Shunfeng's discussion about candlestick patterns (two candles)

Hi Shunfeng,

I am a candle trader and I do lots of reading on candlea. My trading is relying on candle shapes and a self drawn S/R line. I mostly take reversal trade if the candles formation favors. I like your trading but my main problem is when to start and wwhen to ends. So by having S/R line draws I can plan my Profit taking. Of course sometimes the market goes against our prediction but my win/loss ratio is 1:2 the least and preverably 1:3.

Yesterday I read somewhere about interesting candle reading of only 2 candles. I am trying to intergrate it with my trading system and see how it goes. Must wait a while until BREXIT fever subside.

Hope to be in contact.

Rosmo

Some reflections on candle pattern:


IMHO, one essential skill in trading candle patterns is to check different TF and know when to make a decision based on higher TF candle patterns and when to make a decision based on lower TF candle patterns. This means that a multi-TF analysis is already taken into consideration when one is trading candle patterns. Or, more precisely, one needs to have an understanding on the candle patterns that it is only an arbitary segmentation of a continous chart.

Sometimes during live trading as well as reviews, we can find that the different TF are telling different stories but it turns out later (after the fact)one is more important than the other (or it should say that the reversal has taken place but on one TF, due to the nature of the candle formation, the candle pattern is not telling this story or the candle pattern is very ambiguous to show that reversal has taken place.)

The following is something I've thought on the nature of candle formations:

the candle method with 4 prices as Open Close High Low (Japanese candlesticks or american bar line) is only a subjective (defined by humain beings who are trading them) but conventional (accepted generally and then self-fulfilled) method, something as a norm in an industry. The key in the definition/nature of candle is the "time interval". Since hundreds of years, both in Japan and US, people arbitrarily cut the continuous chart into seperate pieces (something similar as of light, both continous and quantized, very interesting, isn't it?). Divided by different time intervals make the candle patterns happen in different formation. (only by understanding this, one can put the use of candle patterns into real practice and use them correctly.)

The following question comes then: Why it is usually a H4 chart, why not a 3H17min chart (divide the whole chart into "pieces" with a time interval of 3H17min instead of 4 hours)? Because it is a convention, a "common agreement" between all people using especially MT4(the first time I got to know H4, it was on MT4, and I wondered since the beginning, why H4, not H6?). I see on other platforms with time intervals such as H3, H2, H6, H8 and H12 and some people provide tools to get a chart on D2, D3,etc... However, there has never been a time interval such as 2H18min 4H05min... different "cutting off" method, different time intervals, but the same convention as using a number of hours which divide 24 to get an integer number. (It is to note that in a given period of time, no matter how the time inverval is chosen, high price and low price during that period of time is the same.)

Daily is arbitary but it is much more accepted as all civilized humain beings use 24 hours system to count their life on the earth. And even before people learn to use 24 hours system to cut off a day into 24 pieces, they know "sunrise + sunset = a day".

Weekly is arbitary too, which is totally accepted in all mordern societies (but only hundred years before "week" only existed in some parts of the world). Monthly also. Quarterly the same.

In my trading summary, I've found that sometimes the high price and low price tell more stories than candle patterns as candle patterns could "falsify" the true story due to the nature of its formation - a segementation of a continuous chart into pieces by a time interval arbitarily chosen (such as H4, H3, H6, etc.). And that is why people use different TFs chart to check the same price movement, they want to diminish this effect. With more experiences, one can see what is going on only with a simple candle chart, as he's understood how the price works as well as when and how the candle patterns can become "cheating".

shunfengcn

Glad to see a mind-like buddy in candle trading.

You are very welcome to publish some charts, reflections, questions, etc. on candle trading.

we can just keep in contact here.

yours,
Shunfengcn

thanks,
as introduction, i am a Mlaysian living and working in Austria- and from your name I guess yr from China possibly Hong Kong.
Anyway I am thanking you that you like to share your knowledge with me-

Why do you think 95% of the traders fail looking at the candlesticks? There is a magic inside them Some very smart people invented them.
Can you read between them? Or Can you read after them, on the right, where the white space is? The answer is there

Hi Shunfeng,

I hope this could be useful to you in your studies, Bar Sequence Patterns.

If you have sequences that can not be built using the supported codes, let me know and I may include them in the EA.

All the best,

Khalil

Dear TheRealDeal,

I took your visit to my post as an encouragement!

I don't know what is in your mind exactly but I believe that at least I've decoded part of the puzzle befind the candles now(with some sleepless nights filled with some excitements), thanks to my months' working on the candle charts. (Traps are there, and by correctly recognizing them with an opened eye, one could accomplish what he dreamed of by trading against the trapped preys)

I will show you if I have got the nuggets with a decent trading record by trading the candle patterns in the way I've discovered (let's say 100% return in 6 month with max drawdown of 20% and 5% risk per trade, or better) Please give me some time as 3-6 months to practice what I've discovered (practice makes perfect, trading is a skill, not a knowledge, Knowing sth is VERY different from Doing it, correctly Doing it.). I will notify you when I put my trading acount on fxbook or trade explorer to show you.

BTW, I never asked any one about their "trading secrets"(some profitable traders even would like to show me how they did in live, which means I can sit beside him to watch how he trades and makes money, very unique opportunity, isn't it?). I believe that, on my own, by myself, I could understand the market mechanism as well as its structure, its defects, ect.. and propose MY OWN Architecture, MY OWN Trading Philosophy as well as MY OWN System to trade profitably. I have this confidence and stubbornness, and I think this is a key part of a true trader (not a baby asking others milk or a begger asking for holy grail as I've seen through the whole world of trading).


yours,
shunfengcn

thanks, but I think I will trade in my own way without an EA(to be honest, I never thought it would work out, the EA things, sorry if it sounds offensive).

yours,
shunfengcn

(NZDJPY H8)
Shunfeng,

I am with you. I trade watching by my eyes the candles , no EA no Indicator just candles and my self drawn S/R not even pivot points indicators.

Rosmo

Since this is the beginning of July, 2016, I will post not only Daily and H4 but also charts of Monthly and Weekly. Then this time there are 4 charts instead of 2 for each pair.

And from this week, I will NOT highlight the engulfing two candle patterns anymore. With the definitions and categorization posted in my previous posts, anyone could see them on the chart.

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

EURUSD

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

GBPUSD

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

EURJPY

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

GBPJPY

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

AUDUSD

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

NZDUSD

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

USDJPY

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

USDCAD

Weekly review of the engulfing patterns (two candles) for major pairs

20160703

USDCHF

a sudden assumption:
without considering money management system
if one trades 10 standard lots for any trade and could make 30 pips per day en average, then he could pack around 3k USD into the pocket per day. Let's say one only trade four days per week with the most daily volatility (TUE, WED, THU and FRI), that would be 3k times 50 times 4 = 600k USD a year. Quite a lot of money, better paid than the majority of jobs in the world (and if you geniunely love trading, that is another REAL BONUS), isn't it?

Weekly review of the engulfing patterns (two candles) for major pairs

20160710