Candle Counting - A market timing near "holy grail."

R

RangeTrader

I realized that one of the key techniques I use to judge the market is just candle counting... So I tossed the counts up on my candles... (Yes, I am just too lazy to count so I need an indicator for it. :D)

Everyone knows the market moves in 3-5 day cycles...

It also follows similar proportional counts on the weekly and monthly.

To screw people up intermittently a false count is tossed in on the daily. This is the "pop and drop" as the shorts who tried to time the top correctly are blown out before the reversal.

If the market is going into a solid downtrend with weekly aligned technicals... It can go for two entire full daily counts.

Understanding these counts will tell you how far your pushing your luck holding a trade after shorting an exact top or buying an exact bottom. Your odds of reversal against you go up extremely after the 3rd count.

How did I call the monday/tuesday bottom this week, last friday??? Candle counts... Most market timing techniques that really work are just stupidly simple...
 

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The market won't necessarily ALWAYS bottom or top at the 4-5 count, but it will attempt to. The price activity around the 6-7th count in a strong daily trend cycle is extremely important and tells you a lot about the market strength.

The increased precision which the market follows the proper counts in recent years is in my opinion a effect caused by the huge increase in short term trading by hedge funds with professional traders. Also, the lack of a large amount of retail traders in the market and their noisy behavior...

Compare the S&P to say a Asian stock market and you won't see this level of chess style technical organization.

The number of counts the market reaches upward vs downward is a great tell on current trend strength too.


False engulfing reversals that do not engulf below the previous couple candles are to be ignored by my rules, and the previous count is still valid and starts counting up again with the continuation.

It's simple common sense... A reversal candle that doesn't drop far enough doesn't blow the longs out of position. As most are still in position the market is still overextended going into the following counts and it's not a restart of a trade cycle.
 

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These same candle counting techniques even work on the fifteen minute and hourly...

Buying engulfing candles works as a technical signal... You just have to figure out how many candles to hold the trade and where the key resistance targets are. I don't trade like that. I buy the bottoms or short tops then analyze the price action of the 2nd and 3rd candles into the new trend. Those generally are the key tell.

The highs of the 3rd candle are a good odds exit point. You better be trading with trend if your pushing for an exit on the highs of the 4-5th candles...


Ill leave you up to figure the rest out yourselves.

Have a good day everyone! :D
 

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Note... Candle counting only works to analyze market strength on the timeframes that the game is being played on.

5m, 15m, Hourly, Daily, Weekly, and Monthly. Those are the only timeframes where this matters. The rest don't have these precision cycle rules.
 
Fibonacci time series can be useful across ANY time frame. Combined with a bar count some internal trading characteristics of the particular instrument can be gleaned.
 
The only numbers I have noted of large importance are 3 and 5.

Edit: Just looked back through the charts... Counts of 8 and 13 are not repetitive and visible in the market so I deem them unimportant. The 3-5 and the doubling of the 5 count are quite commonly seen continually.


Btw, some interesting facts... In recent years we have had back to back 11 week+ rallies.

If the market were random the statistical odds of that would be... 0.048828125%

The statistical odds of back to back 11 week rallies would be...
0.00002384185791015625%


I think I have my math correct... Just trying to remember some statistics techniques from highschool... Hah.
That is 0.5 For a single flip then multiplied by 0.5 for the odds of each additional flip. Then shifting the decimal point twice for percent. <<
 
Hmmm, actually... Looking over my waveforms I am seeing quite a few exact 8 counts.

Fibonacci number sequence 3, 5, 8

Honestly I don't think the eight count is very useful for trading... If you buy a bottom your going to take profits at the reliable three count always and if it's a strong trend... The five count.


As for the naysayers that will come in here... The counts are not all that important. Just buy the exact bottom or short the exact top of a move and analyze the momentum and decide how big of a profit you want to take. Risk of reversal increases to a VERY high level after the five count always... So, you'll have to hold for another cycle generally if your pushing for a higher count... Odds of getting it in one shot are quite low...
 

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I use to have a general rule of thumb that a bull market correction lasts two weeks...

While it's true the main selloff is two weeks... If you count with my current engulf reversal rules it's generally always a three week or five week move.

I am kind of opinionated that this monthly sequence is a Five...

The flash crash corrective move was a three count. The one afterward found good support on the three, but didn't find final support until the retest of the lows on the five...

This one right here I am of the opinion that it is a five. It doesn't matter if your wrong or if your right. As long as you position yourself short high enough at the top of a wave cycle your still in the green even if your counts are a bit off...


Timing the market perfectly is totally unimportant in stocks. Just short at the approximate highs and go long at the approximate lows by your judgement. You will be close enough unless your a retard. :D

"Bulls make money, bears make money, and pigs get slaughtered!"
 

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To judge the strength of a move... I look at the first two confirmation candles of a move...

This is why I am skeptical of this market making it anywhere this week. This move has been very weak so far.

I ain't buying nothing until another pullback cycle... Or possibly more.


This is a momentum market. If there ain't big momentum after a couple candles and the confirmation signal has fired... It's just not going to go far...

Tomorrow with the EU meetings is going to be the key "tell" for the market strength this week. It will tell me if were going up another few days or if were going to sell hard! :D
 

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