Candlestick Probabilities

G'day all,

Can by this picture on my twitter feed and thought I should share. Does anyone have any experience/opinion of the % mentioned with these candlesticks. 84% is pretty good probability i would have thought to create a trading edge?

I would like to have some feedback on how you may use this probability stat to form a trading plan?
Does anyone have any other documentation that they can share on probability $% of candlestick patters they would be willing to share?

I use candlesticks a lot in my trading, but it's easy to get confused as there are an infinite number of formations, sequences or whatever you may call them. Also, looking at candles in isolation will not help you, for the only ones I take notice of are around areas where other indicators have come into play to form a trading decision. For me, a certain candle such as a hammer or shooting star is the very last signal I take to trade, but it has to come at the right place.

On the bigger time frames, say the H4, Daily and weekly, even monthly, Candles can be a definite indicator of what may come, such as the weekly Dow at the moment, which I've been watching for quite some time. I called a possible top back in April for the level it is at now, and so far the candles indicate that this may be so. See my thread ' Hunchback head and shoulders formation' if you want to have a look at this. If this week's candle finishes as a negative Doji, which at present it looks like it may do, then there is a very strong possibility that we may see some pretty big selling next week, and I say possibility, not probability, because we can never be too sure.

So yes, candlestick are a fantastic tool to have, but just like any indicator, they cannot be relied upon in isolation.

ps - A really good example of a tradeable candle recently occurred on the Dax 30 DFB 10 min time frame. The price had risen off of this morning's lows, to just beneath the 10min 200 exponential moving average. The trend is down, so it would be unrealistic to expect the price to rise too high. This candle, which closed at 11.20 am London time, is a fantastic sell signal, not just because of the candle, but also from where it was positioned. It is the sort of thing I look for, on any time frame.

Look ups guy called Nial Fuller He will answer all your questions.

Just as a quick follow on from my post above, I thought I'd post my 1 min chart from today's Dax showing how I use candlesticks in combination with other signals to form my decisions to enter a trade. The chart shows three areas where long opportunities came together supported by the right candle formations.

1/ Shows a trendline plotted from the previous high. The first thing to notice is that the price drops, but it does not break lower. Instead it begins to become uncertain, and starts putting in a series of very bullish candles. I wait for the angle between mu 20ema ( blue/red ) and the trendline to narrow, and I look for a hammer, which as you see came in exactly the right place. This is a golden trading opportunity.

2/ However, because it is still well below the 100sma, it can be expected to come back off it, it usually will, but number 1 is such a low entry, that a SL moved to BE, or halved, should be okay. As expected then, it does come back off of the 100sma, but you are never going to know how far it will come back, though I always put a fib in at this point which gives me a good idea. It can also, in a situation like this, just keep on falling, which is why when trading into the trend like this, it is always wise to move your stop up pretty quickly. Then you get the trade signal candles and you pull the trigger. Why? Because other traders have also seen these candles, and they are thinking the same thing ( we do, that's what makes trading possible )

3/ This one for me is the surest signal of the lot, because I know from experience that once the 100sma gets beneath the price like this, the price will usually pull back to it before going off again. When it does, you put your stop well clear of it, wait for the candle, which here was another hammer, and off you go.

You won't be right all the time with this kind of trading, but I can promise you that you'll be right far more often than you are wrong, and this sort of pattern repeats itself time and time again on any time frame.

Anyone who has found this useful, check out my 'Trader's Academy', and ' Big secret ' threads, as there is a lot of stuff on there, not just from me, but from others, and both threads are a good source of information. I don't post much on ff anymore, only usually on Fridays when I'm winding down.