Candlestick people

Discussion in 'Technical Analysis' started by baggerlord, Aug 22, 2003.

  1. I have a question: How do you handle it when a great candlestick pattern is forming on the 5-min ES, but it is only 2 or 3 minutes into the bar? For example, the 10AM bar on the ES. It was forming a great bearish engulfing, but the bar wasn't closed yet. By the time the bar closed you missed a 4 pt move(assuming you waited). Just curious how the experts here would handle this.
  2. kernan


    I never take a signal until the bar completes. Sure, it worked out when you were looking this one time, but it USUALLY does not. A big down candle could rally back the last minute to form a "hammer", then your short position is in a lot of trouble.

    Best of luck.
  3. Yeah that is what I was thinking. In this case I didn't enter until the pivot/low of day had been broken.
  4. kernan


    You bet. Trust me - it comes from the experience of losing. I have probably entered a candle midway through on every time frame I trade (daily, 60, 15, 5), and lost on 90% of them!

    Have a great day trading.
  5. From the mouth of Nison -- paraphrased: usually it is a good idea to wait until the signal bar closes. However, let's say you are looking to get into a long trade on a bullish engulfing pattern, and there happens to be another candle some bars back, say a rising window or a southern doji to indicate a support level close to the point at which you want to get into the trade, it may not be a bad idea to get in. As with any trade, the candle indicators are not an absolute -- rather, one must consider the the immediate candle in the context of other candle indicators (preceding candles, the same chart on different time frames, etc), and even other "western" technicals to analyze the risk-reward aspect of the trade.

    As with any technical indicator, relying on them mechanically, without considering the context, one's results will be haphazard, at best.
  6. Ken_DTU


    good point daxman ... agree.. I like 1-min and 2-min candles, and always embed in context of market internals (trin, 2d pattern vs OHLC, fibos, volume) in addition to the specific pattern (3lb, engulfing, doji) etc..

    btw I primarily use candles to 1) spot pivots/exits for open moves and 2) confirm s/r levels

    nison's videos are excellent too, he does a superb job of breaking down the various chart patterns to help train in technical pattern recognition ...

  7. (I use times from 5 minutes to weekly). Except in the case of very overbought or very oversold where the candle alone might be your sign of reversal.... you're hopefully using the candle as an indicator of something you've already suspected. That is, chart support or resistance is *apparently* holding or breaking. When the developing candle appears to be *confirming* what you already suspect, you can act before the candle is completed.
  8. ALWAYS, wait until the candle is complete.

    I won't even take a signal with just 10 seconds left until the candle is complete.

    It could still form differently than where it is currently.

    This is a lesson I learned the hard way too many times.

    Enought times though now that it is burned permanently in my brain.
  9. Have you therefore ever looked into the possibility of trading in the opposite direction to what the forming candle appears to be telling you. For example if a bullish engulfing candle is formin on a 5 min chart and there is still a couple of mins to go, go short instead of long. If your above figure of 90% is fairly accurate then you could be onto something significant.