�s a little confusing because it seems to contradict the earlier charts posted but on the latest charts you would go short when the middle Bollinger band is up, MACD is up and the price is at the upper Keltner channel band?

You [U]always go short[/U] on an evening star pattern - that is the trading nature of the pattern. Whenever you see an [U]evening star[/U] you know that you must [U]trade short[/U]. [B]It has nothing to do with the 5 minute chart.[/B]

The 5 minute chart is [U]just a tool [/U]to allow [U]better entries[/U]. It consists of a MACD, BB and KC.

To get these better entries, the 5 minute chart has [U]rules [/U] as follows:

Look at the 5 min chart.
Draw the MACD vector.
Draw the BB vector.
Get the resultant of the MACD+BB vectors.
Decide whether the resultant is up, down or level.

If the resultant is up…best entry at the upper KC band.

If the resultant is down…best entry at the lower KC band.

If the resultant is level…best entry at the middle KC band.

There are also shades of grey in between but don’t worry about that just now.

Hope this helps.
If not then maybe one of the other readers can also help.

[B]In the meantime, watch the next trade…it may help to make things clear. I intend to show several of these until the principle is clear to everyone.[/B]

152

To Loveforex :

They may be talking about your use of the 5 minute chart. :smiley:

What do you want to do?

I hope one of the other readers using Oanda will post a response to you.

I can only tell you that I use the GFT program without problems.

My broker (in Australia) is :

Kinetic Securities

Unlike GFT, they allow indefinite demo trading which is extremely useful.

153

[B]Now to show another evening star trade from start to finish. This is a very recent one and give a real feel for the MACD/KC/BB entry on the 5 minute chart.[/B]

First the main chart in full. We assume you have the 5 minute chart on hand ready. Notes below the chart >>>


By tymen1 at 2008-03-26

The chart shows that the 4th candle (red) (the entry candle) has its [U]open[/U] at 34 pips at the time of 21.30.

It also shows the lowest point reached (within a few candles) at 16 pips.

The 4th candle (red) also has an upper wick reaching 39 pips.

Since we are commanded to go short, an entry at 39 pips would be superior to an entry of only 34 pips. Lets see how we get there…hello to the 5 minute chart >>>


By tymen1 at 2008-03-26

In this chart we see part of the trade (I have blotted the rest out for a good reason).

The starting or “poor” entry at 34 is shown.
The BB bands are shown in royal blue.
The Keltner channel is shown in full grey with the middle KC band in [U]yellow.[/U]
The MACD is underneath the chart.

The vectors are shown, both on the indicators and on a separate diagram. They are in royal blue. Can you see them? Look carefully.

The resultant (price) is shown in pink on the separate diagram. It is going [U]down[/U].

Therefore, according to the rules, the best entry we can expect will be at the lower KC band.

But the price now (at 34) is already [U]above [/U]the lower KC band!!! That is very good news - wow - we are so lucky. !! :smiley:

Should we enter now? Or, considering that it is doing better than expected, should we wait for it to go even better? Hmmmmmm…maybe we are just being greedy. Better enter now …or not…no…yes…no …yes…we do have 20 minutes to play with (time frame).

[B]What is the right thing to do?..next chart.[/B]

OK, I am very tired now so [B]next post tomorrow.[/B]

154

Thanks Tymen, this is all starting to make sense.

I will look into programming the time frames in MetaTrader, I didn�t know you could do that.

I do have a question about timeframes. Like I mentioned earlier I�ve been using the 15, 30 and 60 minutes charts. My worst trades come from the 15 minute chart and I�m not sure if it�s because it�s too short and there�s too much “noise” or if I just haven�t been using good entries yet. So do you think the 15 minute chart is just a little to short or I am just still screwing up? :smiley:

Thanks again, this is a great thread.

155

I am disapointed to read that conversation you had with them.I hope this isn’t something new to come to Oanda.I have been in trades as little as 20 seconds and jumped out without a problem.How frequent do you trade?I average about 4 trades a week.Maybe you trade more and that is what catches there eye.HMMMMM…I picked Oanda because of there integrity as a broker I hope I don’t have to leave them if I run into problems.I was with GFT before them,but they don’t offer micro accounts.So I learned as I became more educated that I needed to start small…Good trading:)

156

To Max99 :

Thank you for the encouragement.

Yes, 15 mins is really too short - even 20 mins is about borderline, i think.

I deal with the 4 majors with time frames from 20 mins to 1hour. Thats 9 time frames for each pair - a total of 36 time frames to look at. Added to this I have 4 time frames for USD/JPY and AUD/USD. Thats 8 more, a grand total of 44 time frames.

With so many time frames, its easy to find heaps of candlestick patterns. Therefore, I pick only the best ones.

