Intraday Candlestick Trading

[walterw 10]

Now a pattern I observed today... actually I dont know if it could be considered a valid candle pattern, but the pattern actually is there...

 

It is a group of spining tops that happen at the midband area creating a congestion action wich happens to be normal to see congestions on the midband areas... swing of the extreme of this group tells us the congestion is over and the mid band rejection is in course...

 

 

this is an interesting pattern as well... cheers Walter.

[walterw 10]

And for last this failed group of spining tops that did not had a follow thru, when we brake their lows pum, down we go... in a nice bearish trend context from higher timeframes dictated by the macd... it also was a midband reject for continuation

 

 

well like you say Brown... some food for thought... so far on this ideas I find more confidence in taking the swings h/l for timing, as it may become noisy this formations...

 

Hope I dont bore anyone here... cheers Walter.

[Anonymous 11]

I know my posts here will be unwelcome but here is a great example of a dark hammer pattern.

 

I think many people think lower timeframes are not good for candle patterns, but the problem is not timeframe it's the patterns themselves. The pattern that can be found on typical internet candle sites are simply not that reliable, regardless of timeframe. One needs to understand the underlying PRICE ACTION that creates the pattern.

 

While this is not a VSA thread, I would point out the Demand entering the market as the hammer pattern is being formed. Those who follow the VSA thread might notice the valid short at the No Demand on the top of the chart. This short was validate by weakness on the 15 min timeframe as well (this is a 5 min chart).

[brownsfan019 17]

Walter - good posts, some food for thought. Too many indicators for my liking, but that's the beauty of candlestick trading - patterns can be primary, secondary or a mix to get to your signals.

 

 

I think many people think lower timeframes are not good for candle patterns, but the problem is not timeframe it's the patterns themselves. The pattern that can be found on typical internet candle sites are simply not that reliable, regardless of timeframe. One needs to understand the underlying PRICE ACTION that creates the pattern.

 

That's simply not true PP. We welcome all posts here, but your statement here is completely false. Patterns found on 'typical' sites work just fine. As a matter of fact, Walter and I found them all day today in the chat room in real-time and saw tremendous profit opportunities.

 

Many people simply do not understand HOW to use candlestick analysis PROPERLY. Some find a hammer and think it's time to go long but there's more to it than hammer hunting.

 

I enjoy your input PP and it would be nice to see more threads from you in our candle corner to mesh a couple trading methodologies. Problem is, I have yet to see any trading VSA in real-time do it with any success. You are more than welcome to join us in the chat room this week to discuss possible setups in real-time.

[brownsfan019 17]

I know my posts here will be unwelcome but here is a great example of a dark hammer pattern.

 

While this is not a VSA thread, I would point out the Demand entering the market as the hammer pattern is being formed. Those who follow the VSA thread might notice the valid short at the No Demand on the top of the chart. This short was validate by weakness on the 15 min timeframe as well (this is a 5 min chart).

 

Looking at your chart here PP, looks great!! Putting the VSA items aside since I don't use them (as you do at least), it basically looks like candle patterns at the extremes on the first WRB of the day for trade setups. Again, not exactly as you are using them but for sake of discussion here I see a Support/Resistance area designated by WRB. If so, we see a few possible trade setups here:

 

 

A few possible trades looking at creating S/R zones on WRB.

 

 

 

Now the next question I have is, what about the other WRB's that appear on the same chart?

 

 

By using Mark's definition of a WRB, I believe there's at least the ones I highlighted. So, during the day on this 5 minute chart how do you handle these other obvious WRB's? Or is there a reason they are not used?

 

I'm trying to see how/when a WRB is to be used for trading reference and when to ignore them, if you do at all.

[walterw 10]

jejeje "hammer hunting"... you do that copyright right away Brown ¡¡ good phrase... yes, the context I show there may be a little cloghted eventually, the nice thing is how this patterns work so well responding to this context analisis... now so far I am looking a lot of charts here and the "flip" or S&R changing roles wich is also teached by Nison probably is a much more easier and robust context... only there is not so much amount of setups on a trading day... the groups of spining tops failing really is a very robust one as well... its that pause preparing to continue...

