Big Candle Observation

[cowcool 10]

Based on my simple observation, a big green/red candle is usually followed by series of other green/red candles. Occurence of big green/red candle usually set panic/greed to retail traders and alert momentum traders to get in. Is my observation correct? (please correct me if I am wrong)

 

Based on this fact, I am going to create a script/program that will calculate the average size/range of all candles during the trading day. The purpose is to correctly determine the size of what people perceived as a big candle during that particular trading day.

 

But before putting some effort, I would like to know if there is readily available software/indicator for this purpose. I don't want to waste my time only to find out that there is readily software/indicator out there for that purpose.

 

Thx a million!

[Tams 20]

The indicator is called Average True Range (ATR)

 

more info here:

StockCharts.com - Average True Range (ATR)

 

 

[cowcool 10]

Thx Tams, is it true that a big green/red candle is usually followed by series of other green/red candles?. I want a confirmation from a veteran .

[brownsfan019 17]

cow - what you are referring to is what has been called a Wide Range Body (WRB). If you search on this forum or ET for wide range body, you'll find a few threads out there. Here is a thread that was popular at one point.

 

If you want to take it a step further, contact NihabaAshi who sells a course that deals w/ WRBs last time I checked. It's been awhile, so double check that.

 

IMO there is value in WRBs; however, as you'll see if you read that thread, how you interpret them can be rather difficult - sometimes those WRBs give you excellent entry/exit points and other times they don't do much. If you can decipher when to use them and when to ignore, that alone could be very powerful. Personally, I never got there. I am observant of WRBs now, but they are not a big factor in my plan.

[ceydababy 10]

Thx Tams, is it true that a big green/red candle is usually followed by series of other green/red candles?. I want a confirmation from a veteran .

 

I reckon you have a fifty fifty chance of a big candle being followed by a big move. Often you can see a big green candle followed by several red ones and a failed move.

 

You should maybe filter them by where on the chart they happen. If you're at a point where you're expecting a turn or a continuation then there is probably more weight in the signal. However, in my humble opinion just hitting long or short after a big green or red bar is a recipe for disaster.

[cowcool 10]

I am using 1 minute time frame and talking about huge candle that is 4-5 times bigger than the size of average normal candles, isn't this indicate that there are buying/dumping by instituionals or big traders? Ofcourse I maybe wrong. comments please

[brownsfan019 17]

I am using 1 minute time frame and talking about huge candle that is 4-5 times bigger than the size of average normal candles, isn't this indicate that there are buying/dumping by instituionals or big traders? Ofcourse I maybe wrong. comments please

 

It could indicate 1 of 2 things:

 

1) Big buying/selling entering, time to jump on the move

 

2) Quick profit covering taking place and you want to fade it

The WRB thread I linked discusses all of this. Go through that thread and then post some questions.

[sep34 10]

Cowcool,

 

Your notice of "big green/Red" (White & Dark) candles or as BF refered to them as "WRB" is not in vien, However its not as simple as just being a buy/sell signal.

 

There is not a software that Im aware of that deals with this...Therefore you can go at it.

 

There should be some posts around this forum about "WRB" as well ... I remeber seeing them a long time ago, more then a year or even longer. You can search for it.

[brownsfan019 17]

There should be some posts around this forum about "WRB" as well ... I remeber seeing them a long time ago, more then a year or even longer. You can search for it.

 

Or he can just click the link I provided after find the thread.

 

[sep34 10]

Or he can just click the link I provided after find the thread.

 

 

Yeah that will work too

[stanlyd 10]

I have in the used the WRB bars as an entry. First thing I would filter by only trading in the direction of the "trend" your trading. Second, is I used this very fast moving average (its actually just a hull ma) and what I wanted to see was not only the WRB but the fact that almost the entire candle was below the hull ma(if getting short). Note in the picture that the candle sort of hangs off the ma(short) or balances nice on top of it (long).

I have not traded like this in awhile but that snot to say I would no revisit the idea at some point.