I had this bit of trivia I am about to present up the other day but deleted it because I added in to much insubstantial fluffy candy to the content and the message was hard to understand.
I want to talk a little bit about reading candle stick charts. For the longest time I looked at my charts with glossy eyes and never took the time to see if the candles were telling me anything. Yes they flow along and I can see if the price is moving up and down, but I never went beyond that.
I am a Skunny fan and have followed his indicator free trading style. He is a Fibonacci trader and showed all of us that fibs can be predictable to the pip. One of the principle steps that are followed in his teachings is watching the 0 and 100 lines on the fib- meaning the high and low of the fib. Skunny showed us that when the low is breached the lower ext. will be hit (to some degree) and if the high is broken then the upper ext will be hit(to some degree).
Having this principle burned into the back of my mind I started noticing predictable qualities in the candle sticks. very basically if you are watching an up trend, meaning that there are consecutive candles closing high, the up trend will most likely continue. This might seem stupid (common-sensical) now but stick with me. If you are watching the charts and a candle closes high, there is a strong likely hood that the next candle will break the high of the previous candle. Go through some charts to see this in action. When it doesn't happen, take note of the circumstances.
This principle also applies to down trends in the same way.
A step further: When a candle closes high, the price will ALWAYS break that high and when a candle closes low, price will ALWAYS break that low.
This is always true, but sometimes it takes a while to happen.
I like to call the principle I just stated 'Candle Cycles.' Every new candle has it's own little or big cycle. Candle cycles end when:
A low closing candle's low (wick) is broken, even if by a pip.
A high closing candle's high is broken even by a pip.
One more useful bit of info before I show possible trading strategies. If you are watching an up trend and the current candle makes a swing high but closes low, stand back because things are about to turn short very quickly. The same thing applies in a down trend. If the candle that makes the swing low closes high, a strong reversal to the up side is immanent. I know candles have already been named all sorts of things but for the sake of possible questions later lets refer to them as 'Warning Candles.'
Go through your charts and look for them. placing orders at these areas can be very profitable, and they can help you to TP at the right time.
Even deeper: So we know that if a candle closes high or low the price will break that high or low at some point. As everyone knows who has looked at a chart, prices do not move nicely up or down. Often it is very jagged in it's movement. Up trends are full of tiny down trends and vice versa with down trends. This applies to all time frames. This makes trading complicated, but we can take advantage of this trait price has.
Everytime price changes directions it has told us in advance it was going to do so, and also where it was going.
Lets say you are watching several candles close low, and then one comes along and closes high but the down trend continues. This happens all the time and that candle that closed high was telling you something. It was making a zone for reatracement. When the down trend retraces the high of the candle would be a great take profit level. The price will come back to break that high. The same is true in a down trend.
Off to the charts. I hope these ideas I have laid out make sense to everyone. I'll post a few charts to illustrate them. Questions are always welcome!
I want to talk a little bit about reading candle stick charts. For the longest time I looked at my charts with glossy eyes and never took the time to see if the candles were telling me anything. Yes they flow along and I can see if the price is moving up and down, but I never went beyond that.
I am a Skunny fan and have followed his indicator free trading style. He is a Fibonacci trader and showed all of us that fibs can be predictable to the pip. One of the principle steps that are followed in his teachings is watching the 0 and 100 lines on the fib- meaning the high and low of the fib. Skunny showed us that when the low is breached the lower ext. will be hit (to some degree) and if the high is broken then the upper ext will be hit(to some degree).
Having this principle burned into the back of my mind I started noticing predictable qualities in the candle sticks. very basically if you are watching an up trend, meaning that there are consecutive candles closing high, the up trend will most likely continue. This might seem stupid (common-sensical) now but stick with me. If you are watching the charts and a candle closes high, there is a strong likely hood that the next candle will break the high of the previous candle. Go through some charts to see this in action. When it doesn't happen, take note of the circumstances.
This principle also applies to down trends in the same way.
A step further: When a candle closes high, the price will ALWAYS break that high and when a candle closes low, price will ALWAYS break that low.
This is always true, but sometimes it takes a while to happen.
I like to call the principle I just stated 'Candle Cycles.' Every new candle has it's own little or big cycle. Candle cycles end when:
A low closing candle's low (wick) is broken, even if by a pip.
A high closing candle's high is broken even by a pip.
One more useful bit of info before I show possible trading strategies. If you are watching an up trend and the current candle makes a swing high but closes low, stand back because things are about to turn short very quickly. The same thing applies in a down trend. If the candle that makes the swing low closes high, a strong reversal to the up side is immanent. I know candles have already been named all sorts of things but for the sake of possible questions later lets refer to them as 'Warning Candles.'
Go through your charts and look for them. placing orders at these areas can be very profitable, and they can help you to TP at the right time.
Even deeper: So we know that if a candle closes high or low the price will break that high or low at some point. As everyone knows who has looked at a chart, prices do not move nicely up or down. Often it is very jagged in it's movement. Up trends are full of tiny down trends and vice versa with down trends. This applies to all time frames. This makes trading complicated, but we can take advantage of this trait price has.
Everytime price changes directions it has told us in advance it was going to do so, and also where it was going.
Lets say you are watching several candles close low, and then one comes along and closes high but the down trend continues. This happens all the time and that candle that closed high was telling you something. It was making a zone for reatracement. When the down trend retraces the high of the candle would be a great take profit level. The price will come back to break that high. The same is true in a down trend.
Off to the charts. I hope these ideas I have laid out make sense to everyone. I'll post a few charts to illustrate them. Questions are always welcome!
Attached Image(s) (click to enlarge)
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