It would be great if you can do the same with Metatrader.

157

Ok, on with that chart.

[B]We were supposed to enter [U]short[/U] (always short on an evening star pattern - thats the way it is traded), at the lower KC band. But we are already above that band making for an even better short.[/B]

The question is…should we wait for an even better entry?

Well, my experience is…that no sooner do you get greedy and start waiting …suddenly the price plummets downwards and you are left in the lurch. You are now some 5/6 pips down and …oh, if only, if only :frowning: :frowning:

You must stick by the rules : in this case entry is at the lower KC band. If you in a better position than this then [B]enter now! Do not wait.[/B]. Count yourself fortunate - a bonus.

Next 5 min chart with notes below >>>


By tymen1 at 2008-03-27

We entered [U]short [/U]immediately at 34. The price indeed rose a little and by waiting we could have entered short at 39. But the rules say to enter at the lower KC band - that means immediately on this chart.

Because this prediction method with 5 min charts works accurately, we have absolutely no guarantee that the price will go any higher - and in most cases it drops sharply to our horror.

A scalp in this case, therefore, from 34 to 16 (on the chart) is 18 pips. I usually go for 10 at high leverage.

[B]END OF EXAMPLE[/B]

158

[B]Just a short break before our next example.[/B]

I have not yet touched on stop losses - that is to come.

Not all evening stars work - some fail. Look at the chart below >>>


By tymen1 at 2008-03-27

In this case we have 2 evening stars (highlighted) and the first one fails, ie the price action keeps going up. Even though we get a good entry on the 4th candle (green), the price keeps going up and eventually our stop loss is activated.

These cases, however, tend to be in the minority. The second evening star, (not quite a true evening star) although short of the BB, sends the price action down.

159

[B]Now for another example. This one was taken only 3 days ago.[/B]

It is a 20 minute chart of EUR/USD, one of the 4 majors. I pay a 3 pip spread on this one.
How much do you pay?

This trade is a splendid example of the reliability of the MACD/BB/KC 5 minute entry system.

The chart shows an evening star pattern so we are looking to trade [U]short [/U]and get the best entry on the 4th candle >>>


By tymen1 at 2008-03-27

The chart shows an evening star located on the upper BB. The Bolinger bands are in royal blue.

The 4th candle [U]begins [/U](vertical line) at 29 at the time of 5.20 am. (shown in pink).

The upper candle wick extends to 34 (it actually pipped 35) and we would like to have [U]that [/U]entry to go [U]short [/U]from. (shown in pink).

The long red arrow shows the direction of the trade going [U]short[/U].

Lets go to the 5 min chart. :slight_smile:

160

Here is the 5 minute chart.

Remember, we go to this chart as soon as the 3rd candle of the evening star is complete >>>


By tymen1 at 2008-03-27

This chart shows the begin of the 4th candle (29), the BB in royal blue, the KC in full grey with the middle band in yellow.
The MACD is at the bottom.

The vectors are drawn on the indicators. They are labeled. Can you see them?

The vectors are also shown on a separate vector diagram.

The BB is going [U]up [/U]and the MACD is going [U]down[/U]. Consequently, the [U]resultant [/U](the price) is going [U]level[/U].

This means, according to the rules, that the best entry we can get will be at the [U]middle [/U]Keltner band (which is in yellow).
It is [U]not there yet [/U]so we [B]wait[/B].

[B]
Thats enough for now - next exciting episode tomorrow. Don’t miss it! [/B] :smiley:

161

Just wanted to send you a thanks!You are putting a lot of time into this and it is great how you are teaching it.Keep up the good work!!!:slight_smile:

162

Pips To You Tymen,

I made 83 pips today using these entries. Keep up the good work!

163

Good for you VulcanClassic - I am so glad you are doing this well! :slight_smile: :slight_smile:
Hopefully you will continue to make good profits.

To jlmac27 :

Thank you for your continuing encouragement. I hope you are doing well too! :slight_smile: :slight_smile:

Yes, the charts take a long time to produce but its worth it if there are people benefiting from it. I hope I am contributing something useful in the forex business and my teacher training is helping me do it.

164

[B]And now, the finish of the EUR/USD trade[/B].

Here is the next 5 minute chart. Notes below the chart >>>


By tymen1 at 2008-03-27

The level [U]resultant [/U]shown in both this chart and the previous 5 min chart tells us that the [U]best [/U]entry is at the [U]middle [/U]KC band (yellow).

The previous chart showed the begin of the 4th candle at 29.

We must [B]wait.[/B]

By [U]waiting [/U]we see the 4th candle grow from 29 to 34 and hence go a hairs breath above the [U]yellow middle[/U] KC band.

Time to enter [U]short [/U]- now

[B]Lets see what happens in the next chart.[/B]