brownsfan019

Ahhh... perhaps the best statement throughout this entire thread... what exactly is a 'valid' candle signal? Having trading candles for awhile now, here is my definition of them being used in the traditional candlestick analysis - first, you must have a clearly defined trend. Why? Traditional candlestick analysis is meant to signify the possible end of a trend. Can't end a trend if you do not have one. Step One: Be able to clearly define trend. Once you've established a trend, then it's a matter of seeing a valid candlestick pattern/formation and then implementing your entry/stop technique. I say that b/c I've read many different views on how to enter a trade once you see a candle setup. Let's say for example you get a hammer. Some would say as soon as you see a hammer, enter a market order to go long. Some would say that you want price to rise above the high of the hammer and then enter. Some would say wait for price to retrace to somewhere in the body of the hammer and then enter. So, it's a matter of trader preference on where to enter and where to place the stop. I attached a screenshot of a chart from this thread. You see a valid hammer signal, now the question is where and why do you enter? If you wait for a retracement into the hammer body, you may be waiting to long and never enter the trade. If you enter at the top, you need to have a larger stop... See the possible dilemna? You cannot just wing it, you must have written rules before placing any live trades. It's easy to say that you would go long right away on this hammer b/c it did not retrace much, but another hammer pattern could easily test the low of that hammer. Step Two: Implement your entry and stop technique. After that, it's a matter of managing the trade and exits. We've discussed WRB's, trailing stops, set profit targets, etc... Again, a matter of trader preference. Step Three: Manage trade according to your specified rules. ------------------ ------------------ MrPaul - regarding the chart you posted, following my normal trading plan as stated above, I do not believe the first doji you have highlighted is a valid candle signal due to a lack of trend. I personally do not call one up candle an uptrend; therefore I would not consider a trade based on that doji. Your other gravestone doji could be a candle signal. In your example volume is also a filter, so this may not be a valid trade for your setup.

Another idea here re: Volume Based Candles - they help 'smooth' out the entire market times, including overnight and premarket times. You will normally see less candles being printed during these times, but your chart will get smoother. This in turn can make other indicators/tools a little more reliable, esp in the AM around the open. That was another frustrating thing with candles on a minute chart - you would see doji after doji in the premarket and then boom, off we go at 9:30am. Well, if you are trading candles in traditional fashion and looking for a trend reversal, you first need a trend. Just another reason why I would highly recommend the review of VBC's (Volume Based Candles).

It can get real interesting in premarket times on the indexes. Here was one example on the YM this morning.

MrPaul - I'm curious to what "sustainable smooth volume flow" is...

Soul - sounds nice! Not sure how far we are from fiber optics lines here in the US... I've read that it's out in a very limited capacity, so I'm not holding my breath. Till then, it's cable! And I recently picked up the Verizon Wireless Aircard as a backup. It's not too bad actually, I get a decent signal and can purchase a strong atenna if need be.

Z - the only problem with equivolume is that you cannot apply traditional candlestick analysis to it. Each print is simply a rectangle - some bigger, some smaller. At least it looked that way from the PDF you attached. Did I miss something?

That's what I need to know. I figured it was easy, but wanted to ask before I ended up with no internet for days!

Walter - yeah, I can't even get the names right when I try. LOL. Shooting star, hanging man, whatever... That's what I say! Joking aside, it's best to learn candles the 'right' way and once you get it, you'll see why I call upside down hammers inverted hammers. Just easier on the mind (my mind at least). I think part of the power of candles is that many traders use them in some shape or form. We may not all see the candles the same way, but there are many traders using them, which is why I think they are so powerful. I'm hoping Pivot and I can get a discusson on WRB analysis going as well.

Pivot - interesting. Let me ask this - what is the idea behind exiting on a large real body being formed? I don't know much about WRB as it's been awhile since I looked at it, so maybe you can give us a little education leeson here. I understand that the exit is when a large real body is forming, but why? Also, how is a WRB actually defined? In other words, when you are preparing to exit when you see a WRB, how much of a move constitutes a WRB? Are you already sitting out there with an order or just hitting the market button as the candle forms? I'm really curious to hear how this is used in real-time trading. Take a look at my attachment - would those be other WRB's? If so, why do you ignore certain ones? This could really be a thread in itself really. Maybe we should have someone move these 2 posts to a thread about WRB.

