THE JOY OF CANDLESTICK TRADING - Part 2

BankDaPips · April 1, 2009, 9:52am

Hello Tymen,

I was trading candlesticks before I saw this post, having read through your posts I realize it was at the basic level. I read through your method on Monday and have had very good and consistent results and just want to commend you for dedicating yourselft to sharing freely a truly powerful trading methodology for others to learn.
Currently I am only trading the GBP/USD and the results since yesterday are as follows:

[B]10 trades, 1 loser, 6 Winners, 3 breakeven - Total +121pips[/B]

Will continue to follow this thread.
Thanks!

BankDaPips · April 1, 2009, 11:09am

husky_1:

Here is the mt4 code for the “double starc”, one indicator with both sets of lines. You can change the colors if you like, but to keep it in the spirit of Tymen, they are pink here. .


//+------------------------------------------------------------------+
//| originally                                                        |
//|STARCBands.mq4                                                     |
//| Copyright � 2005, [email protected]                       |
//| http://www.fxfisherman.com/                                      |
//| Updated by Husky to have 2 sets of bands for the Tymen Method    |
//+------------------------------------------------------------------+
#property copyright "Copyright � 2005, [email protected]"
#property link "http://www.fxfisherman.com/"

#property indicator_chart_window
#property indicator_buffers 8

//---- indicator parameters
extern int MA_Period=6;
extern int ATR_Period=15;
extern double KATR=1;
extern double MKATR =0.45;
extern int Shift=1;
extern color UpperColor=Pink;
extern color MUpperColor=Pink;
extern color MiddleColor=Pink;
extern color MLowerColor=Pink;
extern color LowerColor=Pink;
//---- buffers
double MovingBuffer[];
double UpperBuffer[];
double LowerBuffer[];
double MUpperBuffer[];
double MLowerBuffer[];

//+------------------------------------------------------------------+
//| Custom indicator initialization function |
//+------------------------------------------------------------------+
int init()
{
  //---- indicators
  SetIndexStyle(0,DRAW_LINE,0,2,MiddleColor);
  SetIndexBuffer(0,MovingBuffer);
 SetIndexStyle(1,DRAW_LINE,0,2,UpperColor);
 SetIndexBuffer(1,UpperBuffer);
  SetIndexStyle(2,DRAW_LINE,0,2,LowerColor);
 SetIndexBuffer(2,LowerBuffer);
    SetIndexStyle(3,DRAW_LINE,0,1,MUpperColor);
  SetIndexBuffer(3,MUpperBuffer);
  SetIndexStyle(4,DRAW_LINE,0,1,MLowerColor);
  SetIndexBuffer(4,MLowerBuffer);
  
  //----
  SetIndexDrawBegin(0,MA_Period+Shift);
  SetIndexDrawBegin(1,ATR_Period+Shift);
  SetIndexDrawBegin(2,ATR_Period+Shift);
  SetIndexDrawBegin(3,ATR_Period+Shift);
  SetIndexDrawBegin(4,ATR_Period+Shift);
  //----
  return(0);
}

//+------------------------------------------------------------------+
//| Bollinger Bands |
//+------------------------------------------------------------------+
int start()
{
  int i,k,counted_bars=IndicatorCounted();
  
  //----
  if(Bars<=MA_Period) return(0);
  
  //---- initial zero
  if(counted_bars<1)
  for(i=1;i<=MA_Period;i++)
  {
    MovingBuffer[Bars-i]=EMPTY_VALUE;
    UpperBuffer[Bars-i]=EMPTY_VALUE;
    LowerBuffer[Bars-i]=EMPTY_VALUE;
    MUpperBuffer[Bars-i]=EMPTY_VALUE;
    MLowerBuffer[Bars-i]=EMPTY_VALUE;

  }
  
  //----
  int limit=Bars-counted_bars;
  if(counted_bars>0) limit++;
  for(i=0; i<limit; i++)
  {
    MovingBuffer[i] = iMA(NULL,0,MA_Period,Shift,MODE_EMA,PRICE_CLOSE,i);
    UpperBuffer[i] = MovingBuffer[i] + (KATR * iATR(NULL,0,ATR_Period,i+Shift));
    LowerBuffer[i] = MovingBuffer[i] - (KATR * iATR(NULL,0,ATR_Period,i+Shift));
    MUpperBuffer[i] = MovingBuffer[i] + (MKATR * iATR(NULL,0,ATR_Period,i+Shift));
    MLowerBuffer[i] = MovingBuffer[i] - (MKATR * iATR(NULL,0,ATR_Period,i+Shift));
  }
  
  //----
  return(0);
}

//+----------scorpion@fxfisherman.com--------------------------------+

Hi Husky,

I am not quiet sure how to implement this. Do I save it as a script and run it on the chart. Please help me setup.

thanks!

tymen1 · April 1, 2009, 1:24pm

121 pips in one day.

