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About Candlesticks: Why they were created? What do they reveal?

  • #121
  • Dec 26, 2015 11:02am Dec 26, 2015 11:02am
I soon realized that the actual price chart - irrelevant of timeframe - was in fact an indicator. In other words, the price movement of eur/usd is an indicator.

eur/usd = indicator between two currencies (irrelevant of timeframe/candlesticks).

Ironically, you can have strength in euro and strength in us dollar, yet, the eur/usd 'indicator' (price chart) can be up, down, sideways...

The outcome of THIS is what will determine the inmediate size, color and fatness of your candlesticks.

Candlesticks provide a means to (statistically) analyze range expansion and contraction within a (insert your trading choice) minute/hours/days period, which in turn allows you to build a probable(?) roadmap of potential(!) movement....but it will all go to shit (of course,...its a probability not a certainty isnt it?) the moment euro strength and us dollar strength change, and the best part is it might be another market all together that does this haha.

Happy Christmas to all!
  • #122
  • Dec 26, 2015 11:32am Dec 26, 2015 11:32am
When looking at candle sticks.. Look at the structure of the market... That can tell you where players are and where stops are. More important then focusing in on just one or two candles to make a pattern. Look at the whole big picture..
The only system that will work is one designed by and for yourself.
  • #123
  • Edited 4:30pm Dec 26, 2015 3:32pm | Edited 4:30pm
Quoting Pipalicious
I soon realized that the actual price chart - irrelevant of timeframe - was in fact an indicator. In other words, the price movement of eur/usd is an indicator. eur/usd = indicator between two currencies (irrelevant of timeframe/candlesticks). Ironically, you can have strength in euro and strength in us dollar, yet, the eur/usd 'indicator' (price chart) can be up, down, sideways... The outcome of THIS is what will determine the inmediate size, color and fatness of your candlesticks. Candlesticks provide a means to (statistically) analyze...
i refer to a post you made some time ago regarding looking at the market as a whole ,the entire jigsaw puzzle....

the indifference is the difference between range and trend


imagine a candle stick of the whole market ,or i should say the effecting currencies,cause and effect .the more we are able to measure its entirety the closer we can manage the outcome,would you not agree pip
  • #124
  • Dec 28, 2015 3:15am Dec 28, 2015 3:15am
Quoting diceman555
{quote} i refer to a post you made some time ago regarding looking at the market as a whole ,the entire jigsaw puzzle.... the indifference is the difference between range and trend imagine a candle stick of the whole market ,or i should say the effecting currencies,cause and effect .the more we are able to measure its entirety the closer we can manage the outcome,would you not agree pip
Hey man, yes of course i agree. Not only do you manage the outcome(s) more efficiently, but, you also see (with practice) when to stay away, because now you are looking at the whole 'product' as one, and not in individual pieces.

~ The whole is greater than the sum of its parts ~ Aristotle

Its like owning a small business and having 4 employees. These 4 employees are your 'link' between stock and customers.
What should you be looking at in order to run a succesfull business? well of course its everything, the customers , the stock and the employees.
You cannot blame failure (or success) on employees only, on stock only, on customers only. It is all of it combined (along with the owner) that creates the business. Yet somehow when it comes to trading, we focus on one thing only? be it candlesticks or whatnot?
  • #125
  • Dec 28, 2015 5:52am Dec 28, 2015 5:52am
Quoting bloodpoodle
When looking at candle sticks.. Look at the structure of the market... That can tell you where players are and where stops are. More important then focusing in on just one or two candles to make a pattern. Look at the whole big picture..
This is similar to how I view the market, I look at the short term & long term "health of the market" on the same chart to get a perspective of whether
I should be selling or buying the currency. Looking also at the currency in terms of strength across other pairs.
Candlesticks for me, provide a quick visual analysis. Patterns can help to confirm.
It never gets easier, you just get better
  • #126
  • Dec 28, 2015 8:22am Dec 28, 2015 8:22am
Candlestick is better than line charts and bar charts (If you already not integrated any indicators with those line and bar charts). http://www.myfxbook.com/members/Real...e-live/1450287
  • #127
  • Jan 4, 2016 7:29pm Jan 4, 2016 7:29pm
Quoting kprsa
{quote} k P.S. Nothing wrong with the French, had a great time. {file} {image}
This version is nicer and easier to compare between the approximate total buy and sell volumes to anticipate what happens next.
k

Attached Image (click to enlarge)
Click to Enlarge Name: Clipboard01.jpg Size: 89 KB


Attached File(s)
File Type: mq4 VolUpDn_sep.mq4   2 KB | 566 downloads
  • #128
  • Jun 16, 2016 1:55pm Jun 16, 2016 1:55pm
It has been some time since the creation of this thread, and after few months where I did not really have time to think about Markets, I still spend quite some time (though I am not efficient at all ) attempting to understand better the basics of the candlesticks and the inherent properties of the structure of the Markets, staying in front of a paper with a simple candlestick on it.