GCB - I see what you are saying, the problem there would be that during certain trading times you are going to get massively large or small candle bodies. For example, if you want the first 1 hour on your screen, some days there could be hundreds of candles squished down to meet your parameters and others day there could literally be a handful of massive candles. The EC comes to mind - some mornings this thing is printing like crazy (and would cause your chart to be super tiny) and other days it can put you to sleep (and would cause your chart to have massively large candles). You are correct though, anyone looking at these charts in hindsight needs to pay attention to the actual time elapsed between each candle print. There are times when it's literally seconds. So, you may see a great hammer on a chart and think - Wow, look at that hammer! And while that is true, in order to capitalize on that hammer, you may have need to pull the trigger in a matter of seconds. So, from start of the candle to your entry - it can be under 60 seconds easily.

Robert - sorry, I wasn't clear. I do not have problems seeing inverted hammers (hanging man) on the chart, I simply refer to the hanging man as an inverted hammer. It's just an upside down hammer, that's all. When I said I don't 'see' the hanging man, I meant that I do not understand the description - why a hanging man? I don't know, so inverted hammer works for me. I can understand the training wheels argument, but I can also see the thought process of - well, this appears to be working, so why bother taking the time to learn! Again, it's like going to school... Microsoft Word can spell check for you, calculators can do all the math you could possibly need, etc. - so why bother learning the basics the 'hard way' yourself first? And for me, I could not feel comfortable putting my entire trading in the hands of some guy I met on a forum. What I mean is that I have NO IDEA how HE defines candles, which can be VERY different from mine, so to rely on his definition and coding of candles is just dangerous to me. Again, I truly believe you are going to miss out on many trades by relying on a software program to tell you when there is a candle pattern. The other issue I saw with programs that recognize candles is that you are going to get candle 'alerts' on the entire chart, when you really just want to see candles at the beginning and/or end of the trend. Hammers appearing in the middle of chop is just noise and you do not want to be alerted to every little candle formation when there are so many. I'd be interested to see some charts, so when you have the program running, post some charts where his alerts go off.

Guys, I am thinking of getting a new wireless router. Can you provide me some ideas of what brands/models to look at? Also - how difficult or not so difficult is it to install a router? When I had the one I currently have installed, I had a computer guy do it for me. That was a mistake b/c I didn't learn anything about it. I want to learn how to do this stuff, so if I get a new one and follow the manual, should I be ok? I mean, is it pretty straight forward? Thanks!

Here are a couple great sites for those new to e-mini's: CME Education CBOT - mini-sized Dow ($5) Quotes Electronic CBOT - Publications >Scroll down to Index Publications and look for mini-sized dow info.

Hey Soul! Welcome to the party! I'll try to tackle your questions and I'm sure others will have opinions as well. YM Chart settings - It really depends on how 'fast' you want the candles to print. I use under 1000, closer to 500. That's just me, I like things to print. The actual # is not important. It's simply how quickly do you want things to print. And the type of chart on TS you want is the Share Bar Chart. Trends - in a good moving trend, you should see more candles being printed. It's amazing to watch them fire off during a move, esp around econ news. As for a volume histogram, I don't see the point since each bar will be identical. If you set your chart to say 500 on the YM, each volume bar/histogram if displayed separately will be exactly 500. That may be why TS doesn't like it. Double tops - you are correct, since each candle on a volume based chart is identical in volume, you have to learn to read the candles better. For example, in Mr. Paul's post with a chart, there is actually a nice double top. See my attachment. To me, there is a clear as day double top with two very nice looking inverted hammers (aka hanging men). For a traditional candlestick trader, that's a reason to short right there. You could actually short the first leg, which was a small winner or loser, and then reshort on the double top test and have a nice trade. Exit point - here is probably the biggest issue with candles, in my opinion. They offer clearly defined entries and stops. Profits however, not so much. Here are the options that I have found: Fixed profit target sitting out there. Trailing stop. Exit only when a candle pattern that is opposite of your current trade appears. Some combination of these if trading more than 1 lot. And there is no perfect answer, you have to test different setups and see what you like.

