Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

brownsfan019

Step 2: How to use candlestick analysis

Recommended Posts

Now that we discussed the what these candlestick patterns or formations can look like (click here for that thread), we'll now discuss HOW to use what you've just studied.

 

There are a few schools of thought of how to use candlestick analysis. The most traditional way is to find the end of a trend (aka counter-trend). In other words, candlesticks can visually show the possible end of a trend. In my experience, I have found that candlestick analysis usually will signal the end of a trend; however, a few signals may FAIL before one WORKS. That's part of the game and a risk you have to be willing to accept.

 

The other important consideration here is how you define a trend and then how you define a counter-trend trade. For example, in day-trading the ES, I personally look for "counter-trend" trades, but the "trend" could literally be a small "micro'" trend. In other words, in my day-trading biz, I use the candlesticks to help show the possible end of one of the many, small "micro" trends that appear throughout the day, every day. I think that's what so powerful about candlestick analysis - while the majority of books, websites, etc. are going to talk about counter-trend on a daily chart, I think the candles can help quite a bit intra-day.

 

So in the purest form, candlesticks by themselves are meant to show the possible end of a trend. The other key here is what other indicators, if any, you use to aid you in recognizing a candlestick signal. For example, Tin has mentioned his use of volume in candlestick analysis.

 

And the last consideration for today is whether you use candlestick analysis as the PRIMARY or SECONDARY use in your trading plan. Again, many schools of thought here. I will add this piece of advice after having been 'schooled' by the markets over and over and over again.... ;) I would highly recommend you use something with your candlestick analysis, even if it's as simple as high volume, as Tin has mentioned previously. There's obviously more indicators out there than I could possibly imagine, so perhaps the combo is right in front of you, if you just look hard enough.

 

Good trading!

Share this post


Link to post
Share on other sites

Yes, I think that the combo of price and volume is the best that any could ask for. A fellow trader here, MrPaul, mentioned to me once that its really the simple fact that price attracts volume. Volume doesn't attract the price. Thinking like that really, I mean REALLY, helped solidify my trading. When the end of a trend ensues, you will most always see some sort of volume confirmation. Also breakouts or potential breakout failures will always have volume confirmation.

 

And, like you use brownsfan, volume based candles pretty much give those both to you in one fell swoop. The only thing that I have trouble with watching VBC's is just the speed of it. It's easier for me to watch 2 separate things than just one. Sounds weird, but its just easier for me to see it. I completely understand the validity in VBC's though.

 

So, yes, I completely agree that using candles alone won't give you the whole story. Kind of like most trading books out there. They give you only half of what the real deal is.

Share this post


Link to post
Share on other sites

Great points Tin!!

 

I think VBC's provide that volume confirmation that you like, already in the candles, so that works well for me. The catch being, as you've seen, these things can print VERY quickly if not paying attention. That's the downside, but that's also the upside - when candles are printing like crazy on a VBC, I am able to participate in that action as long as I am paying attention.

Share this post


Link to post
Share on other sites

Brownsfan:

There is very little info on VBC available on the web. Can you give us

some pointers on how to read a VBC chart? For instance what do I look

for in (1) a trend reveral ? (2) Congestion prior to a break out ?

Since you use very short-term VBCs, do you think Volume HLC bar chart

in this case would work just as well ?

 

 

Thanks

Share this post


Link to post
Share on other sites
Brownsfan:

There is very little info on VBC available on the web. Can you give us

some pointers on how to read a VBC chart? For instance what do I look

for in (1) a trend reveral ? (2) Congestion prior to a break out ?

Since you use very short-term VBCs, do you think Volume HLC bar chart

in this case would work just as well ?

 

 

Thanks

 

OAC - here's the thread that is dedicated to VBC analysis - http://www.traderslaboratory.com/forums/f34/volume-based-candles-and-how-to-1414.html

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 22nd November 2024.   BTC flirts with $100K, Stocks higher, Eurozone PMI signals recession risk.   Asia & European Sessions:   Geopolitical risks are back in the spotlight on fears of escalation in the Ukraine-Russia after Russia reportedly used a new ICBM to retaliate against Ukraine’s use of US and UK made missiles to attack inside Russia. The markets continue to assess the election results as President-elect Trump fills in his cabinet choices, with the key Treasury Secretary spot still open. The Fed’s rate path continues to be debated with a -25 bp December cut seen as 50-50. Earnings season is coming to an end after mixed reports, though AI remains a major driver. Profit taking and rebalancing into year-end are adding to gyrations too. Wall Street rallied, led by the Dow’s 1.06% broadbased pop. The S&P500 advanced 0.53% and the NASDAQ inched up 0.03%. Asian stocks rose after  Nvidia’s rally. Nikkei added 1% to 38,415.32 after the Tokyo inflation data slowed to 2.3% in October from 2.5% in the prior month, reaching its lowest level since January. The rally was also supported by chip-related stocks tracked Nvidia. Overnight-indexed swaps indicate that it’s certain the Reserve Bank of New Zealand will cut its policy rate by 50 basis points on Nov. 27, with a 22% chance of a 75 basis points reduction. European stocks futures climbed even though German Q3 GDP growth revised down to 0.1% q/q from the 0.2% q/q reported initially. Cryptocurrency market has gained approximately $1 trillion since Trump’s victory in the Nov. 5 election. Recent announcement for the SEC boosted cryptos. Chair Gary Gensler will step down on January 20, the day Trump is set to be inaugurated. Gensler has pushed for more protections for crypto investors. MicroStrategy Inc.’s plans to accelerate purchases of the token, and the debut of options on US Bitcoin ETFs also support this rally. Trump’s transition team has begun discussions on the possibility of creating a new White House position focused on digital asset policy.     Financial Markets Performance: The US Dollar recovered overnight and closed at 107.00. Bitcoin currently at 99,300,  flirting with a run toward the 100,000 level. The EURUSD drifts below 1.05, the GBPUSD dips to June’s bottom at 1.2570, while USDJPY rebounded to 154.94. The AUDNZD spiked to 2-year highs amid speculation the RBNZ will cut the official cash rate by more than 50 bps next week. Oil surged 2.12% to $70.46. Gold spiked to 2,697 after escalation alerts between Russia and Ukraine. Heightened geopolitical tensions drove investors toward safe-haven assets. Gold has surged by 30% this year. Haven demand balanced out the pressure from a strong USD following mixed US labor data. Silver rose 0.9% to 31.38, while palladium increased by 0.9% to 1,040.85 per ounce. Platinum remained unchanged. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news. Andria Pichidi HFMarkets Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • A few trending stocks at support BAM MNKD RBBN at https://stockconsultant.com/?MNKD
    • BMBL Bumble stock watch, pull back to 7.94 support area with high trade quality at https://stockconsultant.com/?BMBL
    • LUMN Lumen Technologies stock watch, pull back to 7.43 support area with bullish indicators at https://stockconsultant.com/?LUMN
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.