Higher Edge within a Single Candlestick

Thank you Epiphanic for these two amazing posts, I went down the same route but it seems you reached a deeper level.

"This becomes a particular problem when we want to use different measures of a candle to make decisions."

I wanted to share my interpretation of this sentence, the measures I found to happen inside any candlestick with good statistical occurrence. As CP say "an edge is a higher statistical occurrence", you're not granted to be profitable if you find one, problems will arise on how to put it into practice.

When you start analysing candlesticks OHLC data obviously you begin to search for common characteristics, one great example is that on average a candlestick is 50% body and 50% wicks... But that's the basics and you read about this everywhere, whether this implicates randomness inside markets is another topic. The next step is to gather some "expectancy", meaning "what can I expect from a candlestick"? This is when you start to look for the average range of each candlestick, so you know how much movement you can expect on any given candlestick relative to it's TFs; of course if the market wants to shoot 20x it's average range it will do, but I think it's a handy information knowing that with higher statistical occurrence after a certain range size (depends on TF) the observations of price going further will decrease. But this is not the edge I found.

Moving on I wanted to dig a little deeper, a candle has OHLC not just LH, so I started looking at average candlestick range in a "compartmentalised" way; meaning that I look for individual average OH-OL-OC. Of course at the beginning this just produced the same result outlined in previous paragraph, balance and no apparent edge.

I then imposed a restriction, I wanted to look only for bullish/bearish candles, this is when the balance tilted. If we look at all bullish candles average sizes, the average lower wick is no more equal to average higher wick, the average OC is no more equal to the sum of average wicks... Balance is shifted. For example, on bullish candles the average OH distance is ~3 times the average OL distance, and on bearish candles the average OL distance is ~3 times the average OH distance. This is the edge I found.

Those that traveled the same route already know where this eventually lead to, this is a breakout "conditional" strategy... If you want to trade this edge then you need to trade the development of a candlestick, the edge refers to a post-facto phenomenon (you don't know it's a bullish candle until it closes), so your only chance to take advantage of this is by trading candlestick's development. So... imagine we want to trade the development of a 1H candle, you can do it on a 1H chart of course, but remember: we're trying to take advantage of a post-facto edge, that means we'll be wrong many times. Hence it would make sense to trade this development on a lower chart, you can see more clearly the movement and potentially filter some bad signals. But, how do you trade this? There are at least 2 ways.

You know in bullish candles average OH is ~3 times average OL (eg. avg. OH=30 pips, avg. OL =10 pips), so one way would be to wait for a crossover of open line if the OL was <= 10pips, you would expect a 30 pips movement upward, this is why I said "conditional breakout". Needles to list all problems produced by this method.. What if candle open and shoot up without never going below open? In order to catch that you needed to open the trade at the very open of the candle. What if the candle is just fluctuating in a range and it casually cross open? Fakout and loss, it'll happen many times.

The next, slightly better, way I found was by imposing "limits" around the open, we know avg.OL in bullish candles is =10pips, the we place a line 10pips below the open... And another line 10 pips above open... If price cross the lower line then likely you're not inside what will be the lower wick of a bullish candle, if price cross the upper line then likely you're not inside what will be the higher wick of a bearish candle. Now you have solved one problem of the first method, still not profitable tough... Ranges and fakeouts would still kill you. But now you can remove the "conditional part", even if price travels more than 10 pips below lower line and then it start to reverse, shooting back up, and crossing the higher line, technically you're now inside a bullish candle and could go long... Problem of this is the "balancing" of the 2 lines, it happens only once every hour, and again fake-signals will be a huge problem.


I know these things can be tricky things to visualise if you did not went down this route, I apologise for not posting images... Me being lazy
Is this a dead-end route or is it something we can take advantage of? Is there some way the wonderful posts by Epiphany can help trading this? I see rolling candles can solve frequency of balancing problem, I see using a median line can help both to filter signals and to give some exit indications. Epiphany I would really like your input on this, everyone's contribution is always appreciated.

Dear apprendista,

thank you very much for your great contribution! It contains some perspectives (in slightly different form as well) that I would like to address in future posts. Please excuse me for not having the time to respond in great detail at the moment. However, it simply takes time to prepare the posts in such a way that everyone can follow my thoughts. Time that I will not have during the week (and possibly also during the coming weekend).

Nevertheless, I look forward to more of your contributions as well as those of others!

Thank you very much,
Epiphanic

Hi, if you want to see how i use candlesticks dm me when you get message rights, maybe get on zoom when i have the time

Sorry to disappoint you, but I'm not a big fan of private groups. Why don't you bother to discuss it here?

Howdy.

I too went down a similar route as Apprendista a while back. Admittedly, I will have no real answers, so I will just post some observations I have had.

Everyone knows what the basic signal is, so I won’t belabor that point. But just a general idea, pic #1(M1,60-min lookback) shows the price panel, the raw OHLC data(purple is close) on the 2nd, and the 3rd shows a MACD of the open-close.

Everything after this point will show a 10-period smoothed version.




Transformations:
Because this is chart data, there were a few manipulations I did w/the data. Not that I think this is useful, it was just something to do.

