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  • #4,321
  • Jul 29, 2009 10:04am Jul 29, 2009 10:04am
Definition from Price action by Buffy:

Outside Bar, also called a Wide Range or Engulfing Bar, is a bar with a high that is higher than the previous bar and with a low that is lower than the previous bar thereby engulfing the previous bar. Since the open and close are close together on the marked bar, neither the buyers or the sellers are in control and the market is undecided which way to go.
When the open is in the bottom quarter/third of the bar and the close is in the top quarter/third of the bar, it is said to be bullish engulfing with the buyers in control. When the open is in the top quarter/third of the bar and the close is in the bottom quarter/third, it is said to be bearish engulfing with the sellers in control.
Another definition used for this bar – especially if candlestick charts are used - is that the open and close have to engulf the previous bars open and close and not just the high and low of the bar. With this definition, the wide range bar or engulfing bar does not need to have a higher high or lower low to qualify. The first definition most probably came about with bar charts where it is harder to notice the open and close.
  • #4,322
  • Jul 29, 2009 10:12am Jul 29, 2009 10:12am
Japanese Candlestick Charting Techniques. A contemporary Guide to the Ancint Investment Techniques of the Far East. - Steve Nison


Z
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  • #4,323
  • Jul 29, 2009 10:18am Jul 29, 2009 10:18am
Engulfing pattern as explained by Mr S Nison.

Z
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  • #4,324
  • Edited 11:19am Jul 29, 2009 11:15am | Edited 11:19am
Thanks Z and Nicola - you are both correct so no need to fall out over it.

What has happened is that Steve Nison introduced the strict translation from Japanese trading to Western traders and from there specialist Western candlestick traders evolved with situations more akin to our type of trading.

What is important however is learning the basic candles and candle formations and then seeing and understanding them by practicing on thousands of charts. When you see them in action, you build up your own understanding of them and have a better idea what to expect next.

So, you can use the strict definition as introduced by Steve Nison or the "looser" variations as you practice on them.

Me being a simple person, an OB is where it is totally outside the previous bar, an IB is where it is totally inside the previous bar and an EB is where the body only engulfs the previous candles body. I don't use anything else including candle patterns or formations.

I also take these with a "bucket of salt", in other words, they are not gospel, I don't expect price to react in a text book manner when I see these - I need these to prove themselves first - I need confirmation. That's why I mainly use them as "set up" bars.

Danny, while reading all you can is good, it can also be bad - there is no substitute for practicing on thousands of charts. Be careful of reading so much that when you see something on a chart you are so confused you don't know what to do. My advice is to learn the basics - Hammer, Shooting Star then OBs and EBs and then IBs - but be careful with IBs.

As far as M5 being used to practice on - I strongly disagree - the technicals are so weak on that time frame that you will end up being confused and frustrated. A better idea is to f12 historical daily charts of as many pairs as your broker has.

Finally, remember that candlesticks are only one of our tools - they are not the "be all and end all" - they must be used in conjunction with all our other tools.
15 YEARS OF PASR ON FOREX FACTORY!
  • #4,325
  • Jul 29, 2009 11:34am Jul 29, 2009 11:34am
So I have had a couple of PMs about why I can make trading M15 look so easy.

Easy! It was bloody torture for me! Also I was very lucky that on the day I chose to do it, the market had decent volatility or in other words, it was moving.

The key to all and any trading though is taking the lead from the next higher time frame. I see so many just blindly trading a pair or time frame with no idea where prices are in the big picture. I chose AUDUSD because the Worker was making or putting in a double top and I expected the lower time frames to react to that.

Its no good just trading for the sake of trading - you need to have a purpose - so many just trade without regard for what the next higher time frame is doing. If the Worker is stuck in consolidation then any shorter time frame will be constrained in its movement by the same range. If the Worker is topping or bottoming then there is a good chance the shorter time frames will react better. If the Worker is pausing in a trend, there is a good chance the shorter time frames will react better.

