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As some members criticized the name of another thread, I decided to start this thread in which I will give some rough ideas on how my trading style is. It is not really simple but it can be used by everbody as you don’t need any programming skills. It’s an admixture of candlestick and prize action trading – but not in its common use.
Although I know that many people believe that candlestick trading doesn’t work, I guarantee you that it can be profitable. That doesn’t mean that I never struggled in the beginning. However, what I found is that the secret to success is not to know each pattern and trade it but to know when there’s a high change for success. For instance, compare the flagged engulfing patterns in the image below:
Although the no. 1 engulfing is very strong (as both candles are bigger than previous two bars and bearish candle showed nearly no lower wick), it didn’t work (lead to falling prizes). Why did no. 2 work but not no. 1? Any ideas? Here’s a small hint: It has to do with prior candles.
I’ll only continue to discuss this topic if there’s enough interest as my time is still very limited …
Great Anti. Number 1 : the previous candles are bearish (2 red candles before the white engulfing bar). While at number 2: all previous candles are white (all 3 white candles in a row, including the engulfing bar). But i can be wrong though …
Edit : i am agree that to discuss only high probability pattern, not to discuss many patterns. We need only the good one 
Yes, @smallcat – you are right. Especially the preceding red candle in conjunction with the big bullish one of patter 1 shows me that there could be also a bullish breakout soon for two reasons:
- Both form a bullish engulfing.
- The long bullish candle of pattern 1 shows me that bulls have strengthened. Its body engulfs the previous two bodies and covers more than one-third of the big upper wick of the second to last candle (spinning top).
However, do you think it’s only a preceding trend which makes a candlestick valid? Think about the strenght of preceding trend and prize action of single candlesticks …
3rd candle before first patern shows momentum (2x+ bigger). It takes more suply to brake momentum bars, which means, price had to run higher to get more suply.
@mak: Good point, but that’s not exactly what I want to hear. Maybe it’s too hard to guess. Before I enter I will see market exhaustion. What could signs of such exhaustions be?
Yes, that’s one possibility. Others are a number of smaller candlesticks, an admixture of bullish and bearish candlesticks forming higher highs/higher lows or lower highs/lower lows, and candles with small bodies in comparison to their wicks. I’ll post some pictures on that topic later on.
Please feel free to discuss new ideas or ask questions. There is much more within candles, i. e. info on recent trend or when to trigger signals from candlesticks.
Please do continue this thread, I don’t have much to contribute as I am still a newbie, but I have much to learn here
Hello all,
I don’t want to sound discouraging or a smart-ass but I’d spent a lot of time investigating those “patterns” and even read a whole book about this issue. Apart from Doji pattern, I believe, none of them shows anything reliable. Even Doji fails sometimes, however via accompanying Large Volume, a Doji candle may show something.
I really am interested if you found a reasonable interpretation.
Thanks a lot for your efforts.
Best regards.
Nothing has ever motivated me more than this...
@BalrogTrader: I know what you are talking about. I had extreme problems to identify most reliable patterns in the beginning and am still sceptical when I read some books or view some videos on this topic. However, you can increase your chances following some rules. For instance, I only go short if the next candle after the pattern candles wents above/below its highs/lows. In addition, you also have to take wicks of previous candles into consideration. Nevertheless, you still can fail. It is not a perfect system – nothing is perfect. But in the long run you can make more profits than losses.
Ok, let’s summarize. The first condition for a valid candlestick is a preceding trend. The second condition is an exhaustion of the market as mentioned above. Below you can see an example of such an exhausted market:
A bullish market ended in the quite long up candle no. 1 (in comparison to previous candles). The next two candles (2 and 3) show only very small bodies but very long upper/lower shadows (indecision candles, spinning tops, or doji – however you want to call it). This is a great sign that bears become stronger in comparison to bulls. Although candlestick 4 engulfs the body of no. 3, I wouldn’t have go short with its close as no. 4 didn’t build a new low. Once candlestick 5 break below the low of first candlestick of the engulfing pattern (no. 3), there is a good chance that we will make some pips.
Another example for a weakening is shown here:
The candlesticks 1, 2, and 3 build an up trend per definition (higher highs and higher lows, too). After the quite strong up candle (1) two further bull candles form that show recognizable upper wicks. Additionally, the body of each of those candles is smaller than the previous. This candlestick combination is known as stalled pattern and also shows a potential reversal. Finally, the doji (no. 4) indicates indecision for two reasons: 1) the size of it is quite small and thus it neither makes a new high nor a new low (in comparison to preceding candle). Candle 5 opened a few ticks below the close of this doji and closed within the range of no. 1. I’ve opened a short position a few pips below the low of no. 3. (One could have also trade from the break of no. 4’s low. However, the break of no. 3’s low gave me some “extra-certainty”.)
As some members criticized the name of another thread, I decided to start this thread in which I will give some rough ideas on how my trading style is. It is not really simple but it can be used by everbody as you don’t need any programming skills. It’s an admixture of candlestick and prize action trading – but not in its common use. Although I know that many people believe that candlestick trading doesn’t work, I guarantee you that it can be profitable. That doesn’t mean that I never struggled in the beginning. However, what I found is that the secret to success is not to know each pattern and trade it but to know when there’s a high change for success. For instance, compare the flagged engulfing patterns in the image below:
Although the no. 1 engulfing is very strong (as both candles are bigger than previous two bars and bearish candle showed nearly no lower wick), it didn’t work (lead to falling prizes). Why did no. 2 work but not no. 1? Any ideas? Here’s a small hint: It has to do with prior candles. I’ll only continue to discuss this topic if there’s enough interest as my time is still very limited …Basically, you are describing Peak & Troughs, the ClearMethod, which is just the Price Action.