Robert, You bring up something that needs to mentioned - I HIGHLY RECOMMEND YOU LEARN TO READ CANDLES FOR YOURSELF. Do NOT rely on a computer program to find your candle formations. Why? Here's why: Computer programs do not have the 'flexibility' to be able to see a candle pattern. You are relying on someone's interpretation of candle formations and the ability to put them into code. You really need to know how these work, look, feel, etc. before relying on a computer program. It's like when you learn how to add and subtract in school... why bother when there are calculators? You need to LEARN it before turning it over to a computer. I cannot stress how important this is. I've tested many, many programs out there and other than Nison's MarketScan (which is only on his website, not a downloadable program), I have not found ANY worthwhile. Here is my opinion - when I see a 'hammer' a program may not simply b/c the shadow/wick is not quite long enough. In intraday trading, you MUST be flexible on what you call a hammer b/c the picture perfect hammer does not show every day. And if you rely on that program to find your hammers, you'll be sitting waiting for the perfect one b/c the program is set by design to find the textbook hammer. Well, as we all know - real life doesn't always look like textbooks. If so, we'd all be multi-millionaires from trading by now. Robert and others that are studying this - take the time to purchase Nison's books/DVD's and learn to find these on your own. When I looked at the charts posted here, it took me a whole 2 minutes to just see all the candle patterns on them. And that comes from training your eyes and repetition. Just my 2 cents...

Paul - great chart with explanations. I think you found a great example where the candlesticks worked well. There looks to be another nice short around 12:30pm on your chart as well - two hanging men back-to-back. And then about 5 hammers that signified that down move was over and a small move up on those hammers. I will say this - I LOVE hammers/hanging men. I actually call hanging men 'inverted hammers' simply b/c I see hammers easily. I don't see the hanging man. So, if I ever write inverted hammer, it's just an upside down hammer.

Robert - I will be happy to accept a 50% 'savings' fee of that $25k. Just send me a PM and we can arrange for the bank wire of $12.5. Thanks!

Ok, that was a joke. Thought a little humor would be good here, it's getting a bit stuffy in here. :p Charts - I will try to post some, but what may actually be better is what I did with Tin - post a chart and I can screenshot it and annotate my thoughts so you can compare with yours. Just an ida. Tick vs. Volume - A tick chart moves when there is a tick. I don't care for tick charts b/c if the market moves up a tick based on a handful of contracts traded, I am not interested. I want to see and KNOW there is volume being traded there, not just a random tick. A volume chart only produces a new candle when XXXX contracts trade - whether that is a couple ticks or not. I guess it depends on what you consider important - any and all movements or volume. For me, it's volume. I view a tick chart similar to a minute chart in that you can trade off both of them, but for me, a volume chart speaks volumes that those charts cannot. ER2 - not sure what you mean, I use volume based charts there just like all the other e-mini's. At least, that's what TS is showing me. HOWEVER you bring up something that makes sense to me... My TS charts on the NQ and EC (CME based contracts) NEVER match the volume I see on my T4 trading dom; but my YM (CBOT based contract) matches perfectly to my trading dom... Can you provide more info on what you mentioned? Any links to the CME and/or CBOT that explains your statement more? Thanks!

BRONCOS??? Forget it, I am out of here. Do you know what Elway and the Broncos did to my Browns in 86??????? I practically throw up every time I watch 'the drive' on ESPN. That was the LAST time the Browns had a competitve team!!!!!! That changes things. :mad:

One thing I was going to recommend Tin was to post what the volume setting is at to put things into context. Now, to help everyone understand that candles are NOT bulletproof, I attached the same chart of tin and highlighted all candle patterns that I saw. I did not take into account the indicator at the bottom, just pure candlesticks. I did this not to put a damper on this party, but to show that while candles are extremely good at finding ends of trends, they also sometimes can put you into a trade a little soon (early to the party as I like to say). Which then leads to the discussion of where and how do you place your stops if trading off candlesticks... Perhaps another thread discussion altogether. I want to bring your attention to the part I highlighted in purple. The reason is that you see you first get a hammer (long signal), hanging man (short signal) and then another hammer. I bring this up to point out that if you take the first hammer - end of a little downmove and looks like a double or triple bottom (note the first two hammers that failed in my opinion) and right after you enter, you get a candle formation that is opposite of a long trade - a hanging man, and then right after that you get another green hammer and IF you are still in your long, you made some money. One last thing - and Nison says this a lot to - candles do not provide a profit area/target. As you can see in the chart that tin and I posted, you can see patterns that went for points and others that didn't do much. That's the other part of the equation - where and how do you exit? Again, I am not trying to convince you to stop researching this, I simply want to point out how these can work in real time. It's very easy to say that you would take the hammer or engulfing at the bottom of a trend, but there's also other hammers, engulfings, etc. that appeared in that same move. Why would you not take those? Like I mentioned Tin, I think the actual number being used for the volume bar setting is irrelevant. If you want a quick moving chart, use a smaller number; vice versa for a longer term chart.