Excellent!!

I think you will have to send a private message to Husky thro the messaging facility at the top of the page.

Soldier on!!

tymen1 · April 1, 2009, 1:37pm

Sorry no new trades just now - very busy trading myself!!

Will try again tomorrow.

BankDaPips · April 1, 2009, 1:42pm

Thanks Tymen! I will try to send Husky a message.

husky_1 · April 1, 2009, 3:31pm

Funny thing is, I have not been in this thread in a while. I was just cruising around and saw the post.

As far as implementing the script:.

Open notepad on your computer.
Copy the code in the white box that you posted
Go to File “Save As”
In the name box type “Husky_Double_starc.mq4” (Use the quotes, as it will save it as .txt if you do not.
For the location you will go to C:\program files<Name of your metatrader folder>\Experts\indicators…
Once save in their, you can close notepad.
Now go to the above directory and you should see the file,double click it and it should open in Metaeditor.
Hit the compile button and now it should show up in your custom indicators.

BankDaPips · April 1, 2009, 3:44pm

Thanks very much Husky…Got it!!!

BankDaPips · April 2, 2009, 10:01am

Good Morning Tymen,

I am just truly appreciating the strength and reliability of taking patterns on the 4Hr/Daily time frames and going down to 5M for entries. Mega pips and less trading! I am loving this very much. My platform is VT Trader, so I am not able to setup the STARC the way you have it on MetaTrader, but still able to follow the rules. I took the attached trade setup and exited early for lack of confidence, but I really am getting a much better understanding of this method.

flossnhoss · April 2, 2009, 11:32am

Tymen, thanks again for all your teachings. It has been both enlightening and enjoyable to follow the progression of this method.

I have a couple questions on the developments taken place in this second installment so far:

For Beginner and Intermediate, are we still to use STARC band at 0.45 level for interior bands setting? Also, is the direction of the 5minute STARC bands still [U]relevant[/U]? For example: don’t trade long if STARC is going down, even if overall trend on longer timeframe is going bullish (up).
For Advanced, the STARC band setting is at 0.7, and the direction of the 5minute STARC bands is [U]irrelevant[/U] as you have recently indicated.

With the use of the Advanced procedure in mind, I’m curious if your old original graphic (from previous thread/method) still holds true. This is the graphic with the blue and lilac balls on the STARC bands to indicate entry points. The reason I ask, as I see a lot of your recent examples now showing entry 1, exit 1…THEN entry 2 exit 2. Previously, it had seemed the flow was more entry 1, wait to improve, entry 2, THEN exit 1.

The difference being, originally it seemed we used to always have at least one open position. From you recent examples it appears you close a position before opening up the next.

While I believe both are probably okay, just curious if one is preferred over the other, or if you have any comments on that.

Thanks!

tymen1 · April 2, 2009, 12:55pm

Unlike all the other threads, this one is subject to changes as we go along.
The purpose of these changes is to make improvements to the strategy to make it more powerful and also simplify the strategy as well.

At the end of all this I will draft and post the 2nd edition of the pdf file while will contain the final method fully explained.

For now to answer your questions…

The Basic level does not use the 5 minute charts with the Starc bands.

For the Intermediate/Advanced levels the interior Starc bands are now set to 0.7 and I expect them to stay there.

Also, is the direction of the 5minute STARC bands still [U]relevant[/U]? For example: don’t trade long if STARC is going down, even if overall trend on longer timeframe is going bullish (up).

Ah yes!! Thank you for pointing that out.

My research shows that the direction of the Starc bands is NOT relevant.
What is [U]very relevant[/U] is the direction of the trend of the [U]main chart [/U]given by your candlestick pattern that you are trading - eg dark cloud cover means to trade short ie trend is going down (short).