 

Brown since this studies on ES I am also looking at ES with more interest, more cars, very nice performance... I will post some scalping waco things I see as well but on my chimp thing thread... let the interaction continue...

 

One question : had you seen some way to relate 15 min context into the 5 min setups ? thanks Walter.

[brownsfan019 17]

Walter - one follow up. As I mentioned before, the lower the timeframe, the more likely that some additional confirmation is needed to take a possible candlestick signal. I think you are seeing this with your threads tonight.

 

My advice is simple - find something that is simple to follow and then test it out in real-time. In other words, perhaps JUST keltners or JUST the MACD, etc. could work on the 5 minute. Maybe it will, maybe it won't.

 

As we've discussed in the chat room, the real key here is actually how/when to EXIT. There are plenty of trades we saw that went +2 (or more). Of course we want to stay in the winners longer and get out when it's not there, but easier said than done.

 

So I think the entry thing is good, but I actually think the exit plan is MORE important with candlestick trading.

 

Take my opinion for what it's worth.

[brownsfan019 17]

jejeje "hammer hunting"... you do that copyright right away Brown ¡¡ good phrase... yes, the context I show there may be a little cloghted eventually, the nice thing is how this patterns work so well responding to this context analisis... now so far I am looking a lot of charts here and the "flip" or S&R changing roles wich is also teached by Nison probably is a much more easier and robust context... only there is not so much amount of setups on a trading day... the groups of spining tops failing really is a very robust one as well... its that pause preparing to continue...

 

Brown since this studies on ES I am also looking at ES with more interest, more cars, very nice performance... I will post some scalping waco things I see as well but on my chimp thing thread... let the interaction continue...

 

One question : had you seen some way to relate 15 min context into the 5 min setups ? thanks Walter.

 

I like how Nison can draw S/R zones as well. I do think however, it's not as clear on an intra-day chart, in real-time. I know the charts can look beautiful after the fact, but not always so easy in real-time.

 

As for the 15 / 5 correlation, I saw a few trades today where the 5 did not meet my criteria but the 15 did. Instead of taking the trade based on the 15, I can enter the 5 minute chart knowing the 15 is behind it. Example - say I was looking for a long the 5 minute and my entry criteria was not met, but on the 15 minute a confirmed long appeared. I can enter the 5 minute long knowing the 15 confirmed. I do not know how often this will happen since the 5 is going be more responsive than the 15 obviously. But, it is an option to consider. Of course, the can of worms then is to look at as many increments as possible to trade off the 5.... If we have the 5 and 15 up, why not the 10? Seems logical....

[nycdweller 10]

Brownsfan019, what's a WRB? Where can I learn more info? Thanks.

 

Looking at your chart here PP, looks great!! Putting the VSA items aside since I don't use them (as you do at least), it basically looks like candle patterns at the extremes on the first WRB of the day for trade setups. Again, not exactly as you are using them but for sake of discussion here I see a Support/Resistance area designated by WRB. If so, we see a few possible trade setups here:

 

 

A few possible trades looking at creating S/R zones on WRB.

 

 

 

Now the next question I have is, what about the other WRB's that appear on the same chart?

 

 

By using Mark's definition of a WRB, I believe there's at least the ones I highlighted. So, during the day on this 5 minute chart how do you handle these other obvious WRB's? Or is there a reason they are not used?

 

I'm trying to see how/when a WRB is to be used for trading reference and when to ignore them, if you do at all.

[brownsfan019 17]

Brownsfan019, what's a WRB? Where can I learn more info? Thanks.

 

http://www.traderslaboratory.com/forums/f34/wide-range-bodies-or-big-candles-1480.html

[nycdweller 10]

Thank you. Wow, you are quick! I just posted my message and you responded within a few seconds. I'm starting to think you are a computer.

http://www.traderslaboratory.com/forums/f34/wide-range-bodies-or-big-candles-1480.html

[walterw 10]

Absolutely ¡¡ exits will empower the entire aproach...

 

not easy as it is a very hard topic... I must confess I am a scalper because I found on scalping a way to exit trades in a very simplified manner...

