That’s what I was thinking. Just wanted to make sure, just goes back to the saying ‘the trend is your friend’.
OK, after dealing successfully with a major troll problem on this forum, I can now get back to dealing with candlesticks.
We will stay with the Starc bands as set, that is the standard starc band indicator provided on the charting program.
It has a 6 period simple moving average.
The time has now come to look in detail at the most difficult part of the Starc bands - when they are approaching and leaving the Bollinger bands.
Ok this is why I asked how many retracements are safe to trade. I present an one hour eur�jpy chart. I highlighted the pattern I chose, which I think meet the requirements in order to be a good one. And the first retracement worked nicely, but the second one hit the stop loss, and in that case it was a non sense trade since the profit made at first were lost in the second trade.
Could you guys give me your opinions?
Regards!!!
In this case, the trend appears to be up and retracement trading should work nicely. I would venture that your stop loss was simply to tight in this case
To [B]Wrtm_19[/B] :
What pattern?
Sorry, I don’t see any.
Your magnification is still very poor, but even so I can see that what you traded was something with huge doubt.
Put it this way - I would never have traded that.
In fact I would not even have noticed it.
Quality patterns always.
What did you want to call your pattern??
I take it you were trading short.
Further, there is a long wicked shooting star straight after your “pattern”.
The wick well and truely went higher than the highest point in your pattern.
So a 1st retrace should have hit your stop loss.
I am not sure what you think your pattern is but check it against the following website and see where you have made your error.
What??? I mean seariously what??? It’s a dark cloud cover pattern. And I think magnification is pretty well you can see it from 5 meters away! Please tell me you’re kidding.
As I said before first retracement worked very well. First and second retracements are both contained in the long wicked green candle after the dark cloud cover pattern, since they’re one hour candles many upside-down movements can happen there.
To [B]Wrtm_19.[/B]
Firstly, when posting charts, try setting the magnification to about 60 or greater.
Then we can all easily see what you are seeing.
OK, here is your chart and the “dark cloud” cover >>>
By tymen1 at 2009-03-10
There is something wrong with the recognition of your dark cloud.
If you look carefully and compare it with the orthodox pattern in that website, you should be able to spot your error.
If you cannot see it, post again and I will tell you.
This is going to be a valuable learning experience for you.
Now also look at the PCI stoploss I have placed.
It is effectively 3 pips above the highest point of your “dark cloud”.
The “entry candle” I have called Retrace 1.
Notice how the PCI cuts straight thro it.
If you had entered on this trade, you would have lost your money at that point.
This candle set is a [U]no trade[/U] and, therefore, a loss of [U]no money[/U].
On the other hand, the retrace 2 pair of green and red make up a genuine short engulfing pattern complete with flat Bollinger band, and that is the one you should have traded.
Using the Fibonacci tool as I have explained, you could have made a nice profit there.
Hi HIllel! Thanks for you answer. What do you think that my stop loss should be like. I put it a the highest high of the pattern’s longest candle, plus the spread plus 3 or 4 pips.
Regards!
Hope I don’t step in messing up the lesson here. My guess would be that the first retrace isn’t a valid dark cloud cover due to the relatively long lower wick on the bear candle, suggesting that price has turned up again toward the end of the candle.
Would that be correct?
To [B]Wrtm_19[/B] :
OK, you have jumped my post, look back one post to see my complete answer to you.
Oh thank you so much, do you know where can I find some candlestick rules for valid or not valid patterns? You know that of the wicks and others. Thank you
No you are not messing up the lesson - you are contributing and are welcome.
Your answer is nearly correct but there is still a critical part to be added.
If you cannot spot it, I will tell you in my next post.
So is this all about the lower wick?
And another question would be if the bollingers were ok to trade, regardless of the wrong pattern
Thank you.
I’m not 100% familiar with your method, but i seem to recall that trading against trumpeting or very steep BB is a no-no.
Is this what you’re referring to?
Definition of Dark Cloud according to Nisson;
Long bull candlestick followed by a bear candlestick that OPENS ABOVE the prior bull candles high or close and then closes well into the bull candles real body - preferably more than halfway.
Thank you VulcanClassic! What about wicks? Are they way too important?
He doesn’t mention wicks as being too significant in the pattern. More real bodies.
Keep in mind though that wicks are a good indicator of the extent of the bulls (or bears for long patterns) failure to keep pressure on.
Of course, in forex you can’t ask for the second candle to open above the first.
It’s not the norm, but I’ve seen it plenty of times, even on shorter timeframes. I think for forex you could say “opens above or at”.
I’m interested in what Tymen has to say about it.
Here is my answer that [B]VulcanClassic [/B](welcome back 
) and [B]Wrtm_[/B][B]19 [/B]are looking for…
[B]o990l6mh[/B] is absolutely correct.
In equities anything could happen (gaps)
But in forex, [U]where there are no gaps[/U], the 1st close = 2nd open.
This is shown to be true in the pattern [B]wrtm_19[/B] is refering to.
The 2nd candle going down 50% or more of the first is also required and is also the case in the [B]wrtm_19[/B] pattern.
[B]
But lets look at the wicks…[/B]
Originally Posted by VulcanClassic :
Keep in mind though that wicks are a good indicator of the extent of the bulls (or bears for long patterns) failure to keep pressure on.
The upper wick of the [U]2nd candle[/U] is important in [U]forex[/U].
The longer it is, the bigger the rally after the open, and hence the more the sellers were able to drive price back down.
This shows that the sellers are now in charge (the shorts).
But FX traders will turn to the high of the second candle to indicate how strong the opening rally is, to gauge the strength of the subsequent bear move.
If we look at that pattern of Wrtm_19 again, we see that there is [U]no upper wick on the 2nd candle.[/U]
This is the critical decider.
There is, therefore, not enough power to send the candle down thus [U]invalidating this choice for a trade.[/U]
Further, as [B]o990l6mh [/B]pointed out
due to the relatively long lower wick on the bear candle, suggesting that price has turned up again toward the end of the candle.
we note that the bulls have taken a certain amount of charge again and hence great doubt as to whether the price is actually going to go down.
This was proven to be the case with the next candle where the upper wick rose right above the dark cloud.
[B]The requirement is that we choose quality patterns.[/B]
A very careful reading of that candlestick website is required because it not only gives the requirements for a good pattern but also distinguishes between forex and equity patterns…
Japanese Candlestick Charting Explained
[B]Pay attention to the wicks!![/B]