[B]You only trade in the direction given by the candlestick pattern on the main chart!![/B]

For Advanced, the STARC band setting is at 0.7, and the direction of the 5minute STARC bands is [U]irrelevant[/U] as you have recently indicated.

The interior Starc bands are set at 0.7 always.
Direction of Starc bands irrelevant.
Direction of main chart candlestick pattern [U]very relevant and important.[/U]

With the use of the Advanced procedure in mind, I’m curious if your old original graphic (from previous thread/method) still holds true. This is the graphic with the blue and lilac balls on the STARC bands to indicate entry points. The reason I ask, as I see a lot of your recent examples now showing entry 1, exit 1…THEN entry 2 exit 2. Previously, it had seemed the flow was more entry 1, wait to improve, entry 2, THEN exit 1.

The difference being, originally it seemed we used to always have at least one open position. From you recent examples it appears you close a position before opening up the next.

While I believe both are probably okay, just curious if one is preferred over the other, or if you have any comments on that.

Go with what I am posting in this thread [U]now[/U]!!

This stuff I am posting now is the latest and most accurate.
It is also a clarification on last years Advanced method work where I only touched on the Starc bands briefly.

[B]Read carefully the next post to follow after this one.
The example I will post is from yesterday and has everything you need in it to understand fully the Advanced method.[/B]

tymen1 · April 2, 2009, 1:11pm

[B]I am now going to show you an important example of how the Advanced level works.[/B]

This trade I print-screened yesterday but it was still underway as I documented it.
But enough of it is there to show one full trade.

The trade is a 30 minute chart of the Cable (GBP/USD) going short on an evening star pattern >>>

By tymen1 at 2009-04-02

The chart shows an evening star pattern (highlighted) followed by the entry candle at 1.00am (my time!!).
This entry candle is shown by the black vertical line.
The PCI is shown as well.

We observe 2 things…

The entry candle shows a very powerful retrace but it does not hit our stop loss (PCI) which is about 35 pips above the base of the entry candle.
The entry candle does not have a lower wick or even a body below the base entry point.
Therefore, a Basic level entry would not have made any money on this trade.

[B]Let us see now how the Advanced level tackles this retracement problem in the 5 minute Starc band chart…[/B]

tymen1 · April 2, 2009, 1:34pm

[B]Here is the 5 minute Starc band chart[/B] >>>

By tymen1 at 2009-04-02

[B][U]Lets go thro it…[/U][/B]

The entry candle is shown at 1.00am with the black vertical line.

We have to wait 25 minute until we get to the green candle marked E1.
This candle crosses the upper 0.7 Starc band from which we will [U]trade short.[/U]

We enter short at the 0.7 band or better (especially if you trade 2 amounts).

[B]Note that the Starc bands were going down but are now going up.
That is, they are going in the opposite direction to which we are trading.[/B]

[U]This is not going to be a problem[/U], since we know that the evening star pattern in the main chart will dictate the trend, which is down, and, therefore, we expect the Starc bands to start going down again soon.

The most likely turning point for the Starc bands will be at the upper Bollinger band.
Here we expect the Starc bands to turn down again.

[B]As we wait, this proves to be correct.[/B]

There was a slight drawdown after our 0.7 short entry, but after the Starc turned down it went straight down to the bottom Starc band where exits are taken from short trades.

So I marked the trade X1 at this point.

Looking carefully, however, we can see that at this point, the Starc bands started to turn down rapidly.
[B]We could have been on a roll downwards.[/B]

As such, you would not exit at the point I marked, but instead wait for the price action to drop and you would collect all the pips.
You would then exit when the Starc bands finally reverse again.

Now by that time, it was 2.00am in the morning, and way past my bedtime.
So, therefore, I did not record further!!

BankDaPips · April 2, 2009, 1:58pm

Hi Tymen,

A quick question for properly setting up on my platform. My STARC settings are currently
ATR Periods=15, Multiplier=2, Bands=6. Can you let me know what else do I need to add? What I am currently doing is looking at the main chart W retrace and identifying a pattern with the trend on the 5M to estimate my entry.

tymen1 · April 2, 2009, 2:57pm

Nothing else to add.

Make sure you are looking at the trend got from a candlestick pattern on the main chart.

You do not need to estimate your entry on the 5 minute chart.
It will be given when you cross the relevant 0.7 Starc band.

tymen1 · April 2, 2009, 3:07pm

[B]Now my last example for this evening…[/B]

We have here a 35 minute main chart of AUD/USD with an evening star pattern in a powerful uptrend clearly visible on the chart >>>

By tymen1 at 2009-04-02

The PCI stop loss is shown.

