Hi WmWaster, First, I just wanted to say that your thread is a fresh breadth of air and the route you've choosen to advance your knowledge is a route I think most candlestick pattern traders needs to travel. I own a copy of Gregory Morris - Candlestick Charting Explained. It's one of those candlestick books I've classified as a Candlestick Dictionary in that he covered the basics of a lot of different areas of candlestick pattern recognition. Although the book lacks an actual candlestick pattern strategy trading plan...it gives enough generic info to give you a few ideas to start your own personal research. In the back of the book (appendix) is an interview he had with Mr. Takehiro Hikita and till this day I remember a statement by Hikita... ...candlestick pattern analysis is another subject, rather than the charting itself.. That told me that there are traders using candlestick charts eventhough these traders are not doing any specific candlestick pattern analysis as part of their trading plan. However, his Chapter 7 about the Reialibility of specific generic patterns is what caught my attention. Also, I already had a strong interest in Hammer patterns prior to getting the book and his research sampling that deals with Futures (pg. 234-236) showed that Engulfing and Haramis had a much larger signal production. I begin thinking what if I combined the Engulfing/Hammer or the Harami/Hammer as one pattern to see if my own personal testing of their reliability improved as a combo (multiple pattern). It did and that in itself made my cost of purchasing the book worthwhile because it spark an ideal that later became very useful in my trading eventhough the book did not specifically discussed such a topic (combining patterns). Further, I remember writing him at the time about the specifics of the actual trading plan for the Hammer pattern, Engulfing pattern and Harami pattern (initial stop method, trailing stop method, profit targets, contingency plans et cetera). I got no reply. What I do remember is that my reliability results would change dramatically with changes as the trade management after entry changed. This quickly told me that if you give a group of traders the exact same pattern signal and allow them to interpret the trade management on their own... They all will have different results. Main reason why we see some traders say a particular pattern signal doesn't work and other traders say the same pattern does work. Difference is the trade management. That caused me to get into areas of candlestick pattern analysis that have not been discussed in any candlestick book nor articles... The actual application of how to trade these patterns. Looking back...I'm glad he never responded to my letter about his actual trading plan that produced his statistical results because it forced me to develop my own trade management rules that were suitable for my own personality. Don't misunderstand...its an excellent dictionary (explanation) about candlestick patterns to help you understand the difference for example between a Bullish Hammer pattern and a Bullish Harami pattern. Yet, it does not tell you how to apply nor how to trade candlestick patterns. (I knew that before I purchased the book) That's where the problem is for most is that many traders assume these types of books being discussed is telling them how to apply and trade. His book has no holy grail statements and no statements saying it was going to make us great traders. Therefore, the author as many other candlestick authors... Focuses on mere explanation and not application. In fact, I don't think any source (books, seminars, website et cetera) if its not talking specifically about your trading instrument, providing daily instructions and talks about all aspects of trade management (initial stops, trailing stops, profit targets, contingency plans et cetera)... Explaining what caused the pattern in the first place... The info needs to be taken with a grain of salt. Yet, Morris book gives an excellent explanation of the generic patterns to prompt us to discover our own application information... Worth the $35 dollars I had spent on it back in the 90's. Not worth a penny if your looking for info on how to apply or how to trade these patterns. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
I don't claim to be an expert on candlesticks, but I did have a candlestick analysis program for my charting software. This program went through over forty patterns and gave you statistics for each on whatever given security/contract you had up. What I came to find out over a few days was that on average, no candlestick pattern seems to work better than 50/50. Of course if you take a stock that has been trending up and use a pattern to detect upward movement you are going to get a higher percent there. What I looked for were patterns that could determine upward movement in downward trends and vice versa. No pattern I tested showed any statistical significance or forecasting ability. My advice is it's useless, but try it for yourself.
Hi jmmathieu, I strongly agree. I've tried a few software programs over the years that did Japanese Candlestick analysis and the results was very poor. Best to interpret the candlestick patterns on your own without computer codes that don't understand why these patterns developed in the first place. Thus, some things just can't be automated into profits. By the way...anybody that's coded candlestick patterns that makes consistent profits... Please tell us what software analysis program your using. There are some things the mind can analyze much better than computer codes. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Wm Waster, The two above posts go along way towards explaining to you the what and why of the information I imparted to you. People go through a lot of pertibations and rationalizations on making money. It is a very tough process to come up a gainst a wall as you just have. Then to inquire and persevere in going through a rational process to determine what to do about the wall is also a tough undertaking. You are not like Mowery and you would not draw a trivila insignificant conclusion or conclusions. Some people go through the "this is good enough for me for making money" type thinking which is more a justification for not stepping on up through the next several levels of making money based upon greater effectiveness and efficiencies. It is always possible to give deep consideration to the many paths for making money. Most of them stem off a main trunk and work there way to endings of branches that can go no further. Candlesticks is a masterful example of how a given tool has limitations that do not allow a person to fully develop all the sectors of a complete method or strategy for making money by going through the levels of trading from novice to intermediate to expert on the personal side of a trading model. There is also the market side of a model; the other half that has to also be dealt with on the novice, intermediate and expert levels of the model. You have already noticed that there are many method of makng money and they each have considerations regarding effectivenes and efficiency. Most can be paired for compare and contrast intellectual efforts to allow a