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brownsfan019

Why Candlestick Anaylsis is Different and Might Work for You

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After spending countless hours on different trading forums, there seems to be one constant - very few discussions out there actually talk about real trades. Sure there's plenty of after the fact discussions and even then some discussions are foggy at best.

 

But not with candlestick analysis. As I've outlined here with the sticky threads at the top, once you put your trading arsenal together, off you go.

 

And then look at the threads buried here on TL - we have threads where actual trades are being discussed, sometimes we see blotters and many calls are done in real-time. Just look around.

 

I think this little nook on TL is worth so much more than many here would give it credit for. There is money being made in this corner, yet most on the forum would prefer to discuss whether a squat was a short or long. :confused: I have never seen more confused questions than the infamous VSA thread. Has there been ONE person to ever show they make money with that stuff? Just one????

 

Doesn't add up to me.

 

Since trading cannot possibly be as 'easy' as we try here in the CC (candlestick corner), it can't possibly work.

 

Call it what you want - candlesticks, price action, price reading, etc. - the underlying premise works. Visually candlesticks tell the story of the bulls and bears. And that's all this game is about - who is winning and what side will you be on?

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I'd imagine all traders go through the period where they think the "secret" of the market can be unlocked by learning some sophisticated, esoteric analysis technique. The motivation is uncertainty and the goal is certainty. But there is no certainty in the market, except that if you can't find a trading technique simple enough to confidently follow you are going to be the source of income for somebody who does.

 

VSA seems to fall into the holy grail category. Way too complex. Market Profile isn't as bad, but I dumped it because it simply gave me too much to think about and didn't help much to begin with.

 

It's interesting that there seems to be so many people on this board who are into those two techniques.

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I suspect that a large part of it has to do with making something which is essentially discretionary into something that's mechanical so that even the dumbest trader can use it, as long as he has the money to buy the software.

 

There's nothing especially demanding about gauging the balance between buying and selling to determine the path of least resistance (which is what volume spread analysis is supposed to be about). Nor is auction market theory particularly esoteric. In fact, the basics of it can be written on a 3x5 card.

 

But people don't want something they have to think much about. They want signals (Where do I enter?). Therefore, those who want to understand should not expect fascinating exchanges with those who are searching for instructions.

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But people don't want something they have to think much about. They want signals (Where do I enter?). Therefore, those who want to understand should not expect fascinating exchanges with those who are searching for instructions.

 

Interesting observation DB.

 

Tim

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It's not how you get the information but how you use it. Be it Candles, VSA, Market Profile, etc...it's about understanding how the timeframes/fractals are interacting with one another. It's about finding the spot where you can enter on a lower timeframe and exit on a higher. This can be done with any of the ways listed above.

 

For me personally, I like to see pure momentum on the smallest timeframe and use tick charts (story inside the bar). For my largest timeframe I use Market Profile because it gives me more information than a standard bar (daily for example). My central timeframe is 3m and consists largely on basic candle analysis. Could an individual trade successfully using ONLY "time" bar charts...yes. The important thing in my opinion is to have enough information displayed where you can see the smaller and larger forces at work around your main timeframe.

 

Back to the original post (got a little off topic there)...

 

What type of discussion exactly do you want to see over here at the CC? I do believe that many people do get caught up in the other areas and lose site of the 'basics'.

 

Is this where I insert "ALL HAIL CANDLESTICKS"? ;)

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Could an individual trade successfully using ONLY "time" bar charts...yes.

 

If one can see those little notches. :)

 

I use candles, time bars, and CVB. If I'm looking at movement, I'll use the time bar. If I need to know where the open and close are in relation to the high and low, I'll use candles (see above).

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If one can see those little notches. :)

 

I use candles, time bars, and CVB. If I'm looking at movement, I'll use the time bar. If I need to know where the open and close are in relation to the high and low, I'll use candles (see above).

