Big Candle Observation

Discussion in 'Technical Analysis' started by cowcool, May 15, 2009.

  1. cowcool


    Based on my simple observation, a big green/red candle is usually followed by series of other green/red candles. Occurence of big green/red candle usually set panic/greed to retail traders and alert momentum traders to get in. Is my observation correct? (please correct me if I am wrong)

    Based on this fact, I am going to create a script/program that will calculate the average size/range of all candles during the trading day. The purpose is to correctly determine the size of what people perceived as a big candle during that particular trading day.

    But before putting some effort, I would like to know if there is readily available software/indicator for this purpose. I don't want to waste my time only to find out that there is readily software/indicator out there for that purpose.

    Thx a million!
  2. cowcool


    I am using 1 minute time frame and talking about huge candle that is 4-5 times bigger than the size of average normal candles, isn't this indicate that there are buying/dumping by instituionals or big traders? Ofcourse I maybe wrong. comments please
  3. MGJ


    Congratulations, you have rediscovered the Volatility Breakout.

    The first taller-than-average candle (i.e. the volatility breakout) is followed by more tall candles of the same color --> go long volatility breakouts to the upside, go short volatility breakouts to the downside.

    Lee Gettess used to sell a pamphlet at TradeWins called "The $3000 Secret" that talked about this idea, see image below. More recently, "The Ultimate Trading Guide" by Hill and Pruitt ($32 used at Amazon), discusses the same thing on pages 192-196.

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  4. cowcool


    Thx MGJ, now the next part :) How to set target price ... this is what confuse me and is there an indicator or s/w to calculate average size of candle?