Trade the shorter time frames based on the action of the next higher time frame, NOT the other way round. This is exactly what we do trading the Worker - we take our lead from the BOSS.
15 YEARS OF PASR ON FOREX FACTORY!
  • #4,326
  • Jul 29, 2009 11:40am Jul 29, 2009 11:40am
Quoting zuret9
Japanese Candlestick Charting Techniques. A contemporary Guide to the Ancint Investment Techniques of the Far East. - Steve Nison


Z
I agree with everything in this post, I like and trade harami patterns but I see Harami and inside bars as different.
Just my 2c

Nicola
  • #4,327
  • Jul 29, 2009 11:44am Jul 29, 2009 11:44am
Quoting strat
Thanks Z and Nicola - you are both correct so no need to fall out over it.

What has happened is that Steve Nison introduced the strict translation from Japanese trading to Western traders and from there specialist Western candlestick traders evolved with situations more akin to our type of trading.

What is important however is learning the basic candles and candle formations and then seeing and understanding them by practicing on thousands of charts. When you see them in action, you build up your own understanding of them and have a better...
Thanks for the above wonderful explanation. I was just going to PM my friend Nicola to explain the above but you are a step ahead (as always).

I actually have a slightly different definition for IBs and OBs that is a lot stricter (based on my experience).

Have to step out again..

Z
  • #4,328
  • Jul 29, 2009 11:44am Jul 29, 2009 11:44am
Quoting elitejets
I agree with everything in this post, I like and trade harami patterns but I see Harami and inside bars as different.
Just my 2c

Nicola


Z
  • #4,329
  • Jul 29, 2009 2:13pm Jul 29, 2009 2:13pm
Z, Nic and Strat,

Many thanks - seems there is some interpretation after all as I suspected- I think it's where the PA occurs that's important.

I hear what you are saying Strat about the 5m. I'm reading it because I've paid hard currency for the book (I'm so tight!!). I'm just learning about why each candle forms on the 5m and what it could mean. I'd never trade anything lower than 4hr as I don't have the time, temperament or skills. I'm happy with the big money showing it's hand on the daily chart just fine.

Another small tip that may help others wrt trading the worker and watching the boss; On my end of week analysis I leave all the pairs that are in a trading range or not at a major SR level on the weekly TF. I then only change the pairs that I'm interested in from that analysis to the daily chart.
So, when I log on I normally have about 6/7 pairs maybe to check on the daily TF as the others have been left on the weekly - ie I'm happy not trading that pair all week as the boss is not showing me action worthy of losing money on in intraday chop!

Seems to be working just fine so far! (on demo)
Trade less and become more profitable!
  • #4,330
  • Jul 29, 2009 2:44pm Jul 29, 2009 2:44pm
I may have over simplified OBs and IBs to a casual reader so with respect to these type of candles, it is very important to know and understand where these close with respect to the previous (mother or controlling) candle.
15 YEARS OF PASR ON FOREX FACTORY!
  • #4,331
  • Edited 4:20pm Jul 29, 2009 4:01pm | Edited 4:20pm
The indices look like megaphone tops to me. Here is a description.
This is interesting because if this pattern plays out it will be bullish for the USD and Yen.

Reverse Symmetrical Triangle (Megaphone Chart Pattern)
A Megaphone Top also known as a Broadening Top is considered a bearish signal, indicating that the current uptrend may reverse to form a new downtrend.

A Megaphone Top is a relatively rare formation and is also known as a Broadening Top. Its shape is opposite to that of a Symmetrical Triangle. The pattern develops after a strong advance in a stock price and can last several weeks or even a few months.
A Megaphone Top is formed because the stock makes a series of higher highs and lower lows. The Megaphone Top usually consists of three ascending peaks and two descending troughs. The signal that the pattern is complete occurs when prices fall below the lower low.
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  • #4,332
  • Jul 29, 2009 4:44pm Jul 29, 2009 4:44pm
What are those naughty squiggles on the bottom of that FTSE chart Nic??!!! LOL
Trade less and become more profitable!
  • #4,333
  • Jul 29, 2009 5:13pm Jul 29, 2009 5:13pm
Quoting Grimweasel
What are those naughty squiggles on the bottom of that FTSE chart Nic??!!! LOL
Looks like RSI and Stochastics to me, Danny boy.