 

Oh crap, nice catch DbPhoenix. What I meant was "candlesticks" :doh:. I only use OHLC Bars on fast tick charts when reading inside the candlestick. That keeps me focused on the actual movement versus the bull/bear colors. Again thank you...I didn't want anyone to get confused. As far as volume bars, I don't use any. The tick charts give me enough "market action" and much of my volume analysis is done via VWAP.

 

Side Note: "Via VWAP" is suprisingly fun to say. Go ahead, try it. :)

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I'd imagine all traders go through the period where they think the "secret" of the market can be unlocked by learning some sophisticated, esoteric analysis technique. The motivation is uncertainty and the goal is certainty. But there is no certainty in the market, except that if you can't find a trading technique simple enough to confidently follow you are going to be the source of income for somebody who does.

 

VSA seems to fall into the holy grail category. Way too complex. Market Profile isn't as bad, but I dumped it because it simply gave me too much to think about and didn't help much to begin with.

 

It's interesting that there seems to be so many people on this board who are into those two techniques.

 

 

GCB - first, nice to have you back. Second, as you could tell, there has been much concentration on those two areas.

 

It's not how you get the information but how you use it. Be it Candles, VSA, Market Profile, etc...it's about understanding how the timeframes/fractals are interacting with one another. It's about finding the spot where you can enter on a lower timeframe and exit on a higher. This can be done with any of the ways listed above.

 

For me personally, I like to see pure momentum on the smallest timeframe and use tick charts (story inside the bar). For my largest timeframe I use Market Profile because it gives me more information than a standard bar (daily for example). My central timeframe is 3m and consists largely on basic candle analysis. Could an individual trade successfully using ONLY "time" bar charts...yes. The important thing in my opinion is to have enough information displayed where you can see the smaller and larger forces at work around your main timeframe.

 

Back to the original post (got a little off topic there)...

 

What type of discussion exactly do you want to see over here at the CC? I do believe that many people do get caught up in the other areas and lose site of the 'basics'.

 

Is this where I insert "ALL HAIL CANDLESTICKS"? ;)

 

Not sure where I thought this discussion would go HLM. Just felt like posting my observation.

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Not sure where I thought this discussion would go HLM. Just felt like posting my observation.

 

I empathize. And though I haven't read all 2500 posts in the VSA threads, I did read some of the earlier posts, and the view taken at that time was much broader. Somewhere along the line, all that disappeared.

 

As for Market Profile, though it does seem a bit jargon-heavy, it is more open-minded, which is always a plus.

 

But as for candles, there's really nothing that I can contribute since I don't trade according to them. My bar interval is just too small.

 

Perhaps candles have developed too much of a mystique -- the exotic names, the complex patterns. Perhaps what's damaged candles is the same as what's damaged every other approach that has a sound basis: the search for signals. There is also the problem, when seeking out other traders, of having even fewer posts than you have now. The traders are busy trading.

 

As I said earlier. Frustrating.

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Perhaps candles have developed too much of a mystique -- the exotic names, the complex patterns. Perhaps what's damaged candles is the same as what's damaged every other approach that has a sound basis: the search for signals. There is also the problem, when seeking out other traders, of having even fewer posts than you have now. The traders are busy trading.

 

As I said earlier. Frustrating.

 

I agree. Steve Nison has turned into a marketing machine and as a result, candlestick analysis has all these fun names, ideas, etc.

 

And in the end, it's really about visually seeing the fight of the bulls and bears. You can look at a candle and say - bullish, bearish, neutral - and know nothing about candle trading.

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If one can see those little notches. :)

 

I use candles, time bars, and CVB. If I'm looking at movement, I'll use the time bar. If I need to know where the open and close are in relation to the high and low, I'll use candles (see above).

 

Db - care to expand on your use of CVB (Constant Volume Bars, right? - just checking)? I have used them, and still do but I don't think I have found their real potential as yet. I tend to use them in combination, a longer-frame and a shorter-frame, like you could use hourly and 5-min bars/candles (for example) together.

 

Brownsfan - if this is too far off topic let me know ... I know this is supposed to be about candles and you have a CV candle thread here.