 

Any way, candles are a very simplified and organized way of seeing price action...

 

cheers Walter.

[brownsfan019 17]

Thank you. Wow, you are quick! I just posted my message and you responded within a few seconds. I'm starting to think you are a computer.

 

No prob, I just happened to be on when you were.

 

Or I am always on watching posts closely....

 

:pc guru:

 

Absolutely ¡¡ exits will empower the entire aproach...

 

not easy as it is a very hard topic... I must confess I am a scalper because I found on scalping a way to exit trades in a very simplified manner...

 

Any way, candles are a very simplified and organized way of seeing price action...

 

cheers Walter.

 

I think we are similar in this regard as I was mentioning just taking a +2.00 on the 5 min ES chart trades. It's simple, easy and very attainable. Of course the other side will say let the market take you out, etc. but there were a number of trades I saw on the 5 min chart today where taking 2-3 yielded nice results, all day long. A simple, all out exit strategy helps ensure you make money in 'choppy' areas and in strong movements as well. Of course, you could make more in the strong movements by staying in longer, but to do that, you must sacrifice profits in choppy conditions. A simple bracket order is a great and EASY way to exit trades on shorter timeframes.

[brownsfan019 17]

And another follow up Walter - the one advantage to entering @ the close is that the +2.00 becomes even more attainable on winners. Actually, the profit target may need to be a little larger IF entering @ the close.

 

Of course, more stop outs will ensue by entering at close, but smaller losses...

 

Now you see why I tell people candlestick analysis CAN work but there is SO MUCH MORE than hammer hunting. There's so much that goes into a proper trading plan that many just simply won't put forth the time and effort required.

[walterw 10]

In that case momentum discernment may come handy to switch exit methodolgies... one simple method I use to discern mometum and change this "sensitivnes" on the exit management is to see how prices drive far from the keltners... on that case I asume momentum is showing its paws, when market strugles to go far outside from keltners we can asume a cycle condition (wich actually is the norm in the market) and scalping fixed exit strategies may give better results in this case... key for that kind of exits is to ensure a good minimal RRR of 1:1.5 at least... cheers Walter.

[brownsfan019 17]

In that case momentum discernment may come handy to switch exit methodolgies... one simple method I use to discern mometum and change this "sensitivnes" on the exit management is to see how prices drive far from the keltners... on that case I asume momentum is showing its paws, when market strugles to go far outside from keltners we can asume a cycle condition (wich actually is the norm in the market) and scalping fixed exit strategies may give better results in this case... key for that kind of exits is to ensure a good minimal RRR of 1:1.5 at least... cheers Walter.

 

I think I can see it... a few examples would be great. I'm a very visual person. Probably why candles work for me. I like the pretty colors.

 

:embarassed:

[walterw 10]

yes some examples... actaually on tick charts at smaller timeframes this readings get more amplified...

 

 

 

just a very simplified concept... if price action is contained by keltners, we are in cycle... cheers Walter.

[brownsfan019 17]

RE: Keltners - I see what you mean. I actually used Keltner's for awhile at one point for this very idea. Here's the one issue in real-time - you don't know if it will break outside the band till well after the fact and that can lead to very, very small profits (if any) on trades where the lower band is touched and then snaps back. You could have a resting order to exit there, but then you won't catch the momentum trades as you've illustrated.

 

 

 

So then it comes down to - are you better of just taking your +2 and being content so most of these trades now make money or are you sitting and waiting for the giant move....

 

More often than not, my research has shown taking CONSTANT profits CONSISTENTLY does so much for the trader - for their account, for their mental state of mind, etc. Constantly winning is a great feeling and cannot be underestimated.

[walterw 10]

I personaly, (and this may be related to my character) prefer to trade the cycle trades for a fixed exit...its probably the best environment to make profits, and it happens permanently compared to momentum... when the momentum appears its more of an alert state into not aplying cycle scalps and get shaved on a brutal move against me... but basicly all my scalping happens on the cycle condition... ironically the state of the market where most people complaint about and get so confused...

