Disliked{quote} Hi G, I agree with you completely. I read AGs post with interest as I am open to learn any new stuff. However many people try to overcomplicate things which will result in depressing results. We should have our indicators but limit them to a certain point. I prefer most the candlestick action to follow. It is interesting and true what you write about candlestick formations because of time difference. Keep in mind those difference mostly play roles on the daily charts only. Sometimes maybe on the 4H but definitely not on lower TFs as the...Ignored
Yes, of course. This is a great side discussion. The question was. What's your edge? Let's have a little fun with this one. I'll take the side that candlestick patterns are just a bunch of made up pseudo science.
So, let's critically examine using candle stick reading as an edge. If your broker shows a doji on a Daily, and mine shows a hammer, which is right and which is wrong? Quite honestly, I think we are both wrong for wasting time on such foolishness. It's the same as assuming the market is purposefully drawing patterns with price to tell us what the future will be. There is at least a couple big things wrong with that.
All single candles can tell us is whether price was going up or down or stayed the same during that one single candle, a very small sample size. The sample size seems far to small to be of any real statistical significance. Whether it is shaped like a doji or a hanging man should logically have absolutely nothing to do with future price.
In fact, I don't believe there is any method on earth that can accurately predict future prices. I think all the time and effort people put into trying to predict the future is wasted. Perhaps there are some price patterns formed with many candles like a range breakout that will work more than 1/2 the time. But predicting the future of price off a single candle formation? How could that be possible if two brokers are showing different candle formations for the daily candles? Who could be manipulating the entire market to draw such pretty patterns with price, and why? It defies logic.
There has been some statistical analysis on the subject of candle stick patterns. There may be some that work more often than not for some unknown reason, but they are so rare you could sit around for years waiting to see one. Thus they don't produce any useable edge. I suspect the fact that they are so rare means the sample size is small, and if it was large enough there would turn out to be very little if any advantage to them. Here's an analysis to consider, http://premium.working-money.com/wm/display.asp?art=329 I'm sure there are several out there that would be interesting to study.
As has been said before, an extraordinary claim requires extraordinary evidence. I can explain in very detailed logic why I think trend trading can produce a useable edge. Whether it does or does not work for me or anyone else, at least I can explain it logically. I challenge anyone to do that with candlesticks, Elliot waves, Fibs, tea leaves, or cloud patterns in the sky. With that said, if one of those methods is already really producing great profits for you, don't change a thing. But if you are struggling to make it work like the book or article you read said it will, then it might be that you are wasting your time on a bunch of pseudo-scientific junk. That's just my opinion. I'd be interested in hearing others.