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I agree. But it's interesting to note that beginners will become rabidly devoted to the first book they read that purports to disclose secrets or anything that's "hidden". And Nison has certainly pressed the "Mysterious East" component of candles, though I'm sure he's a wonderful person. :)

 

What I like about Wyckoff is the lack of bull. Supply and demand. Anybody who's ever been to a grocery story can understand it. And no software required.

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Db - care to expand on your use of CVB (Constant Volume Bars, right? - just checking)? I have used them, and still do but I don't think I have found their real potential as yet. I tend to use them in combination, a longer-frame and a shorter-frame, like you could use hourly and 5-min bars/candles (for example) together.

 

Brownsfan - if this is too far off topic let me know ... I know this is supposed to be about candles and you have a CV candle thread here.

 

This will be a short answer, so I doubt BF will object.

 

Fact is I gave them my best shot but just couldn't trade without separate price and volume. I've been trading the interaction too long, and I didn't think it was worth the effort to change the habits of twenty years.

 

On the other hand, they make a very nice compromise between time bars and P&F. By having a CVB chart, I can plot the whole 24hr period without having a long string of relatively meaningless non-action from the close to the next day's open. Instead I may have at most two bars that cover the entire period, which isn't even enough to throw off a trendline. And lengthy midday drifts are compressed. They are also handy for finding the "volume ranges" that I use to find S&R (I've posted these in my Blog and also uploaded some sector charts yesterday to the ES/YM thread). Since time isn't so much a factor in those charts but rather price range and volume range, I can eliminate the separate volume window.

 

Guess that wasn't such a short answer after all.

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Fact is I gave them my best shot but just couldn't trade without separate price and volume. I've been trading the interaction too long,

 

Ditto.

 

I persist with them though, the idea of bars/candles holding volume constant is appealing. I think they may be very useful to derive 'indicators' (like stochastics, RSI etc. from) but as I don't use indicators I don't know. I wonder if a market profile could be constructed from constant volume ... never mind now I am really getting OT.

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I think brownsfan wants some thankers!

 

At the end of the day, do what works for you. I am very visual, so candles work great for me. The toughest part is the simple fact they are discretionary. This has lead to many mistakes on my part, but after review I realize what I did wrong. It's a simple learning curve and it's different for everyone. Some may never understand candles, and some may ignore them because they believe they don't work - yet someday find out it's that little niche they have been searching for.

 

I have tried VSA, but never really understood it. Could just be me. I have tried MP, but I've never really had the time to dedicate myself to educate myself.

 

But to be completely honest, I enjoy the exclusivity the candlestick corner has to offer ;) I wouldn't want an enormous thread just to explain how they work. I prefer having traders with plenty of experience coming in and adding their input to something that I have dedicated a lot of time to learning and understanding. It's something that I'm yet to see duplicated on any other general trading forum.

 

As far as making real money over here. Just look through the various threads, the money is there :)

Edited by james_gsx

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GCB - first, nice to have you back. Second, as you could tell, there has been much concentration on those two areas.

 

Good to be back, brownsfan. Yeah, I'm not much interested in VSA or MP. But to each their own. Really, I think people are looking for something to have confidence in and they feel the more complex and seemingly analytical it is the more legitimate it is.

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Good to be back, brownsfan. Yeah, I'm not much interested in VSA or MP. But to each their own. Really, I think people are looking for something to have confidence in and they feel the more complex and seemingly analytical it is the more legitimate it is.

 

I couldn't agree more.

 

The human mind is quite an interesting thing ... we WANT stuff to be complicated so we can crack the code. We WANT the market to be such an enormous animal that only a complex system could stand a chance at killing it...

 

For example - I am not very handy so when it comes time to fix something (car, around the house, etc.) I just know that it will be so hard and complex that I cannot possibly do it. Until I see what is required to fix the problem... Then you sit there going :hmmmm: that wasn't so hard after all.

 

Trading can be the same way if you are willing to put aside the notion that this MUST be difficult.

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