Shown below are, these are all shown in pic #2:
-Standard signal: MACD of the open-close
-Close percentage: (Close-Open)/(High-Low). This turns it into an oscillator bound by 0-1.
-Mid percentage: (Close-Midpoint)/((High-Low)/2). Also an oscillator, but is bound by -1 to 1.
-Velocity: ( (Close0-Open0)/(High0-Low0) - (Close1-Open1)/(High1-Low1)) / 2
-Acceleration: (v2-v1) / 2
-momentum: volume x velocity

Again, not that any of these transformations are useful.





MultiTF:
Of course, with either the original signal or any of its transformations, you can look at it across various sampling periods. I.e., images above are using a 60-minute lookback, but pic #3 shows the standard signal with various sampling periods.




What does this thing do:
In the way that Apprendista mentioned, I was kinda wondering what this value is telling me? I still don’t know, but here is an example.

On pic #4, you can see the sampling used(12,24,48,96,192). I could show this example on any of the transformations, but this one is using the midpoint. Also of note, we are analyzing a single point, and looking at all the points this MTF version is sampling.

Hopefully you can follow along?

On chart, you see the START point we are analyzing. If you look 12-bars back, you see our first sample point. You can also see the Midpoint of that range. If you then go back 24-bars, you can see the next midpoint, and so on.

Also of note, is the cyan, horizontal line. This is the AVERAGE midpoint of all the samples.

You will notice the curling of price. This is the point we are noting. You will also notice a similar curling of the indicator below. What has happened here, is there was an AVERAGE midpoint set, by all of the points we are sampling… price went UP TO that line from below, and turned around. That’s why you get all the TFs turning AT THE SAME TIME.


To note, this curling is not important. I could explain this with some other feature on the price chart. Point was just an attempt to understand what looking at the data this way is telling us. Particularly, with respect to what MULTIPLE TFs may be doing together.

So it seems to me, what this is, is a constant(always n-bars back) sample of previous data, and taking note of where price is relative to whatever point you are looking at. The reason the periodicity is synced up at that point, and they all turn at the same time, is because it just so happens, that the constant sampling used had price turning near the average midpoint.

The point above is either confusing the way I’ve worded it, or it sounds obvious to you.





Other Data:
I am not suggesting that either the standard MACD, or this MACD are to be used as plain trading signals. But, I have tested the number of points moved when the zero is broken on both the standard MACD and the MACD of the rolling candle. I.e., does price travel further(using its close-close distance), when price goes beyond its zero line?

It should, as if you add up all the up bars vs down bars ABOVE a moving average, there should be more tics ABOVE.

It is easy to ‘fit’ data. To try to minimize it, I wanted to use settings that produced a similar number of signals when tested over 12 months.

The test, I tracked both the MAX distance traveled, and the CLOSE distance. The MAX distance is simply the Max distance traversed, before an opposing signal happened. The close distance is what you get if you did a reversal as an entry. An example of this using the standard-MACD is shown in pic #5.

Again, the point is not to suggest these are trading signals. But I am using the standard MACD for comparative purposes to this other MACD. I will post that stuff next.



I will post more data later.

To Be continued...

To me the "edge" crucial point was talking is far easier than recent posted explanations.
It's just we can't still see it (myself included)

I use the hourly chart to swing trade the direction of the weekly chart.

The edge is very simple.

I still wonder, after all this time, how many of the so-called "traders" on forexfactory.com are still running in circles, completely blind to the obvious?!

Just to be clear upfront: In the few posts I've made so far, I’ve tried to drop some hints about a possible way to approach trading. This approach was based on the idea of cumulative candles. In my opinion, it's fundamentally identical to CrucialPoint’s core idea/philosophy. The only difference? It just doesn't have the same flashy visual appeal as his charts; charts that, let’s be honest, probably only seem “magical” because of the aura of mystery he deliberately built around them in countless often misleading posts.

So, if you actually want to understand the essence behind those colorful lines and horizontal levels, you need to analyze the charts yourself. Why haven’t you done that yet?

Alright, let me give you a starting point. Focus on just a few lines. Now, move your head closer to the screen. Closer! Even closer!

Now, in this chart, focus exclusively on the light blue, blue, and gray lines. What do you see?



Here’s what stands out to me: There’s a tight mathematical relationship between these three lines. But why? What could it possibly be?

Let’s take a look at where these lines intersect the zero line. Yep, those are the purple circles labeled A, B, and C. Now, what happens when these lines cross zero?

1. A: Gray crosses zero
   -> blue = –light blue
2. B: light blue crosses zero
   -> gray = blue
3. C: blue = zero
   -> gray = light blue

How is that even possible? Which indicator are these lines supposedly representing? Think about it!

And here’s something else to chew on: If we could trade the turning points of the light blue line above and below zero, we’d be able to ride trends from nearly the beginning to almost the end.

So, once you’ve figured out the first question, ask yourself this: What do the gray and blue lines have to do with the light blue one? What do they actually represent? And how could this help you?

