Intraday Candlestick Patterns

Discussion in 'Technical Analysis' started by kmgilroy89, Dec 28, 2012.

  1. Are intraday candlestick patterns reliable? I realize that many patterns won't exist, but some patterns don't involve gaps like 3 white soldiers, 3 black crows, rising 3 methods, and falling 3 methods. Has anybody back tested these patterns?
  2. Hi kmg, I read your 1st post on ET so I know how raw you are. Just about everything out there that is available to us traders works but only if you know how to make it work. That results in constant bickering among traders and dreamers as to what is useful when the truth is, it completely depends on the users ability.

    There is little difference in the daily or weekly signals of a liquid instrument compared to their 1 min charts so all candle signals work intraday. However if you try to back test candle signals to get the ones that make money, well life doesn't work like that! If it did we'd all be killing it using the best candle signals.

    A signal is all about context, so learn the signals and then throw out the books and learn everything you can about rejecting candle signals unless the context is supportive. I only have about 8 signals and most of the time I ignore them unless they are in the zone and loaded with multiple reasons to take the trade.

    Books overload you with signals and little context with the result you soon realize the promise of candlesticks is fools gold. Candlesticks are fantastic - if you learn to filter them. For example that means two identical looking engulfers will often have completely different outcomes and to the less informed that means candle signals are useless but to the informed there was only one real candidate.

    Btw, Mondays and after holidays are the times when the gap signals can appear on intraday charts on continuous instruments like Fx. Apart from that you can get the gap signals on the daily open of all intraday charts that have RTH and playing the Window (Gap) was a huge part of Japanese thinking.

    In about 7 years time you'll understand much better the holes that are apparent in your thinking :)

    Good trading to you and a Happy New Year young man.
  3. thats good stuff.. i've read alot of books on the matter as well.. done more volatility / options trading then outright directional..
    but i'll tell you.. negation is better then confirmation... because you'll see whatever you want in the randomness.. one thing i see is alot of guys usually just have a few indicators that they are familiar with and thats it.. thats if they use any at all.. less is more in my opinion.. that goes for amount of trades, technical indicators, and a few other things.. the hardest thing is sitting there watching the market and not getting lost in the noise.. and knowing when to NOT trade..
  4. I've read that the most popular candle is the dogi. I've been experimenting with it recently and its win rate is slightly over 80% for intraday trades. But the strategy includes other conditions as well. Good luck.
  5. Reading basic candlesticks on the DAILY, WEEKLY and HOURLY charts is the master skill of success. One doesn't need indicators, oscillators, or news flow.

    So, OP, your answer is "yes."

    Bullish/Bearish engulfing candles are important.

    Anyone who trades FOREX should have shorted GBP/USD twice in the last two months at 1.63. (look at a long term daily chart)

    The "tails" on candlestick indicate REJECTION of the price, which is a big cue.

    Good luck on your quest. Remember to always use a STOP-LOSS.

  6. 80% at what RR? 1:1, 1:.5 ?
  7. cvds16


    doji's, harama's, engulfers ... they all work perfectly for me ... now ! ... but spend years knocking my head against a brick wall ... like xspurt says, it's all a matter of context ... that's the most important thing ... something that I haven't seen really mentioned in books ... so I had to invent it myself ...

    doji is a great signal most of the time ... not always though, even with this signal context matters ... and don't forget there are different kind of doji's too ... you just don't want to take any doji anywhere ...
  8. cvds16


    My advice is: read a lot of Xspurt posts, he really is a great trader ... but don't forget either trading is a personal thing ... I am in a chatroom with 10 other people and each one of us is using his personal method, some use indicators and some don't (like me). I like the 3M chart a lot but use the 5M too, but some go as low as 1M charts or even below that (just heard on friday one of us is using the 15 second chart as means of finetuning his entry). Some go way highter to get their context-reading ... Some use tickcharts ...
    Some of us move their stop quickly to breakeven, while for me my stop is just an emergency case that I don't touch and shouldn't get hit if I read the market well ...
    There are many ways to skin this cat ... I personally got over 40 different kind of signals ...
  9. moonmist



    The reliability of a candlestick pattern depends on a lot of factors:

    a) Context:
    A trader would need a lot of experience to read the context of the market correctly ...............

    b) Personality of the trading instrument:
    CL is a running market, while ES is a congested market. Breakout patterns eg. ascending/descending triangle would be more likely to succeed for CL, while reversal patterns, eg. double top/bottom, would be more reliable for ES. The first thirty minutes of the pit session is usually a good time to make money for ES and CL. As pointed out by Handle123, the last thirty-five minutes of the pit session is great for ES scalping. However, NoDoji did remark that the last thirty minutes of the pit session is not good for CL trading.

    c) Timeframe:
    A five-minute double top/bottom would be more reliable than the one-minute counterparts.

    d) Time of the session:
    During the dead zone between 12:00 and 1:30 PM Eatsern Time, most patterns would not lead to great profit.

    Just my two cents.:)

    Happy New Year to all !!!
  10. Thanks for the advice everybody. I've spent the past month working on an algorithm in Trade Station without much success. I just can't come up with an intraday system that works and is statistically reliable. I thought maybe if I combined some indicators with the candlestick patterns I might have more luck. I think I'm going to go back to scalping with the Level 2 and Time&Sales, because I actually know people who make money doing that. I wasn't making money tape reading, but I haven't had much instruction and have been learning on my own. I'm thinking maybe if I use the technical setups to find opportunities then I'll use the time&sales to confirm if those are good setups, maybe I'll make some money. More specifically I think what I want to do is find setups on 5 minute charts, zoom in on 1 minute charts, and wait for the time and sales to look strong.
    #10     Dec 30, 2012