You started with the Fractal method. Been there, done that (to a perfection….)…
After that you’ll come to a conclusion that you need some more “assurance” or “support” from other methods, like Volume, or market “sentiment”…
Good luck, and many green pips on your simpler way…
G.
Here is a last example on the exhaustion topic:
Also relative long candle ranges (in comparison to previous candles) can indicate exhaustion (cf. 1), especially when followed by an indecision bar (no. 2). The high/low of candle 2 can be used for setting SL and to trigger a short position. But why can an extraordinarily long candle be a sign for weakness? I’m not really sure, but a possible explanation could be that it is part of the big player’s game. Maybe these guys buy to immitate a strenghtened trend. Other traders follow, but the money makers now let drop the prize to buy positions of these losers, just to start a new rise to even higher levels. Do you have another explanation?
This will be my last post until I see more interest in this topic … I don’t want to talk to an empty room.
Basically, you are describing Peak & Troughs, the ClearMethod, which is just the Price Action. You started with the Fractal method. Been there, done that (to a perfection….)… After that you’ll come to a conclusion that you need some more “assurance” or “support” from other methods, like Volume, or market “sentiment”… Good luck, and many green pips on your simpler way…
If I’m right you refer to Peak & Trough alone?! I don’t think that my method is exactly the same as Peak & Trough is quite lagging. In many cases pure prize action described above may lead to an earlier detection of (possible) reversals. However, peak & trough (cf. #10201) can be used to check when to trade long or short. Unfortunately P’n’T don’t identify regions with no trend – that would make it even better (as those regions should prevent us to trade but for strong range breakouts = very long candles in comparison to previous bars).
Basically, you are describing Peak & Troughs, the ClearMethod, which is just the Price Action. You started with the Fractal method. Been there, done that (to a perfection….)… After that you’ll come to a conclusion that you need some more “assurance” or “support” from other methods, like Volume, or market “sentiment”… Good luck, and many green pips on your simpler way…
If I’m right you refer to Peak & Trough alone?! I don’t think that my method is exactly the same as Peak & Trough is quite lagging. In many cases pure prize action described above may lead to an earlier detection of (possible) reversals. However, peak & trough (cf. #10201) can be used to check when to trade long or short. Unfortunately P’n’T don’t identify regions with no trend – that would make it even better (as those regions should prevent us to trade but for strong range breakouts = very long candles in comparison to previous bars).
Trend can be identified using Peak & Trough combined current & higher TF’s, such as in simplex histogram indicator.
G.
Unfortunately P’n’T don’t identify regions with no trend
How about currency strength to identify ‘no trend’ intervals?
s.
A good trader is a realist who wants to grab a chunk from the body of a trend, leaving top- and bottom-fishing to people on an ego trip. (Dr. Alexander Elder)
Well, you know my opinion on currency strength, do you?!
Strange opinion, since it’s my main trading strategy for years…
G.
Maybe I really used it in the correct way. Mabe it’s the opinion that each lagging indicator is not good. But I will see tomorrow what I can grab … Perhaps I’ve to change my mind. So – as far as I can remember you use alway the strongest currency which is pointing up as well as the weakest which is below 0 and pointing down. Right?! And if conditions are not met than you don’t trade? (Doesn’t mean that there isn’t a trend!)
Maybe I really used it in the correct way. Mabe it’s the opinion that each lagging indicator is not good. But I will see tomorrow what I can grab … Perhaps I’ve to change my mind. So – as far as I can remember you use alway the strongest currency which is pointing up as well as the weakest which is below 0 and pointing down. Right?! And if conditions are not met than you don’t trade? (Doesn’t mean that there isn’t a trend!)
Trading Currency-Strength alone is: Currency A is above 0 and pointing UP, Currency B is below 0 and pointing DOWN, Go LONG on AB pair.
BTW: GOOD Currency-Strength indicator isn’t lagging, but precedes Price-Action by at least 1-2 bars.
If yours is lagging, only trade the Recycle-Bin Market with it…
G.
Hmm – I’ve seen in some older posts that there’s also a CS-indicator from you. I think it was called Gadi_Currencies (but not really sure). Is it anywhere available (here or at FF)?
Hmm – I’ve seen in some older posts that there’s also a CS-indicator from you. I think it was called Gadi_Currencies (but not really sure). Is it anywhere available (here or at FF)?
Gadi_Currencies is an ancient one, example prototype, shared on FF “Killing Zone” thread.
G.
Gadi_Currencies is an ancient one, example prototype, shared on FF “Killing Zone” thread. G.
So, you don’t recommend it’s use, yes?!
Gadi_Currencies is an ancient one, example prototype, shared on FF “Killing Zone” thread. G.
So, you don’t recommend it’s use, yes?!
It will still give you an overview of the FX market, and you have more than enough guidelines on how to make a better one.
Use my guidelines, and you can profit with it, but I’m using much more enhanced versions. You need to consult lower TF when using that version.
G.
Edit : i am agree that to discuss only high probability pattern, not to discuss many patterns. We need only the good one 
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