The Dance of Lines

Three lines weave through shifting time,
Each a whisper, soft, sublime.
One moves slow, with measured grace,
One flows swift, a fleeting trace,
The last between them hums along,
A bridge of balance, bright and strong.

The space between them bends and sways,
A tale of contrast, nights and days.
Two stand apart yet shape the third,
Like echoes cast from thoughts unheard.
One grows near, the other wide.
A silent pull, a restless tide.

Where distance sways and gaps arise,
Truth unveils in veiled disguise.
For when two forces meet and part,
The third unveils its hidden heart.
Through space defined by push and pull,
The lines reveal what lies in full.

Thus traced in time, the forms unfold,
A dance of forces, bright and bold.
No single path, no fate decreed,
But shifting tides of silent need.

what is it from your point of view?

That was a fine display of incoherent babbling disguised as mysterious wisdom. And then you decided to drop acid and recite bad poetry.

Indeed... The amount of time I wasted on this forum trying to decipher this useless junk makes me just want to bang my head to the wall.

If the goal of the poster was to help / teach then the post would contain something concrete to work on. Sharing a picture and a small poem about three indicator lines is delusional to say the least. Markets are complex and making worth-enough profits requires knowledge about the markets itself and how it works. Here I see zero real world knowledge. What about picking up a finance book?

I've read this thread at least 10 times and the only thing I learned is that I wasted my time. An edge, in order to be an edge, must be able to be translated in computer code and then tested with proper statistical methods. On here there is no edge, and there will never be an edge within a single candlestick: a candlestick is just a way to visualize data. It's like saying: "higher edge withing a heatmap"... no sense.

Everything that might come to your mind about what the edge described in this thread, I tested it, and it's not profitable.

If you want to be a trader your best bet is to get a degree in quant finance, join a hedge fund, and learn from people who actually do this for a living. God, so much time wasted on this useless website full of lonely people looking for some validation in life.

Fun fact, go to a casino gambling forum and you'll see the exact same pattern of people making vague posts about having found a way to beat the casino.

Fun fact 2: every "pupil" of CP is unprofitable. One of them still posts his beautiful trades and scalping sessions once in a while, fun because he still hop from job to job while trying to become famous on tiktok.

Oh... the amount of time I lost here. Run away if you can.

@Rhevl & oculus: So I guess you guys learnt something: Don't waste your time by just reading: Think about what's been written it!

Or did you notice this relationship beforehand? If so, why do you think these indicators were chosen?

How do you know why the light blue line is approaching zero again? Is it because the price is moving sideways or because it’s reversing? The solution: Split the line and analyze its individual components, gray and blue.

This place really does attract the trading equivalent of the stolen valor schizos that pretend to have served in the military.
And like, I understand scammers. They're lying to get your money. But these people aren't even that. It's like they get some kind of sexual thrill out of pretending to be a forex Mr. Miyagi and then having people go "ooooh, tell me more sensei"

No doubt the indicator periods were chosen so that certain properties would emerge, but that's something everyone can do, and pretending this would be useful only because a guy shared a screenshot 10 years ago claiming he's earning millions... Well good luck.

Anyway, I know CP real name and I can assure you that you're wasting your time. I posses material that was not shared on these threads. And I can assure you that it's everything worthless when put to sensible testing.

Want to prove me otherwise? Share some python code or any language you prefer where you prove me wrong. Otherwise this is just mumbling. Also, don't try to fool people with "I can't share because I put lots of work on this" or "I can't share because it will befome unprofitable" or "I can't share because it would have negative consequences when used by wrong people". I used to believe these statements when CP was asked to share more about his system, now I see the same pattern with many cult leaders around the years. They won't share because they don't even know what theyre talking about.

Here's a real world trading strategy used by many funds: https://doi.org/10.1016/j.jempfin.2018.09.006
Do you think that the things you found, and can't share because you don't want to spoon feed others, required more effort than creating this paper? The paper was made by multiple real world well known researchers and they spill everything out in plain math, that's how science work.
This is one of the rare cases where a hedge fund strategy is published. This strategy is worth possibly millions, yet it was postulated in a scientific paper with proper method and then approved by a scientific journal. This is real trading, you are instead searching from pattern on a 10 years old screenshot from a guy you don't even know it's real name, and you're also trying to teach others about the patterns you found. Absolutely ridiculous thinking that I wasted so much time of my life trying to follow people like you.

Please disprove me with objective facts and research. You can do it via private message if afraid of sharing on here. I already know you won't.

Share indicators and template

Stop the mystery, share the secrets

If this doesn’t make sense to you, that’s totally fine—freedom of thought and speech should always be held in the highest regard. But just because you don’t see value in something doesn’t mean it can’t be useful to others.

For example, this observation tells me that the light blue line is split to analyze the fast and slow moving averages it’s derived from separately. Why could that be useful? Precisely for the reason mentioned: when the light blue MACD flattens, it could mean that the price is consolidating and moving sideways. Or it could indicate that the market is strongly retracing or reversing. I do think this can be useful. Of course, the positions of the individual lines within this grid of horizontal lines also play an important role—they help classify and quantify the market.

And it may also give an idea what these other lines may mean ...