I hope I spell this correctly...try Heikin-Ashi Candlesticks... I can't post the link, but google for Heikin-Ashi candlesticks and the fourth link down titled, "Using the Heikin-Ashi Technique", will give you some information. Michael B.
It looks as if mostly everyone here has given you pretty good advice. I was hoping to add a little with what everyone has said. I have found that stocks make similiar cycles as their historical cycles. So, you have to find out what timeframe you want your cycles. Then look at the stocks historical cycles and see clearly how they measure up. A good way to measure is price appreciation per unit of time(price only guage) and how it got there(volitility). This will give you a basis for what kind of trend you may be anticiapting. If I were you, I would pick up WJO's books and find quality stocks that have high EPS and RS rank and then guage their prior cycles to anticipate the next quality trend. After a qualified stock bases on your timeframe, buy on the BO of the handle for specific risk reasons(as skills are acquired you can buy at the bottom of the cup). Set stops that will allow natural pullbacks.
To learn how to do it check Jack Hershey's posts on equities trading (grob109, bubba7) or Spydertrader's journal on this subject.
This is the performance summary of a very simple system using the momentum concept w/o filters. With filters, it'd be even better. The period tested is 6-22-98 to 2/3/06 for the ES continous contract.
============= Thanks; might ask you some questions about that later on because clicked on it 4 times[should total 50] and can only read about 20% of it even with magnifying glass Momentum measures can be helpful if you are looking to exit a trend shortly; momentum measures can also get you out of a swing trade many days/weeks too early.
============= ThanksBvam1 Cant read almost all of it., breaks up. 1]Whats starting , ending equity???, is it 1 contract, most are???? 2]Average bars/candle length per trade[guess its intraday???] 3 ]average winner$ average loser$ 4] max winner , max loser 5]Did they publish % long ;% short Any thing else you think is important??????? Candle Chart trends are amoung my favorite study areas; looked on XOM lately, data from 1968, XOM was $1.20 split adjust Not a stock tip.
The quality of the trend sometimes is predicated on the instruments traded. Interest rates and currencies are particularly good vehicles for trend trading, stock market indices and stocks in particular are poorer. It has everything to do with manipulation and faking out the markets. It is hard to manipulate currencies and interest rates in general. It is very easy to manipulate stock indices and in general make moves that will kill the average/little 5 lot trader with the leverage even as the general trend might be there.... I like ag commodities for this reason and seasonal trends are my favorite. Note I would not advise to trade forex for curencies exactly for the same season I dislike the big SP for longer term trading, the leverage will kill ya. I like forex pairs as futures ONLY!!!!!
I don't know the level of experience of the OP, so I apologize if the following seems obvious, certainly it will be to many here, while those unfamiliar w/Wyckoff may get something out of it. One thing you might consider is a kind of Wyckoff price/volume analysis, which states that a "quality trend" first has to be prepared in a trading-range. There first has to be an accumulation or distribution phase of consolidation when the weak holders are shaken-out of the market and the strong players take over. (As w/everything in the markets, this is not always true of course, sometimes a strong trend will simply reverse in a V pattern, no range, but even here, one should be seeing distribution on the last legs of uptrend before it reverses. Whether one has the skill to see this or not, or whether it is obvious or not to whatever degree, it pretty much has to happen, right?) For instance a downtrend cycling to an uptrend. Wyckoff first looked for climatic action of the present downtrend, indicating it was exhausting itself: Wide spreads closing on the lows on strong, preferably extreme volume, sharp price moves, all relative to what has occurred beforehand, the classic Selling Climax. If this "stopping" behavior happens at previous significant longer-term support/resistance, so much the better. This is usually followed by what he called an Automatic Rally, which may retrace significantly. If, again, that retracement is back to previous s/r, so much the better. Vol may be low on the AR because the sellers have been exhausted and it doesn't take much to get price up, also shorts will be getting out providing more impetus. The AR may also break the downtrendline, or subsequent price action may do so as the range evolves, further confirmation that something important is happening. The SC and the AR form the trading-range, support/resistance, which one then uses to gauge the significance of what happens subsequently as to whether it is accumulation or re-distribution. Following the AR is a reaction back to/near/past the SC lows, the Secondary Test. Here one uses basic pv analysis: A shallow retracement on narrower spreads and lower vol is very positive, however if price drops below the SC and then rallies it may be a shakeout, which may be even more positive, depending of course, as always, on the nature of the test and subsequent pv behavior - does it follow-thru, to what degree? In a perfect TR price rallies from the ST, then there is a shallow test of the ST, then back to the top of the range and beyond for a breakout on strong vol and wide spreads, a Sign of Strength, then retracement for a shallow test of the breakout on lower vol. Then the uptrend has been prepared and one could say it's "quality". In the real world this is usually a more complex process, but the basic principles of supply and demand have to play out one way or another before a new trend can be born. Another thing to consider in the TR is volatility. Trends usually end in high volatility climaxes and this continues in the first phase of the range to a point; usually the SC/AR/ST are high volatility as weak holders get shaken out and things then settle down considerably as the public gets bored w/the resultant sideways action (as they wait on the sidelines for trend), while the pro's are accumulating, ultimately very quietly. Here volume, price action, and spreads will contract; ma's may flatten and converge, often times right thru the middle of price, or bounding it. Sometimes price forms an apex w/in the range. Then high volatility will return as price breaks out and a new trend begins. So markets constantly cycle between low volatility and high, it is their inherent, inescapable nature. The low volatility cycle (range) absorbs the trend that preceded it and prepares for the next higher volatility cycle (trend) to follow, thru accumulation/distribution or reaccumulation/redistribution. The greater the preparation during the ranging phase, the higher "quality" of the resulting trend. This preparation is achieved thru both time and pv behavior. So this allows one to gauge the potential quality of the trend before it even begins, and depending upon one's style, can give price projections, another bonus. Ok, but as for the trend itself, look at how retracements/consolidations relate to the trend leg that preceded it. Commonly accepted retracement levels are 38% to 50% to 62%, the more shallow the more positive. Are spreads narrow on the retracement relative to the leg that preceded it? Is vol contracting? Are closes on the lows, mid-point, at the highs? Does it stop at previous s/r? How long does it last relative to the trend leg? Where are you relative to your price projection? Also consider the thrusts of the trend legs. If the initial trend out of the TR is 5 pts, the next is 8, then the next is only 3, there is a shortening of thrusts on this last and may be a warning sign the trend is exhausting itself. And so on... H
The winning percentage is 39% or so, which means that there are many wrong signals. A better filtering process could be implemented to identify better entries and exits.