So, just a few things that make me think now :

Attached Image

http://i66.tinypic.com/33c82ds.png

Here i am just doing again an allusion to what CrucialPoint already pointed in his previous posts on this thread, about the wick and potential candle.
This could not be so simple to trade, as it is based on an AVERAGE : on average, the Market will look like this (either with an up or down candlestick), whatever the timeframe you consider for a candlestick.
Also, it is assuming that most of candlesticks will not have their low revisited once what we consider to be the Open will be broken out.

The other thing that is puzzling me is this :

- We know that more than 95% of the time, for any candlestick whatever the timeframe you may imagine, Close price will be different from the Open price. The not too deep conclusion I make is that it means the Markets tend to go away from any reference point you take (here the Open), which to me means the Market tends to "expand", either up or down.
- From my small researches few weeks ago, I observed that some price levels I defined were revisited around 97% of times (the funny coincidence was that in my datas the amount of not-revisited-yet levels were actually equal to 3.14% ^^ But it might be coincidence as the sample was not that big. As it concurred with what I read in some other threads (some of you will remember the threads from Eurusdd and the talking of price being 97% recurrent) I guess that we might say with large room for miscalculation that any price point has well over 80% probability to be revisited (the problem being that we don't know when, and we don't know how much price will travel away from that reference point in-between).

So, what our brain can deduce from these two apparently paradoxes ?
On one side we know that Price tends to go away from any reference point, and at the same time any reference point has a large probability to be revisited, noting that in either case, it is not 100%.
How the probabilities can be so high and at the same time, apparently, so opposite in their meaning ?
Could it be there is "something", a concept, we cannot grasp yet and that we have not defined, that falls in between these two behaviours, and that is where the true opportunity would lie ?


030985
  • #129
  • Jun 16, 2016 2:01pm Jun 16, 2016 2:01pm
I appreciate this thought process.
  • #130
  • Jun 17, 2016 4:06am Jun 17, 2016 4:06am
Maybe:
1. Wait for price to move >25%
2. Wait for price to move back over the open
3. Wait for price to move 25% the other way from open (50% of total size)
4. Entry
5. Aim for 75%-100% of total size or close trade @ candle close
  • #131
  • Sep 18, 2016 8:49am Sep 18, 2016 8:49am
This seems to confirm the highest lowest open method!
My Threads: Trading is as simple as 1-2-3, Highest Open / Lowest Open Trade
  • #132
  • Sep 18, 2016 12:23pm Sep 18, 2016 12:23pm
Quoting 030985
It has been some time since the creation of this thread, and after few months where I did not really have time to think about Markets, I still spend quite some time (though I am not efficient at all ) attempting to understand better the basics of the candlesticks and the inherent properties of the structure of the Markets, staying in front of a paper with a simple candlestick on it. So, just a few things that make me think now : {image} http://i66.tinypic.com/33c82ds.png Here i am just doing again an allusion to what CrucialPoint already...
i spent a year logging every return .i broke them in to groups ,10 to 20 pips,20 to 30 30 to 50 ect.i calculated the % for each group.the results showed how efficient the market is most of the time.for example 10 to 20 pips is around 68 % ,each group always covers the trades and the spread.but they deviate from this at times and those % ,s takes the efficiency away ,this is were the money is .it always returns to be efficient ,the probability increase during these moments in our favour
  • #133
  • Aug 16, 2017 2:50am Aug 16, 2017 2:50am
Hello,

Recently I did some researches concerning upswings and downswings :
If price moves up of at least X points, from a bottom, it is considered as an upswing.
If it moves down of at least X points, from a top, it is considered as a downswing.
Obviously, one upswing is followed by a downswing, and a downswing is followed by an upswing. (Think ZigZag indicator)

I studied Dax index, for different X variable on 6 years of intraday data, and interestingly it revealed some constant numbers whatever the variable X was.
As I am not that smart I am actually not able to see if these numbers can give some clues to how price moves, or if it is just a consequence of obvious things and that my brain does not connect the dots. I just thought I would put them here, maybe it can be of use for someone else also.

Here are some datas of moves of at least 30 points :

Total number of swings : 17163
Average size : 62 points
Median size : 52 points

44% of these swings are between 30 and 49 points;
26% of these swings are between 50 and 69 points;
14% of these swings are between 70 and 89 points;
7% of these swings are between 90 and 109 points;
9% of these swings are 110 points or more.


Interestingly, whatever the number of points decided for X, the average size of swings is always roughly X*2 (average size 62 for X=30; 104 for X=50; 208 for X=100; etc...). It is the same if we observe currency pairs (But I can't say for the next constants as I did not look at it on forex yet, i would tend to think it is the same though, as the average size is the same).

Then, whatever the number of points decided for X, the quartiles threshold are also rougly the same and oscillate around these constants : X*1.3 , X*1.75 and X*2.5 .
Meaning, for X points moves, 75% of swings reach at least X*1.3, 50% of swings reach X*1.75, and 25% of swings reach X*2.5.
For our example above with moves of at meast 30 points, it gave :
75% of were are at least 39 points (30*1.3)
50% of were are at least 52 points (30*1.73)
25% of were are at least 75 points (30*2.5)


These datas may give some small clues about the probabilities that a move will pursue to reach price P before retracing of at least X points.
If I was able to do it I would like to observe more in depth and analyse the small retracements inside these swings, which may explain a bit more these numbers, but I am not able to collect and organise datas correctly and to do it yet.