Nicola, is there something you want to share with us?
15 YEARS OF PASR ON FOREX FACTORY!
  • #4,334
  • Jul 29, 2009 6:48pm Jul 29, 2009 6:48pm
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Is this what you were waiting for? Price has broken below the range support. Would you enter after this beeb or wait for more PA to test the level? I don't really like trading into the MAs but it seems like price has no problem braking them when there is pa - usdchf today for example.
  • #4,335
  • Jul 29, 2009 7:08pm Jul 29, 2009 7:08pm
Quoting Naws
Attachment

Is this what you were waiting for? Price has broken below the range support. Would you enter after this beeb or wait for more PA to test the level? I don't really like trading into the MAs but it seems like price has no problem braking them when there is pa - usdchf today for example.
Yes. Based on your chart, I would enter a few pips below the 20 with a SL above the highest high PROVIDING this is within your MM and tolerance levels and it is in your PLAN.
15 YEARS OF PASR ON FOREX FACTORY!
  • #4,336
  • Jul 29, 2009 8:03pm Jul 29, 2009 8:03pm
Quoting strat
Looks like RSI and Stochastics to me, Danny boy.

Nicola, is there something you want to share with us?
No ... A friend of mine uses them for trading the indices and I put them one chart only to see how they worked ... Anyone who makes money trading the indices lately gets my respect, I have found them tough.
Nic
  • #4,337
  • Jul 30, 2009 3:48am Jul 30, 2009 3:48am
Hi Strat,

What's your take on the attached Wolfe Wave setup on the S&P500 Daily chart? Looks like we are in the sell area! Good target to the downside (if it works out).

On my watch list.

Z
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  • #4,338
  • Jul 30, 2009 5:11am Jul 30, 2009 5:11am
Z-Man,

I did some Wolfe-Wave study earlier this year and I think Strat had a look too. They seemed a little subjective and only became really apparent after the event (ie good in hindsight but difficult to spot in reality). I know some people like them so I’m open to new evidence!

I was an uber-bear on indices but maybe I'm a little more optimistic now? Has most of the bad news been priced in? On the other hand, bear market rallies can be quite strong and get one into thinking the worst is over, just as despair sets back in and it revisits old lows.

As an investor I think there are some good low valued companies out there, but as a trader I wouldn't like to 'buy-and-hold'. If you own a solid company I'd just stick with it I think. I have stuck out all my investment plays as I'm on a 15-25year play with them.

A good UK company that I have noticed moving inversely to the FTSE100 is Goldshield Group (Pharma). Looks like it has good defensive qualities as most days the FTSE has gone down this stock has gone up. I got in early on the BO from the MA consolidation area a few months ago. Spotted it in my Sharescope 'value' screen and just sat on it waiting for a technical entry.
Trade less and become more profitable!
  • #4,339
  • Jul 30, 2009 6:05am Jul 30, 2009 6:05am
Quoting Grimweasel
Z-Man,

I did some Wolfe-Wave study earlier this year and I think Strat had a look too. They seemed a little subjective and only became really apparent after the event (ie good in hindsight but difficult to spot in reality). I know some people like them so I’m open to new evidence!

A good UK company that I have noticed moving inversely to the FTSE100 is Goldshield Group (Pharma). Looks like it has good defensive qualities as most days the FTSE has gone down this stock has gone up. I got in early on the BO from the MA consolidation area a...
A lot of what we do as traders is quite subjective (eg inside bar/harami). I studied the wolfe wave ( some of Ganns work, elliot's wave etc) extensively (intensively as well, lol) a few years ago when i started out and you are right regarding it being somehow subjective. However, when several technicals line up, you have a potential for a good trade. I won't enter a trade purely on Wolfe Wave signals but i find it nice when my analysis is done and also lines up with a Wolfe Wave signal.

Goldshields seems to be doing quite well. Good on you for catching it early.

Happy trading.

Z
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  • #4,340
  • Jul 30, 2009 10:32am Jul 30, 2009 10:32am
Quoting zuret9
Hi Strat,

What's your take on the attached Wolfe Wave setup on the S&P500 Daily chart? Looks like we are in the sell area! Good target to the downside (if it works out).

On my watch list.

Z
Just a quick eyeball suggests a fall down to the TL before a further move higher but I'm no fortune teller.

I just cannot get my head around any type of waves. The last time I used EW theory in my trading, my account "waved" goodbye!
15 YEARS OF PASR ON FOREX FACTORY!
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