person to discover some of the richness of trading and its strategies. The single unique aspect of the candlestick tool of naming bars and assigning a glossary like definition makes it impossible to pair candlesticks trading with another kind of trading. Point and figure is a close second when you see the annotation as a type of bar sturcturing. the wall you are trying to surpass is a circumstance and condition that precludes a person from going any further, comparitably speaking, than any further than edvanced biginner, if that, in terms of money making capability. the effectiveness and efficiency of money making of any system is what generally precludes any practioners from being intermediate or expert. Talent simply cannot be applied because of the construct of the method or approach. It is de facto for you to see as you get responses from many many people who have gone before you and, it looks like, still practise candlesticks. It is a reql adventure to continue to look at the map of trading approaches and possibilities over a long time and see what and why it is not possible to unfurl the map in various directions. the best thing is to realize that it is extreme important to never see the tree of trading as a place to set a goal to go to the outmost part of any of its branches. The alternative is to build stongly within your self the ability to make your own structure by knowing the tree and using reasoning tools to fashion the parts of the tree into a structure and a process within the structure that is always capable of extracting the potential of what the market continually offers. You have to be able to "see" the market first to be able to do this. You are allowed to make the rules it turns out. But knowing this, you also know you are at liberty to change the rules. This is what most people call their "plan". And they play by the rules they keep insisting. But most of them (90% they say for day trading). At some point you become your own coach. You are getting close to this place and possibly doing this needed additional role. So you can look at yourself on the playing field. Thats when you step off the field for a while and write the playbook. The playbook is empty of rules. No rules in the playbook. In the play book you have plays that help to make first downs. Other plays hit home runs. Some plays allow for three pointers, a foul and making the foul. How does a person get to the place where he can write the platbook, be his own coach, and win the playoffs every day of the week? This thread isn't going to entertain this level of discourse. It is not too available out there. Most people aren't remotely interested in getting answers to the most valuable questions they could put on the table. How can anyone get the wax out of their ears, even?
Hi Mark, I respectfully and totally disagree. Imo, the only way is homegrown. I, personally, would never rely on anything canned. But that's just my perspective. No, not if your mind can code it too. Again, imo. kt
Hi ktmexc20, What software program are you using to code candlestick patterns and the results are profitable??? Note: I know patterns can be coded. That's not the issue. The issue is can they be coded and its profitable. Also, I'm not asking for any codes because I do realize that's your work. I'm just curious what program your using. Thanks. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
I code all my own. Any pattern, candlestick or otherwise, can be coded. It's what pattern (or combination), how to apply it (them) and when. Thats where utilizing analyisis and synthesis comes into play. I believe the more knowledge one has in mathematics, the better. I'm always trying to improve my knowledge. No, not a problem. I started teaching my self programing with Python about 2 years ago after I realized that Wealth-Lab (take your pick... tradestation, ami-broker, etc...) was never gonna cut it for me. Since my goals were a very high turn over rate, I started learning to code in "C" langauge last fall. But, that's for very heavy algorithmic lifting I'm doing. I would recommend to anybody to learn how to code your own. Python is a fantastic language to learn. Not only for beginners, but very many experts prefer it too for it's productivity and flexibility. Python allows me to easily embed the C work I do. kt
Hi kt, Your the first trader I've met trading Japanese Candlestick patterns profitably via computer codes. My next question...are you applying your profitable Japanese Candlestick pattern computer codes to trading stocks, futures or what??? The reason why I've asked you these questions in the recent messages is that there's been many threads here at ET where someone has either asked me or asked someone else about knowing any one doing such and being profitable in their Japanese Candlestick pattern trading... The answer was always... I didn't know anyone and/or it couldn't be done because I failed at it and I've never met anyone that has succeeded at it. By the way, I had used TradeStation easylanguage. Now that I do...I've saved this discussion for pointing traders in the future that have an interest in how to get started in profitably trading Japanese Candlestick patterns via computer codes. Once again...thanks for the info. Mark (a.k.a. NihabaAshi Japanese Candlestick term
I realise candlestick pattern alone is useless, as I stated previously "canldestick pattern taken out of the context is notihng more than arbitrary". But how about if you combine other factors into consideration, eg the location/position, the size of the pattern (some patterns have to take this into account), volume behind this pattern, and so on. How about if you try to confirm candlestick patterns by other tools, like indicators? That's what I'm trying to do. No one in the planet ever try to do so?! All authors still (stupidly) teach candlestick learners to indentify the canldestick & their patterns only?! :eek:
Hi WmWaster, I agree. Although most of my candlestick books do discuss combining Japanese candlestick patterns with some form of western analysis... There was nothing stated with any emphasis on that approach. In fact, the bulk of the books only had one chapter towards the back that was devoted to the topic (small chapters in comparison to the other chapters) where the rest of the book was just about Japanese Candlestick patterns all by themselves. Thus, there seems to be three approaches: 1. Japanese Candlestick Patterns all by themselves. Most travel this route possibly because its either the easiest route of the three and/or and an impression they get from their education source (book, seminar, magazine article, forum discussion et cetera) that this is the preferred route to travel. 2. Western analysis or something as a confirmation tool for a Japanese Candlestick pattern signal. 3. Japanese Candlestick analysis as a confirmation tool to Western analysis or something else. The bulk of my approach from the above is #3 although I do a little of #2. * Price Reaction to Key Economic Report releases. * Price Reaction to key regular schedule market events * WRB Analysis * Market Seasonal Tendencies (swing trading or long term trading) * Intraday Market Tendencies (day trading) Mark (a.k.a. NihabaAshi) Japanese Candlestick term