Soul - TS does have this feature, they call them Share Bars. And as mentioned, I am NOT using equivolume candles. Those just look funny to me!

Pivot - I'll do my best to answer... 1) I've chatted with Mark and have visited his site many times. I've never purchased his manuals, so can't speak on that. 2) I've learned and studied 'traditional' candlestick trading, which does not do much with WRB's. So, can't say much on that either. Re: chart speeding up, what I mean is (and I like to keep things simple) is that I know what a 'normal' morning 'should' look like in terms of how many candles printed. By knowing this, when I see many more OR less than normal, it grabs my attention. I am a VERY visual person, so the charts tell me everything I need to know. Not sure if that answers your questions completely, but I am a pretty simple trader. My chart (which I posted on here) is volume based candles and 2 moving averages. That's it.

Robert - you just went thru what I went thru when I first learned of them. You have to keep an open mind, but WOW they can really improve your trading. As for reading candles, get Steve Nison books. He's the best and is the candle 'godfather'. His site is http://www.candlecharts.com/. When I got into candles, I got ANYTHING from him I could get my hands on. I have most/all his books and DVD's. I highly recommend the DVD's. I am more visual, so a book only did so much. I've gone to one of his live seminars and while it wasn't cheap, it was well worth the cost of admission. He also now has a MarketScan which is pretty slick. He puts out a newsletter too, so make sure to sign up for that. Maybe some of you could go in on the DVD's to share the costs ... if someone has a DVD burner... FYI - I am not a shill for him, just a very happy customer. As for the size to use, it's really up to you. The smaller the number, the quicker things move, so you must be nimble if trading on a smaller number. A smaller number would be under 500 on the YM in my opinion. As I mentioned, don't fret about the actual number. There's not much difference in a YM chart with 300 and with 400 as the setting. It's really a matter of how quick do you want the candles to print - just like a minute chart. Play with some settings and see what you like. The key is to do this in real-time!!! It's easy in hindsight to say that you would have taken a hammer, but what you may not be seeing is that the hammer formed in 30 seconds and you had about .5 seconds to make your decision to go long. Bear in mind guys, when these things are printing, there's no time to be messing around. You have to act and act quickly. This is part of the reason I don't spend much time in the chat room. I just can't watch 3 charts, execute my entries timely and chat. One last note - I mentioned this to MrPaul in a PM, but I want to mention here - if you use candles in traditional analysis, be prepared for rough days in trending markets. The candles in traditional analysis are meant to signify the possible end of a trend, which work great in markets that move up and down during the day. In a strong trending day (like the 500 pt day on the dow) you are going to take losses and possibly many of them depending how many times you want to fight that trend. While that is not easy on the psyche, over time, there's money to be made in the market using candlestick analysis. As Nison likes to say... May the candles light your path to succesful trading (or something like that).

Paul - you know, I first learned about them at elitetrader. That site is mostly garbage, but there are some nuggets if you spend the time reading. I honestly never thought I would get much from a site like that, but one friendly trader brought it to my attention in one of my threads and since then, I just started studying and reading about it. As for books or other stuff, I have not found ANY. Perhaps a mention in a book or something, but nothing really dedicated to it. I have given some thought to writing something up about it down the road. If you are interested in the et thread, here's the link - http://www.elitetrader.com/vb/showthread.php?s=&threadid=80582&highlight=odd Keep in mind that as normal over there, the thread delves off into childish name calling and such; BUT there is some good info throughout, esp at the beginning.

Tin - just like minute charts, volume based charts can be based on how 'quick' you want your charts to move. Try out all different intervals and see what you think. I've read that you should use fib numbers, but I like round numbers. So, I wouldn't worry about setting it at 450 vs. 500 or 1000 vs 1500. Taking a sample of say 500, 2500, 5000, 10,000 could give a nice little sample to look at.