Candlestick Patterns for Daytrading

Discussion in 'Trading' started by Machal, Mar 9, 2003.

  1. Machal


    I read book about Candlestick charting techiques.

    Does anybody use candlestick patterns for daytrading, I mean does anybody looking for particular patterns in intraday charts and then trade them, if they appear?

    If yes, which ones work best? On what interval?

    Thank you for your answers and have a nice Sunday. :)
  2. I recommend all books by Steve Nison... in particular I like his book Beyond Candlesticks... Steve goes into depth on candles and then goes beyond candlesticks in this book, and includes a discussion on Renko and Kagi charts...

    One of my favorite candlestick formations is the Doji, where the open and close for the candle are about equal... a Doji can represent a pause or the beginning of a reversal (once you place the Doji in the context of her surrounding candles), and as such forces you to look for evidence elsewhere (e.g. the tick and trin) as to what the likely event will be...

    The fusion of Eastern candles, renko and kagi in combination with Western conventional technical analytics is a very powerful approach...
  3. Hi Machal,

    My reply is based on the fact that I trade the Emini Futures.

    You probably already notice that the books on japanese candlesticks application rarely or do not discuss using candlesticks on intraday.

    Also...via search menu in the upper right corner of this their website...

    you can review all the posts for any useful tips about applying intraday candlesticks.

    Their are some nice basic info on intraday candlesticks that were published in articles in magazines like Stocks & Commodities and Active Trader...

    thus, you could re-order back issues to have access to those articles.

    A few key concepts about Intraday Candlesticks"

    1. Do not use intraday candlesticks alone as a trading tool.

    Therefore...use it as a confirmation tool to another indicator or price action alone pattern or vice versa.

    2. Daily candlesticks have different probabilities in comparison to intraday candlesticks.

    One of the big reason why many traders have difficulties with intraday candlesticks because they see a high probability daily candlestick pattern and think it will also be a high probability intraday candlestick pattern...

    that is far from the truth.

    3. Intraday candlesticks are less reliable during the chop and are more reliable during trends.

    Thus, if candlesticks are going to be an important part of your trading'll be wize to avoid the chop.

    4. Concentrate on only one or two trading vehicles when applying intraday candlesticks.

    This allows you to better understand the price pattern instead of trying to apply candlesticks to different stuff...each trading day.

    5. Whatever your trading...simply review its intraday charts for the past few months (print them out so that you aren't stuck to the computer)...

    you'll start seeing some repetitive candlestick patterns that work well for that particular trading vehicle.

    6. If you use intraday candlesticks with trend indicators instead of with indicators that are more suited for chop.

    7. Use 2 different intervals to confirm your interval your trading.

    For example...using the 1min chart interval to confirm a trade based on the 3min chart or vice versa...have these charts...side by side of whatever 2 time intervals you decide works best for your trading style.

    I highly recommend this for those just starting to apply candlesticks on intraday charts.

    Advanced intraday candlestick users are most likely able to see a pattern on the 1min chart and already know what it looks like on the 3min chart or 5min chart without ever having to actually look at a 3min or 5min chart.

    8. Any chart interval is suited for candlesticks...

    the trick is to know which candlestick patterns are best suited for your trading vehicle (Eminis, MSFT, IBM, T-Bonds...whatever).

    9. Price action alone (basic chart patterns, pivot points, support/resistance levels) work very well with intraday candlesticks or vice versa.

    Putting more emphasis on what I said in number 1.

    10. Whatever you are trading...use the sister trading vehicle to confirm what you are about to do.

    For example...if I take a trade in the ES...the NQ candlestick pattern better confirm what I see in the ES.

    Same if I take a trade in the NQ...the ES candlestick pattern must confirm what i see in the NQ.

    Take a look at both ES and NQ on March 7th Friday in the first 5mins of trading after 0930am est via the 1min all session globex chart interval.

    That Advanced Tweezer Bottom is a high probability bullish candlestick pattern for that particular price action alone.

    In fact...I myself was Short in the ES @ 809.50...I quickly cut my loss @ 810.75...reversed the trade because of that Advanced Tweezer Bottom signal I saw...I was a happy camper after that :cool:

    Also, if the NQ had put in a different high probability bullish candlestick would have been good enough for confirmation for the ES in that particular trade situation.

    In other words...for example...just because I see a Dark Shooting Star in the NQ and I decide to take the trade in the NQ instead of the ES...

    a White Shooting Star or Dark Cloud Cover in the ES would still be a valid sister confirmation signal.

    Note: The Dark Cloud Cover is a rare intraday candlestick pattern in comparison to those on daily charts...just a small example of the difference between intraday and daily charts. Thus, it's not one of the repetitive intraday candlestick patterns to exploit.

    Simply, to answer your question when you said..."If yes, which ones work best? On what interval?"

    only you can answer that because you know what your trading vehicle is and you know what interval your already comfortable with based on your trade methodology.

    Thus, integrate intraday candlesticks into your trading methodology and not the other way around.

    Therefore, if your comfortable with the 5min chart...and somebody tells you it works best on 15min charts...

    don't switch charts because the odds are very high that you don't know anything about the specifics of that traders trade methodology.

    Good luck and its all I'm going to say about intraday candlesticks here.

  4. And I will add that Candlestick is just "Box and Whisker plot" used in Statistical control so I knew the candlestick without even knowing their name before entering trading field :D

    <IMG SRC=>

    The reason why candlestick on intraday level and on daily level have not the same prediction power is that the intrinsic standard deviation (see the term I have posted the other day) should not be in the same proportion since there are proportianally more intraday cotations relative to scale factor.

  5. Make a copy and note how he got upsidedown using his recommendations.

    Use some arrows or something.

    What you want more than anything else is to know when you cannot trade. Look at the voids on the list to find this out.
  6. Interesting post Harry... I hadn't realised that candles were also used in statistical control...
  7. Just to show how different folks can have different opinions on what works and what doesn't: I use candles exclusively on an intraday basis. I trade two basic patterns. But, the same patterns mean totally different things depending on where they are on the chart. I have a high batting average and risk/reward is advantageous. No ma's, no oscillators, no proprietary indacators, no internals, no nothin. Just candles. Oh, I lied, volume is on the chart too.
  8. And doesn't this remind you somehow of symetrical triangle : this is called Vmask in Quality control :D

    <IMG SRC=>

  9. It is not perhaps different opinions it is that they don't use it in the same context as you. CONTEXT is INVISIBLE but it is as invisible as the BACKBONE of a skeleton it is the premisces of what you talk about :D

  10. maxpi


    There was an article a few months back in Technical Analysis of Stocks and Commodities that gave results of backtests of all sorts of candle patterns.

    #10     Mar 9, 2003