For some reason I ignore, I have the feeling that the fact the Median size is around 1.75*X can offer some big clues to how Market Price behaves. But maybe not lol. And maybe there is a very simple and logical reason.
That said, maybe these numbers can be applied on a single candle/bar. Indeed the move from Low to High in a up candle can be considered as a move of at least X points, with (High-Low = X) and then offer us some very small clues about the probabilities of price going there or there before retracing of X points, as on the picture below.

Attached Image


030985
  • #134
  • Aug 16, 2017 3:29am Aug 16, 2017 3:29am
Quoting 030985
Hello, Recently I did some researches concerning upswings and downswings : If price moves up of at least X points, from a bottom, it is considered as an upswing. If it moves down of at least X points, from a top, it is considered as a downswing. Obviously, one upswing is followed by a downswing, and a downswing is followed by an upswing. (Think ZigZag indicator) I studied Dax index, for different X variable on 6 years of intraday data, and interestingly it revealed some constant numbers whatever the variable X was. As I am not that smart I am actually...
Mate well done on a very informative post!! Just re the image when u say retrace 10 pips where is thos measured from? The high of the previous candle, the close erc??
  • #135
  • Aug 16, 2017 10:15am Aug 16, 2017 10:15am
Quoting timster
{quote} Mate well done on a very informative post!! Just re the image when u say retrace 10 pips where is thos measured from? The high of the previous candle, the close erc??
That is something we don't know. And that's why my post is maybe not as informative as you think.
"25% probability price will move to 35 before retracing of 10 points or more" seems to mean that there is NOW 75% probability that a retracement of 10 points or more may occur before price gets the chance to reach 35 (if it ever reaches it). The retracement (downswing) could happen now, or it could happen at 20, at 25, at 30, even at 34. We don't know.

030985
  • #136
  • Aug 16, 2017 12:57pm Aug 16, 2017 12:57pm
Quoting 030985
Hello, Recently I did some researches concerning upswings and downswings : If price moves up of at least X points, from a bottom, it is considered as an upswing. If it moves down of at least X points, from a top, it is considered as a downswing. Obviously, one upswing is followed by a downswing, and a downswing is followed by an upswing. (Think ZigZag indicator) I studied Dax index, for different X variable on 6 years of intraday data, and interestingly it revealed some constant numbers whatever the variable X was. As I am not that smart I am actually...
Hi, 030985.
Funny, but I coded the same thing recently. I studied EURUSD and got the same results like you. I tried a lot of things to predict the next move or get several pips from the zigzag move, but didn't get any edge. Everything is efficient or you don't know when the move will finish. I came to conclusion, that to predict the next move is impossible and that the less R:R, the better it is. Now I have no ideas more. I will try to create money management system based on this stats.
IenDzi.
  • #137
  • Aug 16, 2017 1:57pm Aug 16, 2017 1:57pm
Candlesticks bars are basically a visual summary of price action for a certain period. They were created to make price action stand out more than conventional price bars. That is all.
  • #138
  • Aug 16, 2017 1:59pm Aug 16, 2017 1:59pm
Quoting Madinvestor
Candlesticks bars are basically a visual summary of price action for a certain period. They were created to make price action stand out more than conventional price bars. That is all.
Do you have a source for that? I.e., like from the guy, or group that created it saying this was the purpose of a candle?
  • #139
  • Aug 16, 2017 2:09pm Aug 16, 2017 2:09pm
Quoting forrestang
{quote} Do you have a source for that? I.e., like from the guy, or group that created it saying this was the purpose of a candle?
Oh you mean the history and all that. Well, no. I can tell you from reading Steve Nisson's books (you can Google him) he is considered the authority on candlestick patterns and his books will explain all the extra details you would like to know. Something like Japanese rice traders or something started it..can't remember the rest of details. Didn't really care. I just wanted to know how to use them, but you can check it out for yourself.
  • #140
  • Aug 16, 2017 2:37pm Aug 16, 2017 2:37pm
Quoting Madinvestor
{quote} Oh you mean the history and all that. Well, no. I can tell you from reading Steve Nisson's books (you can Google him) he is considered the authority on candlestick patterns and his books will explain all the extra details you would like to know. Something like Japanese rice traders or something started it..can't remember the rest of details. Didn't really care. I just wanted to know how to use them, but you can check it out for yourself.
I bought that book a long time ago too. Candlestick patterns are another TA tool that is next to useless.

I'm just pointing out, that we really don't know WHY a candlestick was created. It may very well be that it was just a different visual appearance, could be some other reason?

The point of the thread also, is about looking for viewpoints alternative to the common things you see on forums, and most of the things you see on forums is b.s., and most of it is regurgitation from other people who don't have a clue about trading.

I think sure, we can dismiss the thread and simplify it to the easiest answer, but I think the OP wants to discuss the topic in a different way, i.e., thinking differently than most, cause most people fail at this.
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