With that next green candle which is the entry cande to [U]go short[/U], you would have no chance for profit.

Correct??

[B]Wrong!! [/B]

[B]Have a look at the next chart which shows how we use the Advanced level to win good pips out of this trade!![/B]

tymen1 · April 2, 2009, 3:24pm

[B]OK, the 5 minute chart [/B] >>>

By tymen1 at 2009-04-02

In this chart, the corresponding short entry candles are shown with the vertical black line.

We only have to wait 5 minutes before a new candle forms that [U]rises first[/U] to a high point of 112.

The 0.7 line sits at 103.
Short entry at 103 (conservative).

The candle then falls to a low of 69 before rising to its close of 79.

The lower Starc band is crossed at 81.
So the exit is at 82.

Profit…103-81 = [B]22 pips[/B].

[B]And that profit of 22 pips is gained in 5 minutes!!
And that profit is snipered with a short trade from a powerful long trend!![/B]

flossnhoss · April 2, 2009, 3:56pm

Tymen, thank you kindly for answering my questions. I think it has cleared things up greatly.

Looking at your last examples, it looks like you typically enter on the STARC 0.7 line, and exit on the corresponding opposite outer STARC 1.0 line.

Do you currently find that is the best ‘middle of the road’ approach, but not necessarily a hard fast rule? Meaning, would you consider entries/exits slightly outside of that ‘rule’ depending on price momentum? For example, when would your entry point be the middle STARC, or outer STARC? Or an exit on the middle STARC or 0.7 STARC?

I realize this probably a function of experience, but I am wondering if there is potentially a concise answer to help guide us with executing proper entries and exits.

Also, along those lines, do you often come across a ‘pips first’ trade? And if so, how do we know how to enter those trades versus waiting for a retrace (this would only be with extreme momentum perhaps)?

I hope my questions are helping this discussion.

Thanks so much!

BankDaPips · April 2, 2009, 4:08pm

Thanks Tymen!

flossnhoss · April 2, 2009, 6:01pm

I thought I’d make an attempt at posting an example since Tymen does all the hard work around here!

Here we have a 35M chart for USD/CAD with a Morning Star (Doji) pattern in light blue:

Here is the 5M STARC chart for use with Entry/Exit points:

The first entry (and exit) seemed pretty straight forward to me.

What I wasn’t sure about was the second entry/exit… and maybe third.

Tymen, or anyone else, have any comments?

Thanks!

tymen1 · April 3, 2009, 1:14pm

You are most welcome!!

Looking at your last examples, it looks like you typically enter on the STARC 0.7 line, and exit on the corresponding opposite outer STARC 1.0 line.

Correct.

Do you currently find that is the best ‘middle of the road’ approach, but not necessarily a hard fast rule?

Correct.
That’s why there was a delay in the thread a few weeks ago, with no postings, since I had to make a decision as to which way I should go with the thread.

Meaning, would you consider entries/exits slightly outside of that ‘rule’ depending on price momentum? For example, when would your entry point be the middle STARC, or outer STARC? Or an exit on the middle STARC or 0.7 STARC?

Of course!!
If you are trading 2 amounts, then enter the 1st at the 0.7 line, then improve on your entry with the 2nd amount.
Your computer with average the 2 entries and you will get an entry that is better than 0.7.
An 0.7 entry is the minumum.
Anything better than that is to your advantage.

I realize this probably a function of experience, but I am wondering if there is potentially a concise answer to help guide us with executing proper entries and exits.

Concise?

[B]Enter at the 0.7 line minimum and exit at the opposite 1.0 line minimum.[/B]

[B]Always trade only in the direction dictated by the candlestick pattern in the main chart.
The direction of the Starc bands have no relevance.[/B]

Also, along those lines, do you often come across a ‘pips first’ trade? And if so, how do we know how to enter those trades versus waiting for a retrace (this would only be with extreme momentum perhaps)?

A pips first trade here would simply mean that the price action is already crossing your chosen 0.7 line.
Enter immediately as the price action crosses.
Do better if you can.

The retrace first has been the type of trade seen in my posts so far.
I will try to find a pips first trade example.

I hope my questions are helping this discussion.

They certainly are!!