 

About the psicology of taking profits and not hoping for super moves, I believe its a way of being much more realistic and cash $$$ every other day...

 

cant beat that sensation, it feedsback confidence to keep trading ¡¡ cheers Walter.

[Anonymous 11]

Hi BF! Its great to be talking WRBs with you again. I known this is not the WRB thread, but if you're okay with it- I am game.

 

First, you missed one. Check out the large white candle just prior to the Test candle. That's a WRB. Quick definition for those reading this, a Wide Range Body is one where the body (open to close) is greater than the prior three (3) bodies. Therefor 4 candles are involved. One can choose more candles like 4 or 6, but 3 seems to work best and three (3) is the least ammount one should use. Also note that it appears that BF has highlighted the candles next to along with the WRB itself.

 

Now, based on what I have been saying in the VSA thread, there are only two trade set-ups. What this chart does not show is a No Supply that forms within the shadow of the Long Shadow of the hammer line. Hence, for me, most of the WRBs are going to be ignored as no VSA signs are within their bodies. As already pointed out, the No Demand on top of the S/R zone was confirmed by action on a higher timeframe. This is not the case with the Test candle, so despite the fact that we get a beautiful Test (hammer) within the range of a WRB, it is not taken.

 

On what makes one WRB more significant than another.

1. Volume associated with WRB. The more volume the more significant.

2. Size ( sorry, guys but size does matter here too).

3. Was the WRB created on a news related event? A WRB created on the release of the jobs report is more significant than a WRB created 2 hours later over the lunchtime for example.

4. Location. A WRB that forms at an old high is more significant than on that appears where there are no obvious areas of support or resistance.

[BlowFish 10]

 

As we've discussed in the chat room, the real key here is actually how/when to EXIT. There are plenty of trades we saw that went +2 (or more). Of course we want to stay in the winners longer and get out when it's not there, but easier said than done.

 

So I think the entry thing is good, but I actually think the exit plan is MORE important with candlestick trading.

 

Take my opinion for what it's worth.

 

I'd go further - The exit plan is MORE important (compared to the entry that is) with all types of trading.

 

Why not use the candles for exits too? So for example a hammer forms 'against' you and then price breaks out so exit - or even reverse if you are scalping walter style

 

If you are long and each candle is green and making higher highs and higher lows there's really very little reason to get out. (I should say that over and over for my own benefit!!) Actually I think it was Tom Williams (of VSA fame) who said something along the lines of at least stay in until you get a lower close.

[walterw 10]

Higher high and lower lows only happen in trending momentum conditions, on cycle conditions aplying that concept a profitable cycle trade/scalp will eventually become a stop... that so far my experience... cheers Walter.

[BlowFish 10]

Indeed Walter, though I thought those where the moves that Brown was wanting to catch. (not so sure now you mention it ).

 

Sitting through coils and such is likely to be necessary to catch the bigger moves unless you 'shift gears'.

 

Edit: quickly recognising changes in market condition is quite a valuable skill for a trader.

[brownsfan019 17]

I'd go further - The exit plan is MORE important (compared to the entry that is) with all types of trading.

 

Why not use the candles for exits too? So for example a hammer forms 'against' you and then price breaks out so exit - or even reverse if you are scalping walter style

 

If you are long and each candle is green and making higher highs and higher lows there's really very little reason to get out. (I should say that over and over for my own benefit!!) Actually I think it was Tom Williams (of VSA fame) who said something along the lines of at least stay in until you get a lower close.

 

BF - good idea on the candle thing, however candlesticks do not provide timely exits. Waiting for a reversal will cause many trades to 'give too much back' in my experience. Higher highs, lower lows sounds good on paper, but again, back to the 'give too much back' by the time a stop is hit. For example, if trading on the 5 min chart, there can be some decent price action to cause a higher high but by the time you trail a stop, you can literally give back POINTS.

[walterw 10]

I wasnt following anymore today the market when this gorgeous doji did his job...

 

 

today was very nice the amount of good setups we had like this...

 

funny, if you taked the es signals into ym at the same time, ym was VERY profitable today.... nice work here Brown ¡¡ cheers Walter.